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Managing Your Investments Abroad

Technology has made it far easier to live the expatriate life glamorized in the works of Ernest Hemingway and F. Scott Fitzgerald, among other artists and writers.

You can gather information about a foreign country by spending a just few minutes online; buy or rent real estate anywhere in the world from your home office; and, in many professions, work remotely wherever you have an internet connection. Plus, mobile devices keep you connected to your family and friends – and your money – at all times.

All of this certainly benefits the many retirees who plan on taking extended trips or living overseas for parts of the year. According to research profiled in the trade publication Travel Market Report, 3.3 million baby boomers plan to retire abroad. The retirement goal of travel or the desire to live in warmer climes alone doesn’t account for the exodus outside the United States.

Retiring abroad can be a good financial decision because of the cheaper cost of living in some countries. For example, International Living’s Global Retirement Index 2014 shows a retired couple can live comfortably in Ecuador for $1,500 to $1,800 a month. The average monthly Social Security benefit in 2013 was over $1,200, which means a retired couple could actually live abroad on Social Security alone. By lowering your living expenses, it’s possible to decrease the income you need from your portfolio and extend the longevity of your nest egg.

Does that mean living abroad in retirement requires you to chart a different course when it comes to managing your investments?

Generally, no. After all, your investment portfolio’s asset allocation and withdrawal rate should be determined based on their ability to help provide the income stream you need over the length of your retirement to fulfill future financial needs and goals, including travel. And, in order to capture the potential long-term returns from your investments, you should stay the course, whether it’s from an island in the Pacific or along the cobblestone streets of Old Europe.

One thing not to forget, other than your passport, is to periodically rebalance your portfolio to return your assets back to your desired target levels. However, you should discuss a rebalancing strategy with your investment adviser prior to departure.

Social Security is another retirement income source you generally can still tap when you’re overseas. As long as you remain a U.S. citizen, you can have payments directly deposited into your bank account. However, the U.S. Treasury has restrictions against sending Social Security payments to certain countries.

There are some special considerations to keep in mind if you plan to retire abroad. For one, it is important to stay up to date on the economic conditions of your host country. Currency exchange rates and inflation will affect the value of your money and your budget.

Additionally, health care is a primary concern for most retirees, and Medicare will not cover medical treatments you receive in another country. Several countries provide national health systems that are accessible to foreigners; although, it is recommended you investigate the costs and quality of services beforehand. Of course, retirees can keep their Medicare plan and return to the U.S. for medical attention as needed.

Finally, remember the U.S. taxman has a passport, too. That is, as a U.S. citizen you are still required to pay U.S. tax liabilities and file an annual return with the IRS. You may also owe taxes to your host country. To find out more about your potential tax liabilities overseas, consult your tax adviser and/or the IRS.

To help ensure a smooth experience managing your investments while abroad, simply exercise basic travel preparations. That includes alerting your bank, credit card companies and financial adviser of your departure and providing all necessary contact information. This will prevent a potential hold on your accounts from suspected fraud due to international purchases.

Some U.S. banks have locations or specific banking partners near your destination. If you choose to open an account with a local bank, be aware of U.S. regulations that require you to report assets held in foreign bank accounts. While ATM machines are generally found throughout the world, they do have withdrawal limits. In case of an emergency in which you need greater sums of cash, an alternative may be withdrawing from your investment accounts. Therefore, keep all cards and account information – account numbers, logins, passwords, etc. – in a safe but accessible location.

Your investment portfolio should be appropriately designed to help fund your retirement, wherever you decide to rest your head. Therefore, managing your investments abroad shouldn’t be any more challenging. Worrying about money at home is stressful enough; it's definitely not the type of baggage you want to bring with you overseas.