Two Big Expenses Of Retiring Overseas That Nobody Talks About
July 13, 2014, Panama City, Panama: Factoring health care and visits home into your living-overseas monthly budget.
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Editor's note: With Kathleen on vacation until tomorrow, we revisit this essay from her, originally published in April 2013...
Dear Live and Invest Overseas Reader,
You may be surprised to learn of the two biggest expenses expats often face. Most of us think of rent. Food and entertainment. Taxes maybe.
But, in my experience, many expats spend more on two other expenses. These two expenses rarely show up in cost summaries for destinations abroad, and they rarely seem like a big deal when planning to retire overseas.
What expenses am I thinking of? Trips back to the United States and U.S. health insurance.
We recently heard from a Seattle couple planning to retire to a tropical climate. They're on a budget and are thinking of Ecuador, which they know to be a good low-cost choice. They're interested in Ecuador rather than one of the tropical countries in Southeast Asia (which could, in fact, be more affordable than Ecuador) because they want to be closer to "home." They plan to make frequent trips back to Seattle.
I told them to forget about saving money. If they make frequent trips to Seattle, their cost of living, all in, after moving to Ecuador will almost certainly exceed what they spend now.
Let's run some numbers for this couple. A quick check on Expedia shows fares from Guayaquil, Ecuador, to Seattle at about US$1,300, or US$2,600 for two. Those are the deep-discount, advance-purchase, come-hell-or-high-water fares, nonrefundable, nonchangeable. In many cases, the couple will have to pay more.
But airfares are only the beginning. The couple will have to get from their overseas home to Guayaquil, in a bus, car, or taxi, maybe spending a night in a hotel. Once in Seattle they may need a hotel, too, and a rental car. They'll need presents for the grandchildren, and they'll want to have dinners out with family, including a few splurges.
We have to make some guesses, about total trip costs and what the word "frequent" means. For the sake of argument, let's put the trip costs at US$5,000 and figure on three trips a year. That totals US$15,000, easily more than the couple might spend annually on rent, food and entertainment, or any other cost category while living in Ecuador.