7 mistakes middle-class Americans make when trying to retire overseas

Retiring abroad has this glamorous ring to it, doesn’t it?

Palm trees, lower costs, fresh adventure. The idea of stretching your dollars further while sipping coffee in a European square or walking the beaches of Costa Rica is undeniably appealing.

But here’s the truth most glossy retirement magazines don’t highlight: retiring overseas isn’t as simple as selling your house and buying a one-way ticket.

As someone who worked in finance for years before turning to writing, I’ve seen the dreams and the numbers. And too often, those two don’t match up.

If you’re considering this move, here are seven mistakes middle-class Americans often make—and how to sidestep them.

1. Underestimating the cost of healthcare

This is the number one pitfall I’ve seen people fall into.

Yes, healthcare costs are usually cheaper abroad than in the U.S., but that doesn’t mean they’re negligible. Many retirees are shocked to discover that Medicare won’t cover them outside the States. That means private insurance or paying out of pocket.

A 2023 survey highlighted by International Living’s Global Retirement Index shows that while routine care in places like Mexico, Costa Rica, and Portugal is affordable, major medical procedures—especially in private hospitals serving expats—can still carry hefty price tags.

The mistake isn’t assuming care is impossible to afford. It’s assuming you won’t need serious care. Let’s be honest: aging comes with curveballs. Planning for them is not pessimism—it’s survival.

2. Ignoring visa and residency rules

Have you ever noticed how many people think they can just “figure it out” once they get there?

Visa laws aren’t flexible guidelines. They’re legal requirements. Overstaying or working under the wrong visa can lead to fines, deportation, or losing the chance to return.

I knew a couple who moved to Spain with plans to “sort out residency later.” They ended up back in the U.S. within eight months—broke, stressed, and disappointed.

Before you pack a single box, research the residency requirements of your chosen country. Some require proof of a certain monthly income. Others require hefty deposits. And some take years before granting permanent residency.

Skipping this step is like starting a marathon in flip-flops. You’re not setting yourself up to finish.

3. Romanticizing the exchange rate

At first glance, retiring in a place where the dollar is strong feels like winning the lottery. But currencies don’t stay static.

I once worked with a client who retired in Ecuador when the dollar stretched beautifully. But within five years, local inflation and global market shifts erased much of the advantage.

Here’s the psychological trap: we latch onto today’s numbers and assume they’ll last. Behavioral economists call this “anchoring bias”—clinging to the first figure we see.

Instead of building a retirement plan around today’s rate, ask: “What if my money only buys 20% less here in five years? Could I still live comfortably?”

If the answer is no, you’re gambling, not planning.

4. Forgetting about cultural adaptation

“Travel is glamorous only in retrospect,” wrote Paul Theroux.

Living abroad isn’t the same as vacationing there. What feels charming during a two-week visit can become frustrating when it’s part of your daily life.

Bureaucratic offices that move at a snail’s pace. Stores that don’t carry the brands you’re used to. Locals who are kind but view you as an outsider.

I once met a retired teacher who moved to Portugal. She adored the landscape but quietly confessed: “Some days I just miss having conversations where I don’t have to search for words.”

This mistake isn’t about failing to learn the language (though that helps). It’s about underestimating how deeply culture shapes our sense of belonging.

If you’re planning to retire abroad, spend extended time in your chosen country first—three to six months minimum. You’ll quickly see if the lifestyle matches your reality, not just your daydreams.

5. Overlooking tax obligations

It sounds boring, but taxes are the silent budget-buster.

Americans are taxed on worldwide income, no matter where they live. Yes, there are foreign tax credits and exclusions, but they don’t wipe out everything.

As noted by the IRS itself, “U.S. citizens must file a U.S. tax return regardless of where they live.” Many retirees don’t realize this until they’re already tangled up in penalties or paying accountants to sort out the mess.

Here’s a simple step most people skip: talk to an international tax advisor before moving. They’ll help you understand if your retirement income—pensions, Social Security, 401(k) withdrawals—will be taxed twice or if treaties will soften the blow.

Skipping this is like ignoring termites in a wooden house. The damage creeps up slowly until it’s too late.

6. Assuming your social circle will stay the same

One of the hardest truths? Retirement abroad can be lonely.

Friends and family may visit at first, but over time, the distance wears on relationships. Grandkids grow up, siblings age, friends drift. You’re suddenly the one who has to make the 12-hour flight home for weddings, funerals, or emergencies.

As psychologist Susan Pinker has noted, “The most significant predictor of a long life is social integration.” Translation: your relationships matter as much as your diet or exercise.

I’ve met retirees who underestimated this and spiraled into isolation. Others thrived because they invested in building local networks—joining clubs, volunteering, or befriending other expats and locals.

Ask yourself: How will I create community abroad? If your only answer is “Facebook groups,” you may be setting yourself up for disappointment.

7. Believing a lower cost of living means no budgeting

Here’s the final trap: thinking “cheap” means “easy.”

Sure, many countries offer a lower cost of living than the U.S. But lifestyle creep happens everywhere. Expats often spend more than locals because they chase comfort—imported foods, private healthcare, air conditioning, and frequent flights back home.

I’ve seen retirees burn through savings at alarming rates, not because the country was expensive but because they lived like they were still in America, just in a sunnier climate.

A lower cost of living is a gift, but only if paired with discipline. Create a budget, track expenses, and revisit your financial plan regularly. Otherwise, the money that looked like it would last 30 years may evaporate in 10.

Final thoughts

Retiring overseas can be one of the most enriching experiences of your life. But it’s not a fantasy postcard—it’s a major financial and emotional decision.

The middle-class dream of stretching your retirement funds in another country is possible. But only if you treat it like a real plan, not a leap of faith.

Do your homework. Anticipate the hidden costs. And most importantly, ask yourself not just, “Can I afford it?” but “Will this actually make me feel at home?”

Because in the end, retirement isn’t just about where you live. It’s about how you live.