Experiences from early retirees, please comment
or took early retirement to get right out on the journey,
pleas comment on how it worked out for you.
Recently the relatively low cost of health insurance when purchased as part of a travel insurance package caught my eye. So I began to wonder about the possibility of starting retirement early with a RTW trip.
We have a few years to plan.
Be Appropriate && Follow Your Curiosity
My retirement plan is to head out and live off my retirement; backpacking the world with no particular destination or timeline.
I figure that I can easily move around off $3,000/month. I'm also selling everything that I've amassed over 48 years. What will be left will fit in my backpack, and into a small trunk that I will securely store someplace.
My medical is covered already as part of my retirement, and I will pick-up yearly, on-going medical evacuation insurance to cover me if i run into a bit of trouble.
I have to sort out how I'm going to pay taxes while I'm wondering, as well as a few other legal obligations.
Other than that, this is what I've worked for, and now it's time to enjoy.
Empty-handed I leave it
Two things that became entangled.
That's the big question, if you have lots of money or a good inflation linked pension plan then no problem but if not you need to consider and take into account inflation on your savings and the fact that you could have medical problems later on.
Our income in the last few years as reduced considerably because of the financial problems in the UK my husbands pension was reduced twice because he was under 65.
Once you get over 65 and you have medical problems like I have just the medical travel insurance is sky high. For my husband and I for our last trip which was 3 months this last winter it cost us almost £700.
Our problems don't stop us traveling and we consider ourselves very lucky but you never know what is round the corner.
In my experience, a lot of people move to what they think is going to be a cheap paradise only to find it isn't for them. The biggest mistake they make is buying a home in 'paradise'. Approximately half return home within 2 years and over 80% probably within 5 years.
So what that tells me is that you should not move and buy anywhere until you have lived there at least a year and preferably two years. After the 'honeymoon' period ends. There is no way to know whether you will adapt or not other than to try it. The biggest problem for people seems to be simply the differences. Not good or bad, right or wrong, just different. It takes a couple of years to find out if it is for you. Rent, Rent, Rent. Buying a house is a whole lot easier than selling one, the locals know the score. I lived in one country for 7 years and saw a lot of people arrive and a lot of them leave again. Not one left with more or as much money as they arrived with.
Perpetual travel in retirement is not likely. The reality is that you get tired of it after a while and need some stability and structure in life. For that reason, the best way in my opinion is to have a base you can afford and to take trips as often as you want from there.
The practical considerations also have to be addressed when looking at a base. If you are from a country with free or nearly free healthcare such as the UK or Canada, going elsewhere can add a big cost onto your outgoings in health care coverage.
You also need to consider future pensions. A lot of people who retire early and move to another country get a surpise when it comes time for their government old age pension from their home country to kick in. Many are based on residency and if you have been out of the country for the last 10 years, that may be 10 years you don't get credit for. The UK and Canada both have rules along this line for example. Canada pays CPP based on what you paid in during your working life. It isn't effected. But Canada pays OAS on years of residence after age 18 with 40 qualifying years being needed to get the full OAS pension. Each year less means you get 1/40th less pension. So retire at 50 to Mexico and at 65 you discover you are only eligible for 32/40th of the pension. Also, you need to have lived in Canada for the year (or two I'm not sure) before you apply !
The UK NI pension is based on income AND years of payment. So a similar situation can occur.
Another issue is exchange rates. If your income is derived in one currency but you are living in a country with a different currency then your monthly income will fluctuate with the exchange rate. Many people from the UK who moved to Spain have discovered just how much it can fluctuate to their detriment. They have been returning to the UK in droves in the last few years simply because their income in Euros was no longer enough to live on. Returning to the UK they are eligible for a lot of government assistance.
Early retirement and extended travel or moving abroad requires a lot of homework ahead of time if you do not want to get a rude awakening down the road.
Hedonist wrote:I The UK NI pension is based on income AND years of payment. So a similar situation can occur.
The UK state pension has no basis on income and is based entirely on years of payment. If you leave the UK then the pension may or may not be adjusted for inflation depending on the country in which you reside. If you are a perpetual traveler and don't reside in any country than it wouldn't be adjusted.
P.S. In October, we went to northern Italy and southern Germany. In April we'll go on a cruise.
Circle of Life - The Lion King
You're right about the UK pension not being index linked depending on which country you retire to. The issue has been taken all the way to the House of Lords with no results. There are plenty of links online that outline the situation and there are groups that are still fighting to get it index linked regardless of what country someone retires to.
I think the big obstacle is that those whom it affects are by geography no longer voters and so lose their clout so to speak. The irony is that they can show that the cost to the government of someone who remains in the UK and is retired costs them more than someone who leaves and has an indexed pension. You'd think they would encourage people to leave. LOL
It's also somewhat ironic that the countries where index linking is not paid is primarily the Commonwealth countries like Canada and Australia. Retire to the USA and it is index linked.
I think the biggest factor that people fail to account for though is the exchange rate fluctuation. Since we moved to Canada 7 years ago (I grew up here), my wife has lost 25% on her NHS pension due to the exchange rate drop during that time.
That's what has driven so many Brits back to the UK from Spain as I mentioned.
1) automatic 25% tax on CPP/OAS even for those with income below the poverty line
2) loss of health insurance
3) $100 surcharge to renew passport
4) being treated like a criminal by the CBSA agents when returning legally to Canada
We're saving the tax-payers thousands of dollars a year in unused benefits/grants & being penalized for it.
It's great to be Canadian EH!!! NOT!!!
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