Should I retire overseas?

Growing trend

According to the ABS, there has been a 47% increase in the number of Australians retiring overseas in the past ten years. New Zealand, Italy, Greece and Spain are the most popular destinations, but expat communities are also swelling in Thailand, Bali, Cambodia, France, Panama and Portugal.

It’s easy to appreciate the financial incentives. If retirement finds you short-changed in Australia, your savings could last longer in a country where the cost of living is lower.

Former nurse Cheryl Fankhauser, 66, is part of a friendly expat community in Malaysia who all “look after each other”. Originally from Tweed Heads, NSW, Cheryl returned home after three years teaching English in China and decided it was time to retire.

“I owned a house in Tweed Heads but by the time I paid insurance, tax and rates, I couldn’t afford to retire there,” says Cheryl. Now, she rents out her Tweed Heads home and investment properties and lives comfortably, paying AUD$600 a month rent for an apartment in an upmarket area of historic George Town.

When Norah Ort retired from her job in an art gallery in Perth seven years ago, she realised very quickly there was no way a single pension and her superannuation would cover even a small one-bedroom apartment in the area where she wanted to live.

“I don’t think I would have been able to afford to go to the theatre, to go to films, to eat lamb and beef, to have expensive heating in my house,” says Norah. “To me, that is not how pensioners should have to live.”

Norah, 72, had fond memories of a year spent in Madrid in the 1960s, so she did a little investigating on the internet. She soon found a house she loved in Martos, a charming village overlooking olive groves in Southern Spain.

Norah bought the three-bedroom, two-bathroom house outright for AUD$60,000 and spent a further AUD$40,000 renovating it. She successfully applied for a Spanish visa and organised for her Australian pension to be paid directly into a local bank. She even took her two beloved Abyssinian cats to Martos with her.

“I can afford the lifestyle that I had in Australia when I was working,” says Norah. “I entertain my friends, I can go out and buy a case of wine, I can buy all sorts of meats that I want to buy, I can do everything I want to do.”

Before you leave

While making an exotic location your new home may sound enticing, there are a few reasons why you should look before you leap. Accessing the Australian pension while living overseas depends on several factors, such as the length of time away, a change in assets and income, and if the pension can be paid via a social security agreement with another country.

Depending on your country of residence and how long you’ve lived there, you may be eligible to split the age pension between Australia and your host nation, but penalties can apply if you want to return to Australia permanently after living abroad.

Travelling outside of the country for as little as six weeks within two years of returning could result in payments being cut. If you’re planning on maintaining income through working while overseas, then tax will also be a consideration.

Health is another significant factor. Australian citizens living abroad for more than five years, and permanent residents living overseas for longer than 12 months, forfeit their right to Medicare payments.

While healthcare procedures can be cheaper in some countries, Australia has excellent aged care facilities and services, so if you’re planning to live out your days on the other side of the world, it pays to check how your proposed destination compares.

For some, family can also be another major consideration. Norah admits moving was easy for her because she wasn’t leaving any grandchildren behind. “Spain is ranked as having one of the best heath care services in the world, and private health cover is affordable,” she says. “I pay just over €2,000 a year so, if I go to hospital or to the doctor, I don’t have anything extra to pay. It covers absolutely every penny and that’s for specialists, surgery, x-rays, everything.”

Norah’s biggest challenge, she says, was learning to speak the language. Now she has fluent Spanish, a whole new circle of friends has opened up for her. “I have no regrets at all [about moving here],” she says. “This is my home and I will die here. My heart is very happy with that.”

Note: The Department of Human Services recommends pensioners considering living abroad for longer than six weeks report their plans to Centrelink. Visit humanservices.gov.au for more info.