Retirement Abroad

Retiring abroad has shifted from a fringe idea to a mainstream strategy for Americans facing high US healthcare and housing costs. The appeal is concrete: in dozens of safe, warm destinations a couple can live comfortably on roughly $2,000–$3,800 a month all-in, often less than the cost of staying put. International Living's 35th Annual Global Retirement Index (updated December 1, 2025) ranks Greece, Panama, Costa Rica, Portugal, and Mexico as its top five for 2026, scoring each across seven categories including healthcare, cost of living, visas and benefits, and climate.

Key Points

• 1International Living's 2026 Annual Global Retirement Index (35th edition, updated Dec 1, 2025) top 10: 1) Greece, 2) Panama, 3) Costa Rica, 4) Portugal, 5) Mexico, 6) Italy, 7) France, 8) Spain, 9) Thailand, 10) Malaysia — each scored across seven categories (housing, visas/benefits, cost of living, affinity, healthcare, governance, climate).
• 2Cost of living can run far below the US: couples often live comfortably for $2,000–$3,800/month all-in. Mexico runs roughly $1,500–$2,500/month, Panama under $3,000, and Portugal $2,500–$3,000 for a couple — with Algarve rents about 60% lower and groceries ~40% cheaper than comparable US cities.
• 3Social Security travels with you: US citizens with 40 credits (≈10 years of work) keep full benefits in most countries, paid by direct deposit to a US or foreign bank. The SSA cannot send payments to Cuba or North Korea and restricts payments to Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan.
• 4Medicare does not cover care abroad except in rare situations, so retirees must arrange local national-system enrollment or international private insurance (e.g., Cigna Global, Allianz, IMG) — and most countries require proof of coverage as a condition of the residency visa.
• 5Retirement visas are typically passive-income based: Portugal's D7 requires roughly €870/month (~$1,000) in pension/passive income; Costa Rica's Pensionado requires a $1,000/month lifetime pension; Panama's Pensionado requires $1,000/month and grants steep discounts; Mexico tightened temporary-residency income to roughly $4,300/month and permanent residency to about $7,000/month in 2025 (figures vary by consulate).
• 6US taxes follow you home or abroad: 401(k), IRA, and pension distributions are taxed by the IRS as ordinary income, and the Foreign Earned Income Exclusion does not apply to retirement income. The Foreign Tax Credit plus tax treaties with 60+ countries are the main tools to avoid double taxation; Panama, notably, does not tax foreign-source pensions paid to residents.
• 7Plan for the residency math, not just the lifestyle: rising income thresholds (especially Mexico's 2025 increase) now put some destinations out of reach for retirees relying on Social Security alone, making documented pension/passive income and an income-screening check essential before committing.