Retiring abroad? Don't cut these financial ties to the U.S.

By Edd and Cynthia Staton

Think carefully about your Social Security, Medicare, credit cards and bank accounts before picking your new home overseas.

Before you choose a home overseas, think about the financial logistics of your move.

People considering retirement abroad devote countless hours of research to finding the "perfect" place.

They compare weather, cost of living, healthcare, crime statistics, visa requirements and whether to rent or buy.

Meanwhile, some of the more mundane questions get ignored.

How do I deal with Medicare? Where should Social Security be deposited? Do I keep my American bank account? What happens to my U.S. credit score? Can I get a credit card in my new country?

And here's one rarely considered thought: What am I going to do about my mailing address and phone number?

We certainly didn't have all those bases covered when we moved to Cuenca, Ecuador, 16 years ago. Over time, we have learned there are really two parts to moving abroad.

Narrowing down the right location is the exciting part that most people focus on.

Then there are the financial and logistical matters that are often pushed to the side. Failing to consider this humdrum second category can create unnecessary confusion and aggravation.

Here are some key things to consider before you pack the suitcases.

Do I have to give up my U.S. citizenship?

A common misconception is that moving abroad requires relinquishing your U.S. citizenship and passport. In reality, unless you relocate to one of the few countries that offer fast-track "citizenship by investment" programs, this choice isn't even a possibility.

An application for legal residency must happen first. This is often a two-step process of temporary and then permanent status that takes several years. Afterward, each country has its own rules for the length of time residents must wait before becoming eligible for citizenship.

Even if that option is chosen, most countries allow dual citizenship. That means that relinquishing U.S. citizenship is a choice, not a requirement.

Even for entry, many foreign countries require your passport to show at least six months of remaining validity. Unless you have recently renewed your U.S. passport, doing so before relocation abroad gives you 10 years until the next expiration date.

Why do I need an address of record?

Keeping an address of record in the U.S. is a good idea, even if you are moving to another country.

If you plan to maintain a banking relationship in the United States, federal law requires you to provide a physical address to prove your identity. A post office box or mail-receiving agency does not qualify.

Credit-card companies need an address to send replacement cards. Banks have the same requirement for debit cards.

Medicare Advantage and prescription-drug plans are tied to specific geographic locations. To enroll in these programs, you must have an address in the area the plan serves.

What if you've sold a residence or were renting? In this case, a trusted family member or friend can be enormously helpful for receiving the occasional piece of mail, replacement credit card or other documents that still must be sent the old-fashioned way.

Simply having a U.S. mailing address doesn't automatically demonstrate you legally reside in that state. Residency can affect taxes, voting, driver's licenses, insurance and other matters, and the rules in every state are different.

How do I keep a U.S. phone number?

Retaining a U.S. phone number means staying in touch with friends and loved ones is so much easier. But international plans with major carriers can cost $100+ per month.

Fortunately, there are affordable and even free options available. Our phone numbers are through Tello, a mobile virtual-network operator that rents tower space from T-Mobile. Rates start as low as $5 per month. In most countries, a Wi-Fi connection is required.

Many people around the world stay connected through WhatsApp. It's totally free and easy to set up. When connected to Wi-Fi, you can make unlimited voice or video calls, send texts, plus share photos, videos and large files to anyone with an active WhatsApp account.

What should I do about Medicare?

Original Medicare does not provide coverage beyond U.S. borders, and some Medicare Advantage plans offer only worldwide benefits for emergencies. If you are a senior moving to another country, should you keep it or opt out?

In our 16+ years living in Cuenca, we have seen innumerable instances of people arriving with the intent of never living in the United States again. But a personal health emergency arises. Grandchildren tug at the heartstrings. Or being an expat doesn't turn out as expected.

And they find themselves on a plane heading home.

Initially refusing Medicare and applying later, or canceling and reapplying, triggers a late-enrollment penalty. For every year without Part B coverage, you permanently add an extra 10% to your current monthly premium.

Example: You opt out and re-enroll 10 years later. You've added an extra 100% (10% x 10 years) to your payment as long as you continue coverage.

Our strong advice is to enroll in Medicare when you become eligible or, if you are already receiving benefits, continue your coverage when you move abroad. You never know what the future holds.

Should I close my U.S. bank account?

We don't recommend rushing to close your U.S. bank account because you may find it extremely useful when living abroad.

You can pay existing installment and revolving debt, receive Social Security payments (more on that next), handle tax payments and refunds and transfer money between countries.

This isn't an either/or decision. A local bank account in your new country can be helpful. Our Ecuador savings account simplifies daily life since we have it set up to automatically pay ongoing bills for utilities, cellphone service and internet.

Where should Social Security be deposited?

The choice is up to you. The Social Security Administration will deposit benefits into a U.S. bank even if you live overseas. The SSA also offers international direct deposit into financial institutions in many countries.

If you are concerned about constantly transferring money from the United States and paying foreign transaction and/or ATM fees, international direct deposit could be more convenient.

Look for banks that allow you to receive Social Security payments abroad without service charges or foreign transaction fees.

What about credit cards?

When you reside outside the United States, your credit history doesn't follow you. That means you can have decades of spotless credit in America and still be a ghost to a financial institution in another country.

For this reason, obtaining a credit card abroad can be difficult when you first arrive. The same is true for mortgages. Home purchases often require all cash, and in countries that do offer mortgages to foreign buyers, be prepared to put up to 50% down and pay higher rates.

To keep your credit score active, retain and continue to use at least one U.S. credit card. We recommend using one that doesn't charge foreign transaction fees.

Don't forget Uncle Sam

Leaving the United States doesn't mean waving goodbye to the U.S. tax system. American citizens living abroad generally remain subject to U.S. tax-filing requirements on worldwide income.

Opening a local bank account can also inadvertently create additional reporting obligations. If the combined value of your foreign financial accounts exceeds $10,000 at any point during the year, you may have to file a Foreign Bank Account Report (FBAR).

Depending on the value of your total foreign assets, other reporting requirements can apply as well. Consulting a tax professional experienced with Americans living overseas about your personal circumstances is advised.

Your homework assignment

Going on vacation temporarily gets you away from your regular life. When you move abroad, you are relocating that life.

Along with fantasizing about exotic locations and charming apartments, we encourage you to spend some time on the boring yet important daily life stuff.

Renew your passport. Organize your phone number and mailing address. Evaluate Medicare options. Decide where Social Security payments will go. Protect your U.S. credit history. Understand your tax obligations.

Then go back to looking at those beachfront condos with beautiful views and trendy historic lofts, all the while dreaming about your future adventures.

Take it from these two longtime expats - it's all worth it.

-Edd and Cynthia Staton

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10-16-26 1100ET