For many years a viable retirement strategy has been to sell inflation-lifted assets like homes and businesses in the USA and use the money to buy property and live offshore in economies where homes and the cost of living have been considerably cheaper than in the USA. If you choose this route for your retirement how do cryptocurrencies fit into this picture?
The Details of Retiring Offshore
The main point of offshore retirement is to live in a country where the cost of living is significantly lower than in the USA. Additional advantages may include a milder climate if one moves from the northern USA to virtually anywhere with a tropical or semitropical climate. Things a person will have to deal with include learning enough of a foreign language to navigate a new life offshore as well as learning to deal with local customs,, laws, and a different currency. Avoiding dangerous countries is also a great idea. While health care may be significantly cheaper offshore the availability of a good doctor and advanced care may not be what one would like. Day to day living and paying the bills will require familiarity with the local currency and an efficient way to move necessary assets in order to have money at hand. Remember that Medicare does not pay for care outside of the USA so you will want to find a good insurance plan as well as a good clinic or local doctor who will take payments from that plan. Signing up before you have a condition that would disqualify you from care is important as well!
Colombian Coffee Country Retirement
How Will Your Dollars Convert to the Local Currency?
Fluctuating exchange rates can be a real pain when your savings are in dollars and your expenses are in a foreign currency. As it turns out there are a lot of countries that either use the US dollar or peg their currency to the dollar, These nations include Aruba, Azerbaijan, the Bahamas, Bahrain, Barbados, Belize, Bermuda, Cayman Islands, Cuba, Djibouti, Ecuador, Eritrea, Jordan, Lebanon, Oman, Panama, Qatar, Saudi Arabia, Timor, Turkmenistan and the United Arab Emirates. If you use stable coins to pay for your retirement it will be useful to have your dollar based crypto buy a predictable amount in the local currency.
Crypto Versus Dollars and Visa or Residency Requirements
Many foreign nations welcome American and European retirees providing the retiree can prove that their retirement pension or social security meets moderate requirements. In general such requirements are in dollars, euros or other fiat currencies and not in cryptocurrencies. As such one will need to have and demonstrate assets in dollars, etc. If the retiree then wants to use crypto to live offshore they will need to do this after residency requirements have been proven and residency obtained.
Offshore Crypto Advantages
A genuine advantage of crypto when you live offshore in retirement is that you can transfer money for considerably less than by using a US bank debit or credit card at a local cash machine. By using crypto a retiree can avoid wire transfer delays and costs associated with both US and foreign banks. Another advantage, depending on the offshore location is that many foreign nations do not have capital gains taxes in regard to cryptocurrencies.
Does Crypto Help When Your Expenses Are in a Foreign Currency?
While there are foreign countries whose currencies are pegged to the US dollar, many of the cheapest places offshore to live in retirement do not use the dollar. Thus you need to send money to yourself to pay your bills in Colombian pesos, Vietnamese đồng, or euros in Spain or Portugal. If your crypto holdings are in stable coins pegged to the US dollar then you will have the same rate of exchange issues that you would have had with converting dollars to the local currency. If your crypto assets are in Bitcoin, Ethereum, or another cryptocurrency you will have to deal with fluctuations versus the local currency just like the same cryptocurrency will be fluctuating versus the dollar.
Should You Convert All of Your Dollars to Crypto or a Little at a Time for Living in Retirement?
The issue here is whether you trust the local currency or cryptocurrency your assets are in more. Which is likely to be a better hedge against inflation and which will avoid severe market fluctuations. This gets into crypto as a long term retirement investment on one hand and the relative solvency of local economies and currencies on the other. While fortunes have been made in cryptocurrencies the reality for any given individual can be a lot more worrisome. You can make money trading crypto but you need to ask yourself if you want to spend your time watching crypto markets when you are retired and if you are willing to risk your hard earned retirement money on an asset class known for its occasional wild fluctuations.
Crypto in Retirement Does Not Need to Be an All or None Issue
How much crypto should be part of your retirement portfolio will depend on your risk appetite. Investment advisors commonly suggest limiting crypto to no more than five percent of a long term investment portfolio and applying the same diligence one applies to all other investments. Thus one can in retirement hold a portion of one’s assets as crypto and benefit from the efficiencies of international asset transfers while holding the bulk of assets in more predictable investments such as dividend stocks that have