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Expats with second thoughts: Pandemic puts retiring abroad in a new light

Until the pandemic, the number of Americans choosing to retire abroad had been climbing. That trend could slow down or even head in reverse.

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San Miguel de Allende, Mexico. Photo: Getty

The pandemic is forcing some to put expat life on hold, or return home years earlier than they had initially planned.

When the borders between the United States and Mexico closed because of the coronavirus pandemic, Hernán Drobny and Ann Barden decided to remain — at least for now — in their San Miguel de Allende home rather than return to Michigan.

Drobny, a retired physician, asked local doctors if they would provide care should the couple come down with COVID-19. He looked into home delivery of oxygen tanks, purchased hydroxychloroquine and azithromycin and made inquiries about in-home nursing.

More than two months later, Drobny is convinced it was the right call.

“We have some sadness in feeling constrained, not seeing family and friends, and feel a bit stranded,” he told the Washington Post. But had they returned to their second home in Michigan the situation would have been the same, just colder, he said.

The coronavirus pandemic has forced many American expats to weigh their financial situations, access to health care and the prospect that cross-border movement could be limited to essential travel — cutting them off from loved ones.

About 1.4 million American retirees receive Social Security payments abroad, though that figure may not include those who split their time between another country and the United States.

Until the pandemic brought vacation life to a grinding halt, the number of Americans choosing to retire to other countries had been climbing over the last few years, said David Kuenzi, a partner at Thun Financial Advisors in Madison, Wis., which has more than 500 Americans abroad as clients.

Kuenzi now expects a slowdown, and possibly a reversal of the trend.

“If you’re elderly and high risk and think ‘If I get this I might need ventilation,’ then maybe the United States is the better place to be,” Kuenzi said. “As of right now, a lot of people who were planning a retirement abroad are putting those plans on hold.”

Olivia Mitchell, a professor at the Wharton School of Business at the University of Pennsylvania who studies pension, Social Security and retirement security, said that retirees tend to stay abroad until their health begins to deteriorate. Then, the United States becomes attractive again, because of the availability of health care and the proximity to family.

“There is a reverse flow to be closer to kids,” Mitchell said. “This epidemic may hasten that return flow for people on the edge of that, who are starting to struggle with taking care of themselves.”

For retirees already abroad, many of whom are considered high risk for severe illness with covid-19, the decision to stay or go home is personal, based on health, savings and the potential for social and economic upheaval in their adopted countries.

Retirees whose wealth and income is largely derived from U.S. investments need to factor in a potential drop in income from their investments or retirement plans and make sure they have a financial buffer.

“Cash is king, so ideally you’ve got a lot of savings,” said William Jordan, the incoming president of the Association of American Residents Overseas and a retired American diplomat living in Paris. “Having that cushion is key for any retiree, but especially for retirees abroad in times like this.”

It also makes sense to review health care in their retirement destination, Jordan said. “The coronavirus is acting as a test of health systems all around the world, and how they cope could affect whether people choose to retire overseas,” he said.

And then there are security considerations. “Billions of people are out of work in many countries,” Mitchell said. “Food security is declining and corruption, bankruptcy and thievery are clearly going to become more of a concern.”

Drobny and Barden are already beginning to factor those concerns into their plans. The couple expects to remain financially secure even as U.S. and global markets experience a significant downturn.

But Drobny does worry that economic instability might trigger social unrest in Mexico, where many locals who are dependent on the informal economy, working as housekeepers, gardeners and in other service industry jobs, are now out of work.

“People, when they’re desperate, do desperate things,” he said. If safety becomes a concern, he said he and his wife will return to the United States.

For others, money is more of a concern. Ava Wilson, 72, and her husband moved from the Denver area to Lake Chapala, Mexico in 2008, after losing most of their savings in the stock-market crash. They sold their home in a short sale and bought a modest home in Lake Chapala that they have fixed up over the years.

The year they moved to Mexico, Wilson fell off a ladder. The couple did not have health insurance, and the accident cost them $30,000. They still have money in the stock market, but Wilson says they cover most of their living expenses through Social Security.

While they love Lake Chapala for its climate and easy living, they have talked about leaving Mexico. Wilson misses her grandchildren, the Internet is often spotty and simple tasks, like paying a phone bill, can be frustrating.

“For a short time we talked about having an escape plan,” she said. “We don’t know where to go where you can afford this lifestyle with fresh, clean air. Where do you go where you can live on your Social Security?”

Condensed from a story that appeared originally in The Washington Post.

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