Easing into Overseas Retirement

Easing into Overseas Retirement

An increasing number of retirees and seniors close to retirement age want to move to warm, sunny locations. Money matters such as cost of living and tax, health, lifestyle and safety are high on the list of retiree priorities. This segment of the market prefers a location that offers a variety of activities, sporting options and natural beauty such as beaches, nature reserves, and walking and cycling trails. This group of people, which include millions of Baby Boomers, want to balance independence with access to necessary care and proximity to an international airport to allow them to stay in touch with loved ones. Importantly, they want to make their pensions stretch, and eliminate unnecessary costs and taxes.

For the majority of those who want to make a move overseas, the option is to buy a home abroad. This does beg the question: why would someone who has spent the majority of their working life paying off a mortgage, immediately tie up a large part of their available cash or take out another mortgage on entering retirement? Purchasing real estate is seen by many retirees as a ‘safe’ step, because they are reinvesting their hard-earned cash into real assets. While real estate is generally an excellent long-term investment, the fundamental difference between working and retired life is the question of predictability, which means that the ability to access cash in the case of an emergency becomes more important as age increases.

After, or even in the period leading up to retirement, as health costs increase, and with pensions lower than salaries, tying up a significant portion of wealth in fixed assets makes less and less sense. Many individuals argue that having assets which they can pass on to their next of kin, or a guarantee of a roof over their heads should any emergency occur, gives them peace of mind. However, this hides the fact that to achieve either objective often implies a large sacrifice in terms of the quality and standard of living. In many cases, those who invest in real estate have done so while still on a regular wage or salary, and have failed to account for the effects of a lower pension and higher healthcare costs. They may find themselves in a situation where a monthly shortfall of cash is difficult to make up if most of the capital is tied up in fixed assets.

Baby Boomers in general possess the financial muscle to choose their retirement location. Many are buying a retirement property away from home, severing all links with their home country or community without first experiencing their new life and seeing whether or not they adapt to a new location and lifestyle.

The risks are varied: you may not like a new country or location, the lifestyle may not be right, making new friends is not as easy as you think, healthcare concerns might be better resolved with your own doctor, you may miss the culture back home or don’t get to see family as often as you would like, or you may simply not like the food. There is a need for flexible solutions for the 50+ market, especially for seniors migrating between countries or regions of the world.

Europe lags the USA, Australia and South Africa in independent living solutions for the 50+ market. There are almost no options available for those who do not wish to purchase real estate, except for renting an apartment or villa with few neighbours and little immediate local support.

To address this gap in the market, it is expected that solutions that sacrifice none of the advantages of a real estate purchase in a Mediterranean but offer the advantages of flexibility, choice and to the extent possible, tax efficiency, will emerge over the next few years.

Author: Luis da Silva

Algarve Senior Living

For more information, please contact Luis da Silva on +44 208 144 7558 or luis.dasilva@algarveseniorliving.com