About 8.7 million Americans now live abroad and over 400,000 of them are retirees. That last number is growing rapidly as more and more Baby Boomers choose to move countries. The reasons for this vary from financial benefits to the freedom of enjoying life in exotic countries. However, for all the joy of living out your retirement in some tropical paradise, there are some issues you’ll have to face. One of the biggest among them has to do with finances. Retiring abroad doesn’t mean you aren’t tied to the US. In fact, you’ll have to use an international money transfer service and exchange foreign currency regularly. The good news is that there are money transfer service providers today that make these financial operations affordable.

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Challenges of Retiring Abroad: Expensive Foreign Currency Transfer

There are quite a few important things you need to consider when retiring abroad. One of them is a matter of international money transfer services. You’ll need to pay taxes and, possibly, make other transfers to your former home country. You’ll also need to receive social security, salary, or other payments and exchange the currency to the one in your new country of residence.

All in all, you’ll need to use foreign currency exchange (FX) services regularly. And you’ll lose a lot of money in the process.

The main sources of your monetary loss will be:

• Money transfer fees
• Foreign currency exchange rate margins

If you choose to transfer your money via banks, every single transaction may cost you between 3% and 7% of the total transfer amount. International money transfer services are expensive in banks because they both charge high fees and use very unfavorable FX rates. The cost might be even higher. This will depend on the currency and destination of the transfers. There are still some places in the world where transfer costs go above 10%. But these are few and mostly restricted to Sub-Saharan Africa. 

Moreover, bank wire transfers take a while. The duration of the transfer can be anywhere between 3 and 7 days. If you need to complete an urgent transfer, the cost will be exponentially higher.

Because of how expensive bank wire transfers are, digital money transfer services are steadily replacing them. PayPal is a leader among international money transfer service providers today. However, PayPal transfers are also expensive. Therefore, if you aim to be frugal, it’s not a money transfer service you should be using.

Cheap International Money Transfers: How to Do It?

An alternative to both banks and digital payment platforms like PayPal comes in the form or foreign currency transfer platforms. This industry is growing fast, so there are many of those today. You’ll need to choose the best services for international money transfers by studying reviews and comparing their offers carefully.

Top money transfer service in the industry today are:

• Moneycorp
• Currencies Direct
• TorFX
• OFX
• WorldFirst

Please note that the foreign currency transfer industry is growing fast. Therefore, new companies appear quite often and many of the “old” ones start offering new services. Also, it’s important to know that FX rates offered by the majority of these services change constantly.

The change in rates is understandable because they are tied to the international foreign currency exchange market. Currency values there are in constant flux. They are also highly volatile today because of the COVID-19 crisis.

However, many companies also change their FX margins. This is the additional charge foreign currency transfer services add to the mid-market FX rate. Only a few companies, like WorldFirst, which was recently purchased by Alibaba, offer fixed margins.

Due to this lack of certainty, you should monitor FX rates offered by all top companies in your region. This will allow you to choose the best option for every transfer you need to make.

How to Choose the Best International Money Transfer Company

When you are comparing international money transfer companies, you should consider several factors:

• Fees.
  The majority of foreign currency transfer companies make their money off the volume of transfers they process. Therefore, unlike banks, they charge very low fees. In fact, many of these companies won’t charge any fees at all per transfer. However, even if there is some fee you need to pay, it shouldn’t be your main consideration.
• FX rates.
  The biggest part of the money you lose on foreign currency exchange is taken by FX rates. Therefore, it’s imperative to see who offers the best rates of the day. Moreover, you need to think long-term and study FX forecasts. This way you’ll be able to see when it’s best to make big transfers and when is the time to use hedging tools to avoid huge losses.
• Additional services.
  The best international money transfer providers will offer hedging tools, like forward contracts, at the minimum. They should also offer foreign currency exchange counseling that will help you determine when to use those hedging tools. These services will allow you to get FX rates “fixed” at a specific level or use other financial tools to minimize your risks. The selection of these services is the most important factor to consider when choosing a money transfer service. They will allow you to save more money in the long run.

In Conclusion: Retire Abroad Without FX Pressures

Retiring abroad can be a great idea for many people. It’s an especially good one if your goal is to enjoy yourself to the fullest somewhere with a low cost of living. However, no matter where you’ll go, you are sure to face the problem of costly foreign currency transfer services.

The solution is to use an international money transfer company that will keep those costs to a minimum. Platforms like Moneycorp, Currencies Direct, TorFX, and OFX all offer a cheap way to transfer money to nearly every country. All you need to do is to choose a money transfer service that covers the regions you need and offers low FX margins along with little to no fees. Also, pick a company that provides hedging tools as well. Those will help you avoid losing money on volatile FX rates in times of global economic crisis.

This detailed and informative article was contributed to Leisure Freak by Kate Bregovic

Bio: Kate Bregovic has been working in the financial planning and investment services industry for over 10 years. Now being a freelance writer, she is well equipped to provide advice on a wide array of areas. Follow her on Facebook!