A study by Edelman Financial Engines shows that many Americans are seeking retirements that don’t link them together. Almost 40% of survey respondents said they wanted a “adventurous” retirement, while 24% said they wanted a “nomadic” lifestyle that doesn’t require a single place to live.
If you are part of 24%, you can create a plan for the retirement of nomads with careful thought beforehand.
Key takeout
Types of nomadic retirement
If you require nomadic retirement, start planning before you stop working. Understand what nomadic retirement means to you. Do you want to live:
Do you travel long stretches at home at a time, 100% of the time on the road, in the US, abroad, or both, at part of the year?
Any of these visions of “nomadic” retirement are possible. Think about what you want, then consult with a financial planner to decide what steps you need to save right now to enable your vision.
Savings for Nomadic Retirement
“We are committed to providing a range of financial services and financial advisors at Cary Street Partners,” said Jill Fletcher, certified financial planner and financial advisor at Cary Street Partners. “An important consideration is healthcare, especially if you travel internationally. Another consideration is to decide whether to maintain your housing situation and home base.”
Fletcher says that if you are pursuing nomadic retirement, managing cash flow and withdrawal strategies for your retirement income will be more complicated. If your living situation is constantly changing, there will be less fixed costs and more variable costs. Also, if you are traveling internationally, you should consider the exchange rate.
A good goal for retirement savings is generally 15% of your income. But “we recommend working towards a 20% goal of total revenue,” Fletcher says. This savings rate is especially important if you plan to travel for the majority of your retirement.
Create a savings plan that takes into account all these variables: emergency situations, taxes, insurance, and other surprising costs.
Should you sell your home?
When you stay in a hotel, living on the road becomes expensive. Here are some ways to keep these costs down:
Buy a comfortable RV and buy while traveling when installing long-term home arrangements that find long-term or international long-term rentals at various destinations
Tip
Eating out is generally more expensive than cooking for yourself. Plan to live in a place where you can at least prepare some of your own meals to keep costs down while traveling.
If you own your home, selling it can make nest eggs that fund the retirement of nomads. However, it is important to think long term before selling. Inflation-adjusted housing costs across the United States have risen by around 65% since 2000 and are still rising. If you sell at retirement, if you have bonds, you may not be able to purchase them again at your current location. Or you may only be able to buy a smaller space.
However, if you are part of 51% of retirees planning to reduce their size during their retirement, buying smaller spaces at the end of their trip may not pose any problem. And if you are planning on traveling for part of the year, reducing it to a smaller space might make the most sense. If you’re just there from time to time, you don’t need such a big house, and funds from the sale of your big house can help fund your trip.
Management of healthcare on the road
If you are planning to retire as a nomad, and find yourself at an out-of-network provider, you may be worried about your healthcare costs being added. However, if you have the original Medicare (parts A and B), you are lucky. As long as you are visiting providers that accept Medicare, you will be covered as follows:
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The original Medicare and Medicare Advantage Plan is required to cover emergency and emergency care across the United States without incurring out-of-network costs. Also, some Medicare Advantage plans offer state-to-state coverage and national pharmacy networks, but not.
Medicare usually doesn’t cover medical expenses overseas, but there is a certain Medicare advantage and Medigap plan that covers emergency care while traveling. If you plan to live internationally during your retirement, you should purchase international health insurance that covers both daily care and emergency costs.
Social security while living abroad
In most cases, if you live abroad during your retirement, you will still be able to receive Social Security Retirement Benefits and Social Security Survivor Benefits, as long as you meet the general eligibility requirements. However, if you live in some countries, the Social Security Agency (SSA) will not make payments.
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If you are a US citizen resident in any of those countries, your unpaid benefits will be retained on your behalf. You will then be paid when you enter a country where you can send Social Security payments. If you are not a US citizen, you will confiscate Social Security benefits for the months you live in Cuba and North Korea.
important
Social Security benefits are calculated in US dollars. Due to international exchange rates, the amount of your profit will not increase or decrease.
If you are outside the US, you can apply for Social Security benefits online and receive them through direct deposits at an international financial institution with an international direct deposit agreement with the US when you start Social Security payments at a US financial institution or overseas. The SSA will send a survey every two years to ensure that you are eligible to receive the benefits. If you fail to answer the survey, you will be considered ineligible and can suspend your interests.
To check if you are eligible to receive Social Security payments while living abroad, you can use SSA’s international screening tools.
Paying taxes
If you live in the United States during your retirement, you will need to continue paying your owed federal income tax, including Social Security benefits. If you meet the income threshold, up to 85% of your Social Security income will be taxable. You will also be required to pay local or state income taxes owed on your retirement benefits. This is generally paid in the state in which you reside, even if you live nomadically.
Even if you live abroad during your retirement, you will still be required to file a federal tax return for your global income in accordance with federal tax laws. However, if you earn income overseas, you may be subject to foreign earning income exemptions or foreign tax credits. However, to qualify for these, you will need to file a US tax return.
You must report your cryptocurrency transactions to the Internal Revenue Service on your tax return. You also need to report your foreign bank account to the US Treasury, even if you don’t generate taxable income.
The rules differ when it comes to state taxes. Each state has its own residential requirements. Even if you currently live abroad, some states may consider you a resident and require you to pay taxes. You may be considered a resident of the state you are in:
Maintain a permanent address for a significant portion of the year registered to vote for driver licenses
To understand your tax obligations while living abroad and traveling, consult a tax advisor who specializes in foreign residents.
Fast fact
If you live and travel abroad, you must also follow the tax laws of the country you are in. Whether or not you need to pay foreign taxes may depend on the length of time you reside in the city or country.
Conclusion
Nomadic retirements allow you to travel and explore in ways that you could not work or raise your family. Planning this type of adventure “really comes down to the lifestyle that someone wants to live in retirement and salvation, depending on their goal,” says Fletcher.
However, this lifestyle can only be possible while you are healthy and do not need assistance with daily tasks. Even if you are planning to retire as a nomad, you will need to plan even if you are not traveling safely or receiving assistance. Whether you want to be in a community with a gradual level of care or plan on aging with your family, make sure you plan a long term retirement, not just for the first few years after you quit your job.
