Retiring Outside the U.S. No Longer a Foreign Concept
CNBC.com News Editor
Retiring in another country used to be a foreign concept to most Americans but it’s becoming more common thanks to two main factors: the Internet and the economy.
The Internet has provided some much-needed connectivity to family, friends and access to important things like bank accounts and retirement accounts.
And, while saving money has always been important to retirees, the recession and subsequent hit to retirement accounts, plus rising taxes and health-care costs, have made it a necessity for many. So when retirees get priced out of warm-weather cities in the U.S., cheaper alternatives in other countries become more attractive.
“You can live better for less in a tropical paradise,” said Dan Prescher, the special projects editor for International Livingmagazine. “It sounds like a dream but you can actually never shovel snow again and live off of half of what you’re living on in the U.S. — or less!”
International Living has seen a huge jump in attendance for their annual seminar on retiring outside the U.S., where they bring in experts to answer questions on everything from financial planning and real estate to foreign currencies, expat taxes and legal issues. A few years ago, they used to get about 150 to 175 people. That more than doubled to 400 last year and this year, they’re looking for a venue that can hold 500.
“For a huge number of people in the U.S., especially the Baby Boomers coming into the market, the retirement they dreamed of just isn’t possible in the U.S.,” Prescher said. “You can take those same funds outside the U.S. to a place like Belize, Ecuador, Panama or Costa Rica and live for half as much and have what is essentially a better quality of life, with less stress, less pollution and get as good a health care benefit.” he said.
That’s an important concern for many retirees — the quality of medical care. But, you might be surprised to learn that medical care is often more affordable and just as good — if not better — in other countries as it is in the U.S. In many of these countries, doctors even make house calls, something Americans pay a premiumfor in the U.S.
The only downside is that Medicare doesn’t cover you outside the U.S. Some retirees have gotten around that by flying back to the U.S. on Medicare runs.
Worried about crime rates in an unfamiliar land? Do your homework and you'll see there are plenty of safe cities in other countries.
“It’s kind of the devil you know,” said Prescher, who was born and raised in Omaha, Neb., but has lived outside the U.S. for the past 10 years. He and his wife now split their time between Mexico and Ecuador.
“You would think that [Omaha] would be one of the safest places on Earth,” Prescher said. “Somebody gets shot in Omaha every day. In Merida [where he lives in Mexico], I can’t remember the last time I heard of someone being killed. It’s one of the safest towns in Mexico – but also in the northern hemisphere.”
You can also find places where you'll be more secure economically. For example: Real-estate prices never crashed in Latin America because there was never a bubble the way there was in the U.S.
“There’s no such thing as a real estate fire sale in Latin America because the prices didn’t drop that much,” Prescher said.
Still, if you’re gun-shy about buying real estate, Prescher said the rental market is on the rise in some countries, where developers are building affordable condos. In the charming valley town of Cotacachi, Ecuador, tucked in the Andes Mountains, for example, one developer built condos in a gated community, where you could rent a three bedroom for $150 a month or buy for $45,000 to $50,000.
“You couldn’t do that in the U.S.,” Prescher said.
Plus, inflation isn’t really a concern in Mexico and many Central American countries for a few main reasons: Many of these currencies closely follow the dollar and prices are just cheaper there.
For example, if a $20 meal in the U.S. goes up to $25, that’s a problem. But you can get a four-course meal in Ecuador for $3, so that same inflation would mean it would cost $3.25. “That’s not really a deal-breaker,” Prescher said.
And, while the weak dollar has made Mexico and Central America more attractive, don’t count out Europe just yet.
“We tend to think ‘Forget it, Europe is too expensive’ but one of the places we found was Le Marche, Italy,” said Ken Budd, the executive editor of AARP magazine. “If you go to Italy and want to retire in Tuscany, it will be very expensive,” he said. “You want to stay away from those places and find the places that are under the radar … You’re looking for the next Tuscany before it becomes Tuscany!” he said.
AARP advises using five criteria when choosing a foreign city to retire to: the cost of living, housing costs, health care (both quality and accessibility), cultural and recreational options and if there’s already an expat community there.
>> Check out AARP’s full list of the Best Places to Retire Outside the U.S.
It’s important to remember that living in a foreign country is very different than visiting as a tourist. A tourist visiting New York City to see the Broadway shows, for example, has a very different experience than a New Yorker living in Brooklyn and riding the subway every day.
“Don’t just go for the lower costs,” Budd advised. “You have to embrace the experiences of living in another country and the changes – both the pros and the cons.”
“The only real hurdle is thinking outside the borders,” said Prescher.
For example, “are you going to be OK if you’re in a foreign country and you can’t find your box of Cheerios in the morning?” Budd asked.
The best way to find out is to go to a country for several months. Rent a place. See what it’s like to get around. Go to the grocery store. Deal with paying for your own utilities. Hooking up your Internet. See if the language barrier or culture are going to be a problem for you. And just see if this what you want your life to be like.
Prescher also advises signing on to bulletin boards for expats in that country to get a first-hand account of what it’s like to live there as an American.
“Every place where expats have settled, there is probably a bulletin board or blog by an expat,” Prescher said.
Remember, this isn’t a vacation, this is your life. If you have an adventuresome spirit, it can be a great, exotic adventure.
“Just think outside the border and all of that becomes possible,” Prescher said. “Take a leap!”
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