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Retiring abroad requires transferring pension funds and managing international finances. Money transfer companies offer better rates and lower fees compared to banks, helping to preserve your retirement savings. Consider a multi-currency account for flexibility and to avoid frequent conversion fees.
Travelling, or moving abroad more permenantly, is on the checklist for many in retirement.
Either way, you'll need to bring money with you across the globe, and likely spend it in a foreign currency.
This currency conversion opens the door to hidden costs & high fees eroding your retirement nest egg.
Thankfully, there are smart ways to transfer your savings, residual income and pensions to your new location cheaply & easily.
How to transfer retirement savings & pensions
When making the conversion from US dollar to your new destination currency, follow these tips:
Avoid the banks - while convenient, their rates can be up to 5% worse than money transfer specialists. Use a dedicated transfer company and you could save thousands
Compare before you send - there are dozens of money transfer companies to consider. The cheapest today might not be tomorrow. Use our rate search tool and you'll know where the best deals are each time.
Consider a multi-currency account - these accounts make international transfers easy, but also help you manage and spend your money like a local.
Social Security, private pensions & 401k distributions
Many retirees rely on regular withdrawals or payouts from their retirement funds.
Whether you receive 401k, Roth IRA or Social Security payments, it's usually possible for them to be made to an international account.
You can also choose to keep your US bank account open, receive the payments into this account, and then move them abroad.
Taxation
Retirement income is usually subject to taxation. Qualifying distributions from Roth IRAs should be tax free.
Don't forget that reporting requirements in the US will still apply, including complying with the Foreign Account Tax Compliance Act, and regular IRS tax return filings.
US income tax will likely apply to both state and private retirement income. There may also be local taxes, however the US maintains tax treaties with certain countries to prevent double taxation.
Take a look into Foreign Earned Income Exclusion (FEIE) and Foreign Tax Credit (FTC), and speak to a specialist tax advisor.
Let's look at an example.
Eric and Sandra are planning to buy a property in Portugal and enjoy their retirement in Europe.
They plan to buy a property for €300,000 using their accumulated savings, while renting out their US house and drawing from their 401k.
Instead of directly wiring money from Bank of America to the property lawyers, they used a currency broker like Currencies Direct. Their saving was almost $7,500, as the exchange rate offered was substantially better than their bank.
For their ongoing pension withdrawal and rental income, payments were made to a multi-currency account. This allows them to hold US dollars, and convert to EUR at any point for a low fee.
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