12 Steps To Choosing Your Overseas Retirement Haven

June 24, 2008

Paris, France

PLUS:

n  The World's Top 15 Retirement Edens...

n  Playing the Parallel Market in Venezuela...

n  No, You Can't Take Medicare With You...

n  China Puts The Brakes On...

n  World's Best Health Care...Eternal Spring...Tax Advantaged...Kid Friendly...

n  Retire In Luxury On $2,900 Per Month?...

n  Nicaragua's Cigar Industry Hits The Big Time...

AND:

n  Weak-dollar Economics And The American Abroad...

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Dear Overseas Opportunity Letter Reader,

"My wife and I are looking for a place to retire outside the States, in relative luxury, on a retirement income of $2,900 per month. Is that a possibility in Nicaragua?"

"We are older, 62 and 58, raising six kids ages 4 to 16. We like the kicked-back beach lifestyle. Where is the most economical place to live? And how difficult is it to retire overseas with kids?"

"I am 57, single, and retired. I have been researching the idea of living outside the United States for 11 years. The recent increases in the costs of housing, gas, food, etc., have made me think about this idea more seriously. I've considered Costa Rica and Mexico in the past but today am more interested in Panama, Brazil, and Argentina. Can you give me some idea how to make this decision? Are there steps I could take to help me select a country?"

---------- Important Notice ----------

The cost of a Reforestation Visa, Panama's best residency option, is scheduled to double Aug. 26.

If you're thinking of settling in the world's premier tax haven, act now. Details here.

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In fact, dear reader, there are. Twelve of them. Think of it as 12 Steps to a New Life in Paradise.

Step #1: Know Yourself

There are a dozen good reasons, at least, to think about living or retiring overseas. Your challenge is to make sure you're moving for your reasons. Be honest with yourself...and with your significant other. What's most important? Cost of living? The weather? Accessibility to your home country so you can visit your grandkids on holidays? A reliable Internet connection so you can manage your stock portfolio? Health care (if you have an ongoing health concern)? The local school system (if you're moving with children)? The language (are you willing to learn a new one?).

What are you looking for? And, critically, what are you willing to give up and to live without?

One reader, whose recent question I shared with you above, is looking to retire "in relative luxury." Can he do that in Nicaragua, he's wondering? That depends on his idea of "luxury."

In Nicaragua, on a budget of $2,900 per month, you could live in a big, comfortable home, employ a full-time maid, a gardener, a driver...you could eat dinner out two or three nights a week...you could travel around the country exploring...entertain friends regularly...

All with, for example, a long view of the crashing Pacific from your bedroom window...

On the other hand, in Nicaragua, your options for cultural evenings out, five-star meals, and high-end shopping are limited.

Could you retire in luxury to Nicaragua? I'll leave it to you to make your own judgments.

Meantime, here are 12 factors to take into account as you work through the process of shopping for a new country to call home. I list these things in no particular order and, again, leave it to you to prioritize according to your own preferences and interests:

n  Cost of Living

n  Cost of Real Estate

n  Health Care

n  Infrastructure

n  Accessibility to Your Home Country

n  Language

n  Taxes

n  Safety

n  Special Benefits (or lack thereof) for Foreign Residents

n  Education and Schools (if you're moving with children)

n  Climate

n  Culture, Recreation, and Entertainment

Step #2: Take Out A Map

Once you've taken inventory of your personal priorities and agendas, you're ready to consider the geographic possibilities.

There are about 200 countries in the world. Some are cheap...many are beautiful...some have sandy coastlines...others boast interesting histories...

But not all of them are places you'd want to live. Here, then, are 15 countries worth considering right now:

n  Argentina

n  Belize

n  Costa Rica

n  Croatia

n  Dominican Republic

n  Ecuador

n  France

n  Italy

n  New Zealand

n  Nicaragua

n  Malaysia

n  Mexico

n  Panama

n  Thailand

n  Uruguay

The trick is to connect the dots.

Good health care...affordable cost of living...lots of sunshine...favorable tax legislation for foreign residents...leads you...where?

I can't consider all 15 of the countries on our shortlist of The World's Top Retirement Havens in detail here (we'll do that for you over time...keep reading). However, I can offer some Cliff Notes, to help shortcut your research. For example:

*** World's Cheapest Retirement Havens

Ecuador is the world's cheapest place to retire. You could live in this beautiful, safe country on as little as $660 per month if you own your own home or on as little as $1,240 per month if you rent.

World's second-cheapest place to retire overseas? Nicaragua. Live well in the second-oldest city in the Americas, Leon, on as little as $954 per month if you invest in one of the city's grand old colonial haciendas for yourself...or on as little as $1,300 per month if you rent.

Also remarkably, enticingly affordable is Uruguay, where you could live comfortably on $1,038 per month if you purchase a home, on $1,555 if you choose instead to rent one.

See detailed monthly budgets for living in each of these countries here.

 *** Luxury Living on a Budget

You aren't going to live a "luxury" lifestyle in Belize, no matter how much money you have. Even in Belize City, there's no fine dining, no great shopping, no haute-couture.

In other words, luxe living has as much to do with opportunity as it does with income. Where could you enjoy the good things in life on a budget of, say, $3,000 per month or less?

n  Buenos Aires, Argentina

n  Kuala Lumpur, Malaysia

n  Panama City, Panama

n  Paris, France

I'll qualify my Paris pick a little. First, I'm assuming you're not paying rent (or a mortgage). That is, you own an apartment. In that case, take my word for it: Living in Paris is as luxe as it gets...and can be far more affordable than you might ever imagine. A couple could have a hard time spending $3,000 per month in this city (again, assuming no rent). Many of Paris' finest offerings come gratis, or nearly so, and transportation, too, is almost free (1.10 euro to get from one end of the city to the other on the Metro). Telephone, cable, and Internet are a bargain. And, outside the tourist zones, everyday things (haircuts, groceries) can be very affordable.

*** Kid-friendly

If you're moving with children, you're looking at city, probably capital city living. That's where you'll find the international schools you need. Right now, consider:

n  Montevideo, Uruguay

n  Paris, France

n  Panama City, Panama

n  Wellington, New Zealand

*** Entrepreneurs Welcome

Don't move to France to start a business. Instead, consider:

n  Argentina

n  Dominican Republic

n  Ecuador

n  Panama

n  Thailand

*** Best Health Care

If health care is an important consideration for you, you'll want to choose a big city, probably a capital city. Consider:

n  Paris, France (the World Health Organization says France has the best health care in the world...and I'd agree)

n  Kuala Lumpur, Malaysia

n  Managua, Nicaragua (correspondent in that country Lori Estrada told you about Managua's new world-class hospital facilities last week

n  Panama City, Panama

*** Eternal Spring

Don't like it too hot...or too cold? Here are three places where the weather is just right, all year-round:

n  Mountains of Costa Rica

n  Ecuador

n  Mountains of Panama

*** They Speak English

Don't want to learn a new language? Consider:

n  Belize

n  New Zealand

*** You're Connected

Don't want to go without high-speed Internet? Your best bets are:

n  Paris, France

n  Kuala Lumpur, Malaysia

n  Panama City, Panama

*** Part-time Paradise

Don't want to leave the kids, the grandkids, or your old life behind entirely? Think about seasonal living in:

n  Argentina

n  Costa Rica

n  Mexico

n  Panama

n  New Zealand

n  Uruguay

*** Quick Escape

Want to know you could return anytime to the States or Canada, quick and easy? Choose:

n  Belize

n  Costa Rica

n  Mexico (you could even drive back and forth)

n  Nicaragua

n  Panama

*** Super Tax-friendly

Keen to mitigate your tax burden by moving abroad? Choose a country that taxes you only on the money you earn or remit locally:

n  Belize

n  Malaysia

n  Panama

n  Uruguay

Next week: Steps #3 through #12...

Kathleen Peddicord

P.S. The sun is bright, and the days are warm and long here in Paris. We're savoring every one of them, as we count down to Panama. Saturday, we walked along the river and ended up at the Eiffel Tower...Sunday, we wandered the Ile St. Louis...both things we haven't taken time for in years. Funny the things you don't do when you know you could do them anytime. Now, after four years in the City of Light, we find ourselves cramming sightseeing experiences into a final few weeks...

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FROM THE MAILBAG:

"Which countries accept Medicare? I'm looking to move outside the States but worry about medical bills."

-- R. McNair, United States

Unfortunately, the answer is none. Although you can take your Social Security income with you anywhere in the world (you can even have it direct-deposited into your foreign bank account), your Medicare won't follow you beyond U.S. shores.

Local health care can make sense (and can be quite affordable). Global options include MEDEX (medexassist.com), HTH Worldwide (hthworldwide.com), and Bupa (bupa-intl.com).

We're preparing a full report on international health insurance options, to be available later this summer. Watch this space.

ALSO RIGHT NOW:

Time to put the brakes on, say the Chinese...and developers and investors are beginning to panic.

The Chinese government has decided that that country's property markets have risen far enough fast enough. Time to put a lid on things, they've said, and they have passed a series of regulations to that end, including a 40% down-payment requirement for mortgages for second property purchases. The effect has been quick and dramatic. In Shenzhen, for example, the average per-square-meter price of new residential units dropped from more than 16,000 renminbi in February to 11,000 renminbi at the end of May...and sales volume was 50% less this May than a year ago.

In Venezuela, there's the formal currency market...and the parallel one...the big-city rate of exchange...and the small-town discount...

"Don't change money in places like Caracas or Margarita Island if you can help it," advises Venezuela correspondent Don Ellers. "Wait, if you can, until you get to a small town and exchange your cash on the parallel market. You'll do better in the small towns than in the big cities...plus you'll do better on the parallel market than the formal one.

"Recently, I was able to get a rate of BS3,200 to 1 instead of the 3,000 to 1 that everyone in the cities was offering.

"The small towns see few foreign tourists or business people, meaning there aren't a lot of dollars in circulation. As a result, money-changers are happy to give you a better rate. 

"Plus, of course, the official exchange offices at the airport, etc., give you the official rate and then deduct a change fee to boot.

"Here's another tip: If you rent a car, put it on your credit card (you'll have to), then, during your trip, change enough money on the parallel market to pay the bill in cash in bolivars when you return the car. Not only will you come out ahead by getting the better on-the-street exchange rate, but you'll also dodge the extras fees your credit card company will charge for the offshore transaction. You could save hundreds of dollars this way. Car rentals in Venezuela aren't cheap."

Now you can release local equity to build a real estate investment or rentals portfolio in France.

Big banking news in France: equity release. Paris-based finance and lending expert Tahminae Madani of France Home Finance explains:

"In France now, you can convert up to 75% of the value of your property to cash to use for other investments.

"For example, say you own a second home in the Dordogne worth 350,000 euro. You have a mortgage on this property with 120,000 euro outstanding. You now could release equity up to 350,000 euro X 75%, or 262,500 euro, less the outstanding mortgage amount of 120,000.

"Meaning you could access up to 142,500 euro cash.

"Many investor clients are using this equity release option to come up with down payments for additional real estate investments. It's a good way to expand a real estate investment portfolio, especially one that includes rentals. If you organize things carefully, the rental income can be enough to cover the mortgage payments.

"Equity release makes more sense than a personal loan, as the interest rate is likely to be far lower. You can take an equity release loan interest-only, fixed-, or variable-rate."

Contact Tahminae for more information.

Nicaragua's cigar industry is enjoying a rebirth. Places like little Esteli, with its rich soils and humid mountainsides, are making a name for themselves, producing some of the finest cigars in the world.

"Look out, Cuba, here comes Nicaragua," writes correspondent Scott Taylor (www.LiveAndInvestInNicaragua.com). "Its world-class tobacco is being rolled into up-and-coming brands that are increasingly considered among the world's best."

Much of Nicaragua's world-class tobacco is grown in the hillsides around the mountain town of Esteli. Years ago, I made the long trek up the Pan-American Highway from Managua to Esteli to see the tobacco fields and to visit the factories where Nicaragua's cigars are rolled by hand. Today, finally, these cigars are making a name for themselves.

If you're a cigar-lover, Scott recommends you try: 

"3. Felipe II Fat Boy--Rated 90 by Cigar Aficionado, this rich-tasting cigar by Felipe Gregorio is round and robust but smooth. The Fat Boy's stocky size (3.5 x 55) translates to a definite 'Don't Mess with Me' attitude.

"2. Padrón 1964 Anniversary Series--If you want to feel like a celebrity, pull out any cigar from the Padrón 1964 Anniversary Series. Made to celebrate their 30th anniversary, this line comes from their best tobaccos and can be difficult to find.

"1. Perdomo Edición de Silvio--Considered by many to be the best in the world. It's exclusive (that is, expensive) but worth it."

What's the dollar-toting expat to do in light of current weak-dollar economics? Veteran retiree abroad Paul Terhorst offers some advice...

"U.S. economic policy these days seems to be 'prosperity via a weak dollar.' Over the past several years, the dollar has fallen steadily against the yen, the euro, the pound, the Canadian dollar... The U.S. government from Henry Paulson to Congress seems intent on pressuring China (and others for all I know) into revaluing their currency-that is, devaluing the dollar.

"As I said, the idea seems to be that the way to success is via a devalued greenback.

"Devaluation can help in the short term, but never long term. The best a devaluation can do is gain a little time.

"Meantime, Germany and Britain now outsource to the U.S. the way Japan has been doing for decades. I predict Brazil, Mexico, and Malaysia will follow suit soon. Just last year, Bimbo, the Mexican bread maker, bought Wonder Bread, the icon of my youth. High flour prices drove Wonder Bread into bankruptcy, while the modern, efficient, well-managed Bimbo Mexicans are making big bucks snapping up Wonder Bread and other bakers around the world.

"Good for them. Mr. Bimbo is using the weak dollar to build a global franchise.

"One of my partners at KPMG used to say, 'All change is for the better.' I think he meant that we should think of change as a positive and that we should use it as an opportunity.

"What does all this mean for the retired American expat?

"On the down side, I expect continued higher dollar costs of living in both Europe and the Third World, except in special situations (Venezuela comes to mind). Even if the dollar strengthens down the line, as I predict it will, we can expect globalization to continue narrowing the historic advantages of moving abroad. Flour used to be a local commodity; now it's an international one. Mr. Bimbo wasn't born yesterday. He'll manage to keep those peso prices high even if the dollar strengthens.

"On the other hand, again, I think the weak dollar will reverse in coming years. I've been singularly unsuccessful predicting currency movements, I'm the first to admit. But taking the past as prologue, we can expect the current phase to reverse. It's only a question of when. I don't think there's reason to despair long term.

"Furthermore, with the dollar so weak, we expats probably have unrealized gains on overseas real estate holdings we've bought over the past several years.