Managing your money when you retire overseas
By Tom Watson
In 2012, newly retired schoolteacher Laurie Lumley and his wife Jill packed up their life on the South Coast of NSW and moved to the Philippines.
From the ocean-facing balcony in their new home 50 kilometres outside Cebu City, Lumley reflects on how different life would be had they stayed in Australia.
"In Australia, we could see the water, but we were probably about two kilometres back from the beach," he says.
"It's also so cheap here compared to Australia, where costs have basically gone through the roof. This is my dream come true, but there's no way we could afford this in Australia."
The Lumleys are part of a cohort of Australians, estimated to be in the tens of thousands, who have opted to spend their retirement overseas. With travel returning to pre-COVID norms and life here becoming more expensive, more Australians could be eyeing off a move abroad to get the lifestyle they want at a cheaper price.
"Jill has a lot of family here: she's got three sisters and her mother here, plus countless cousins, nieces and nephews," says Lumley of their decision to stay.
"When we moved in 2012, I had originally intended to go back to Australia for six months of the year to spend the summer there, but I just fell in love with this place.
"On days like today, we'll sometimes go down and have a dip in the morning and the dogs will go for a swim with us, and then we'll just get on with the day."
While retiring overseas can certainly sound blissful, it isn't as simple as packing up and booking a one-way ticket. There's a lot to think about logistically, including the finances.
Here are three areas worth thinking about before taking the plunge.
1. Super and pension
Whether they're planning to live in Australia or abroad, one of the first questions anyone approaching retirement will need to contemplate is how they're going to pay for it.
"The main financial consideration is the ability for someone to leave Australia and maintain their lifestyle overseas and how they're going to do that," says Natallia Smith, director and principal financial adviser at TruWealth Advice. "You are obviously able to take money out of your super, tax free, when you hit 60, which is great. And you can relocate to another country and take that money with you, or you can keep it in Australia and continue to receive that income overseas as well," she says.
For many retirees, their retirement funding will also be bolstered by the age pension - and this is where it can become more complicated for retirees living abroad.
"If you do decide to go and live overseas permanently, you will continue to receive a pension, but it will be at a reduced payment," she says. "It really does depend on many different factors, though, because there are some complexities around social security payments."
According to Services Australia, the maximum annual pension rate available to a single person living outside Australia is currently $25,038.20, while for someone in Australia it's $27,664.
Meanwhile, for an eligible couple, the maximum rate is $37,845.60 if they're living abroad compared with $41,704 in Australia.
On top of that, overseas retirees may also receive a reduced rate depending on how long they were an Australian resident and if they're receiving social security from the country they've retired to.
2. Overseas banking
Retirees will also need to think about any new financial needs. They'll need to ensure they can easily access their super or pension payments abroad and facilitate their new day-to-day expenses. For Lumley, the solution has been to keep an active bank account in Australia along with new accounts in the Philippines.
"My superannuation just goes straight into my Australian bank account and I transfer it through a remittance company over here," he says. "I can request a transfer from my account in Australia and that'll be in my bank here by the afternoon. It's that simple."
While Lumley has his own banking set-up operating smoothly, a recent study by HSBC found that many people moving overseas weren't so confident.
"Our survey showed that just under half of those who plan to relocate have no idea how they'll manage their finances between countries when they move," says Jessica Power, HSBC's head of wealth and personal banking for Australia.
"Not having a bank account or a credit card, for example, meant that people really struggled to set up essential services, something simple like a mobile phone, or to set up their utility bills as well.
"It's important that people do their research and understand the costs involved in setting up their new life to ensure they've got enough savings in place," says Power. "Also, what is really important, and many banks do this, is setting up a bank account before you leave."
3. Access to health cover
The affordability and availability of healthcare will be a major consideration for retirees considering a move abroad. Ultimately, this will come down to country of choice, because the cost and quality of healthcare varies greatly around the world.
Australians who have resident or citizen rights in the new country might be able to rely on any public healthcare available while others may have to pay for access. Health insurance through an international insurer may also be an option - though an expensive one.
For Lumley, the cost of hospital and medical care is one of the few downsides to retirement in the Philippines - and that's even with access to the national health insurance program PhilHealth.
"If something bad happened to me, I would have to get back to Australia if I could because it's pretty expensive over here," he says.
In Smith's experience, concerns about healthcare are one of the major contributing factors that end up pushing people who have started their retirement overseas to return to Australia.
"When people reach 75 and their 80s, in particular, that's when proximity to healthcare and other kinds of services become really important," she says.
"And if they don't have a very good social security system or medical system in the country they're in, and they don't have the support of relatives, it can become really difficult."
At the end of the day, this is one of the reasons why Smith encourages retirees to try before they buy, and to seek the advice of experts to get a true idea of what they will and won't be entitled to.
"I think what's really important is going to live in your country of choice as a tourist, or on a semi-permanent basis, first, because there are so many considerations to make," she says.
"Then finding out about social security is obviously important and whether you'll be able to receive any support from the country, and any considerations you'll need to make from a tax point of view.
"I would go and see a local professional for advice on those questions and whether or not you'll be able to bring in any assets to the country and how that may work.
"If you do have a bit of complexity when it comes to your financial position, it's quite important to get that advice from a professional in that country, not just in Australia."
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