You’ve worked hard for many years and now it’s time to kick your feet up and enjoy your retirement. The question is, should you stay in South Africa or head abroad?
Moving overseas is a great adventure, but while picturing yourself sipping cocktails on a beach or taking leisurely strolls through exotic marketplaces, it’s easy to get too swept up in the excitement. Leaving your current life in favour of something different can be incredibly rewarding, but it’s a big decision that shouldn’t be taken lightly.
Here are a few factors to consider before you commit to the big move.
Residency and visas for retirement abroad
Your choice of where to retire will likely be constrained by which visas and emigration options you qualify for.
- Residency- and citizenship-by-investment. The easiest way to retire overseas is through an investment visa. These visas, often known as “golden visas”, are offered by governments to encourage foreign investment. You can usually qualify by either purchasing property in the country or by making a large capital donation. In exchange, you’ll be given permanent residency and sometimes a full second citizenship.
- Digital nomad visas. These are visas aimed at those who are earning foreign income. For example, someone who is earning a living through social media or a website. As pensions count as foreign income, these visas are often perfect for retirees too.
- Passive income or retirement visas. Some countries have visas specifically aimed at retirees or those who can earn income without working. For example, Portugal’s D7 visa.
- Visas through family. If you had a parent or grandparent born in your country of choice, you might be able to apply for a visa that allows you to live and work in the country and eventually claim citizenship. For example, the UK Ancestry visa. Other countries, for example Australia, grant visas to parents of citizens.
It’s important to consider the long-term when applying for a visa, as some visas only offer temporary residency, and you don’t want to be forced to uproot again when the visa runs out. It’s also important to compare how much different visa routes might cost, the time you’re required to stay in the country in order to qualify for permanent residency or citizenship and the timeframe — how long the visa application and processing will take.
When considering where to spend your golden years, bear in mind that going somewhere on holiday and living there permanently can be very different.
Ask yourself: Is the weather very different from where I currently live? Am I willing to adapt? For example, moving further north might mean you have to get used to whole months of snow. Moving to an island in the Caribbean might mean white sand beaches some of the time, but also hurricanes and tropical storms in the off-season. Weather conditions can have a large effect on our overall happiness.
Religion and personal freedoms
Look into whether you’ll be able to freely practice your religion and if there are any other local laws or customs that you don’t agree with or will make it difficult for you to fit in. South Africa has the benefit of being a diverse country with many freedoms enshrined in the constitution. As a result, we’re sometimes unprepared when this isn’t the case in other countries that we’d like to call home. Some of these laws might be easier to live with than others. There’s a great difference between not drinking alcohol when out in public, for example, and the country having laws against you being with the person you love.
Part of the appeal of travelling to somewhere new is getting to experience new cultures and customs. But, once again, there’s a difference between experiencing these briefly or living them. Read up about the people and about what behaviours are expected before you decide for certain on a retirement destination. In some places, it will be considered rude if you do not know the local language, for example. While in others, the most you’ll have to worry about is rooting for the wrong rugby team (or using the word “rooting” — which is considered very rude in Australia!).
Once you’ve chosen a location, finding an expat community on Facebook or other social media before you arrive can prepare you and help you feel at home once you land.
Easy access to home comforts
One of the things that South African expats miss most when overseas is our food. Food is a factor – what do the locals eat, what is manufactured locally, what food is affordable? But home comforts go beyond whether Mrs Balls chutney is easily available or not. There are many types of products and experiences that we rely on for our day-to-day happiness. Research whether you’ll still be able to do your favourite hobbies and whether it’s possible to source your favourite brands locally.
It’s also worth considering this when choosing a location within a country. An idyllic vineyard two hours from the nearest town might seem like a dream come true… until you need to do grocery shopping and there’s no Takealot, let alone Amazon.
Related to the above, living on a quiet hill with a gorgeous view in the middle of nowhere is an appealing fantasy, but it might not be the wisest reality. Living in a new country can be isolating enough and you’ll want to have easy access to services, medical help if needed, and expat communities that can make you feel welcome and help you get settled.
When choosing a country, also consider how easy and affordable it might be for your loved ones to come visit you, especially if you have grandchildren who you would like to see often.
South Africa’s public healthcare may not be known for its high standards, but it is free. We also have the option to use private healthcare if we desire it. This choice is not possible in every country.
In your retirement years, when you are more likely to need health services and be on a limited budget, it’s important to consider the quality of healthcare you’ll be able to receive in your new home and its cost.
Many top retirement destinations do offer free healthcare that’s of a high standard, but sometimes you must have permanent residency or citizenship before you can make use of it.
Tax and financial factors to retiring abroad
Will you be able to continue working?
Some retiree visas do not allow for you to continue working and only allow a passive income — your pension and any other investment income.
If this is the case, you will need to work out whether your passive income, when converted to local currency, is enough for you to comfortably live on. Generally, even if you can work in your country, it’s better to ensure you have enough to live on regardless as it takes time to set up a new venture, especially if it’s in a different jurisdiction. That way, any extra you make can go towards luxuries and you won’t have to deal with the stress of wondering whether you can make ends meet.
Tax residency and double taxation agreements
When you start living abroad, your tax residency will likely change. This means that you will need to start paying tax in your new home.
South Africa has a number of agreements with other countries to prevent South Africans having to pay tax on the same income twice. Look into whether the country you wish to relocate to has this type of agreement with SA, as it could make a large difference to the size of the pension you take home. It’s worth taking the time to get advice from a tax practitioner with experience in these matters.
Some countries offer tax incentives for foreigners. For example, Portugal has the non-habitual resident tax regime (NHR) that means you only need to pay 10% flat rate tax on your pension for your first 10 years living in Portugal. It’s worth finding out if your country of choice has such incentives.
Different countries have different laws about who automatically inherits (if there is no will) and also what tax must be paid. If you have a complex family situation, it’s important to consider how your estate will be impacted if you relocate and to make necessary allowances. How will relocation affect the trusts you have set up, if at all? Will you be able to leave the new assets you acquire in your new country to your nearest and dearest?
South Africans are no strangers to the ups and downs in currency value. However, there’s an extra layer of complexity when you’re being paid a pension in one currency while receiving it in another. Ensure there’s enough of a margin that you will still be able to live within your means should the Rand become weaker. You might consider transferring your pension or retirement sum into an offshore living annuity or another vehicle that offers more stability.
See also: Retirement funds – what to do when emigrating?
It’s essential to look at your assets and investments before you leave South Africa as it will likely be necessary to restructure while you’re still resident in SA. Many of the policies and vehicles you currently have will not be suitable when you leave the country.
- Endowment policies – these provide tax benefits for South African tax residents, which will fall away when you leave.
- Dividends and interest – these are taxed differently in different jurisdictions and sometimes Double Taxation Agreements don’t apply.
- Capital Gains Tax – you might be charged capital gains on assets and investments when you leave SA and might be charged again if you redeem them after you’ve moved.
These are just a few of the many ways your investments might be impacted. You should get advice from a cross-border financial adviser who can look into your unique circumstances.
The Sable International Explore Analysis and Report gives you an overview of all your citizenship and relocation options alongside an in-depth lifestyle comparison and financial planning. When making one of the biggest decisions of your life, don’t go in blind. Talk to us and we’d be happy to help you chart your route to global citizenship. Get in touch at +27 21 657 1507 or firstname.lastname@example.org.
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