Jerry and Helen kept their two cars, one for each of them. They stayed in the same house, with the same mortgage and taxes, utilities and gardening costs. They kept the golf club membership, their pets, and their symphony tickets. Food costs stayed the same. So in retirement's early years Jerry and Helen had pretty much the same expenses as before, plus they figured they'd go out and travel more, go out to eat more, go out with friends more. They would save a bit of money on work clothes. Jerry had more than enough ties, enough dress shoes. But that small savings was more than offset by trips to Europe, cruises, wine tastings, and more time at the golf course.
By contrast, Vicki and I retired in Argentina. We moved out of our luxury apartment to a small, one-bedroom condo in Buenos Aires with minimal maintenance costs. We lived without cars, without pets, without much of anything. We wanted a small apartment to serve only as a base, a place to land now and again between our overseas trips. Often during our sojourn at "home" we house-sat for friends who lived in the suburbs and wanted to spend their summers in Punta del Este. Our living costs in retirement fell to practically nothing, mainly just air travel, local hotels, and food.
Make no mistake: To retire cheap, you need to relocate. We at Live and Invest Overseas recommend that, when you are considering where to retire in the world, you relocate to a new, sexy, exciting place abroad. After all, as long as you're going to relocate you might as well do it in a big way. Relocating in your same neighborhood seems boring, almost depressing. The word downsizing comes to mind. Relocate to Vietnam, on the other hand, and the mind fills with fun and adventure, the new and exotic.
So, again, Jerry and Helen started their retirement spending more. That was 10 years ago. I can report that, today, Jerry and Helen continue to see their spending go up. They recently remodeled their house--a major expense--and bought new cars. They still take short, expensive trips abroad, afraid to leave their house and pets for very long.
Vicki and I, on the other hand, probably have about the same expenses as when we retired in 1984, adjusted for inflation. We've moved in and out of Buenos Aires a number of times since then. In our view, Buenos Aires these days has become too expensive, and too dangerous, a place to live comfortably. But we'll go back. Meanwhile we're spending most of our time in Southeast Asia.
And that's the point: We're used to relocating. When one place becomes unacceptable, we move to another. When one place we enjoy a lot, like Paris, costs big bucks, we balance our budget with stays in Southeast Asia.
Every time we move we get a kick out of it. We have our emotional struggles, to be sure. We have to get rid of stuff, over and over. But we're used to it, and each time the move becomes easier. With e-mail, Facebook, and Skype, we maintain heartfelt friendships and a sense of community with others we've made connections with around the globe.
Paul TerhorstContinue Reading:
I thought about this a lot during our recent extended tour across America. Over the holidays, when we traveled from Vermont to Baltimore to Chicago to Santa Fe and to Ojo Caliente before returning to Panama City, we couldn't help but notice something: The United States can be a really cheap place to be. Not in Vermont or Chicago...but in remote, rural New Mexico, where we have some family? In this part of the country? Your dollars go far.
Dinners for eight of us cost less than US$200, including wine, sometimes much less. That's hard to do even in Panama City these days, and even Lief, who could be described as very careful with his money, was happy to pick up the checks throughout that leg of our journey.
Of course, we were passing through as tourists. Our expenses were limited to hotel rooms, restaurant meals, rental cars, and souvenirs. We weren't, for example, shopping for health insurance.
Lief had a meeting Friday with a local Panamanian businessman. They spoke about the cost of doing business in this country. One of the big advantages of Panama, compared with any other country that's a reasonable doing-business choice (with international-standard infrastructure, a varied, educated, English-speaking labor pool, and a pro-business atmosphere), is that the cost of that educated labor force is quite reasonable on a global scale.
Which is to say that salaries in Panama are much lower than salaries for comparable positions in the United States.
The gentleman Lief had lunch with on Friday, who knows lots of other businessmen and business leaders in Panama, explained to Lief that, in recent years, top executives in Panama City have begun to notice this wage disparity between Panama and the United States...and, when positions within their firms for which they were qualified have become available Stateside, they've requested transfers.
"Hey, I can go do what I do in the United States," they've thought to themselves, for example, "and make six or seven times as much money."
Now, these Panamanians are asking to be transferred back to Panama. The biggest reason? The cost of health care and insurance. These things are reasonable parts of a family's budget in Panama. In the United States, as the transplanted Panamanians have discovered, a couple of hospital stays can wipe out much of the "extra" income compared with Panama.
What are you to take away from these observations?
First, the cost of being a tourist anywhere in the world has nothing to do with the cost of living in that place. Not in Stowe, Chicago, or Santa Fe...and not in Panama City, Paris, Chiang Mai, or anywhere else.
Second, it's impossible to talk about the cost of living in any country on earth. Is the United States an expensive place to live today? Are we talking about Stowe or Ojo Caliente? The same thin-sliced thinking must be applied when considering any other country, too.
Third, how you live has everything to do with your cost of living. You have to compare your total cost of living in one place versus the total cost of living in another. You can't try to make a determination as to the relative cost of living somewhere based on the costs of just a few items.
Years ago, when we moved from Ireland to Paris, our overall cost of living remained about the same. How could that be? We had had two cars in Ireland. In Paris, we didn't need a car. That change alone saved us enough to cover the extra housing cost.
P.S. What else this week?
Why would an American want to leave the United States?
I'm not in the business of persuading someone to make a move like this if the idea doesn't make sense to him. From where I sit, after living outside the States for more than 14 years, my real response to the question is, why wouldn't an American consider leaving the United States?
But, again, I'm not trying to convince anyone. I'm just trying to help those for whom the idea appeals consider, evaluate, and act on the opportunities.
And that's the real answer to the question. The reason for anyone to think about moving from whatever country where he happens to have been born to some other country is opportunity. More, better, new, emerging...
In many ways, these two places are the retirement haven yin and yang of each other...
"This is because there are several colonial cities that could be considered 'best in class,' each in its own way--including Cartagena, yes, but also including Santa Marta (also on the Caribbean) and Popayán, in Colombia's southern mountains...
Also This Week...from Resident Global Real Estate Investing Expert Lief Simon:
Kathleen and I are considering a further real estate investment in Panama. Specifically, we're thinking of buying a house in Panama City that could work for our office here long term. So we're thinking through financing options.
Panama is one country where a foreigner can get a local bank mortgage for the purchase of real estate, even as a non-resident.
The question you have to ask is whether or not you want one. Is a Panama mortgage worth the cost and effort?
Lending terms in Panama aren't the same as you're likely used to. You won't get a 30-year, fixed-rate mortgage, for example. The longest term you're likely to find is 25 years, and the interest rate will vary in some way.
The longest fixed term you'll find is five years.
That said, a variable rate doesn't necessarily vary. There are no guarantees, and you certainly can't predict whether or in which direction your rate might adjust, but I can tell you that, while the interest rate for our current mortgage (for a rental investment property we own) in Panama is variable, it hasn't changed once in the five years we've had the loan.
In addition, mortgages in Panama come with a small catch. As part of the lending process, you'll be required to get a local life insurance policy that would pay off the loan if something were to happen to you. The life insurance is an extra expense.
But the real issue is the potential limit on the term of the loan you'll be eligible for, as you can get a mortgage only for as many years as you can get a life insurance policy.
This isn't unique to Panama. Mortgage life insurance is a typical requirement in most countries, but the limitation created by the ability to get life insurance can catch older buyers from North America off-guard.
In Panama, the typical life insurance company will cover you only until age 75. Therefore, you can get a mortgage only to age 75. So a 65-year-old buyer would be able to arrange no longer than a 10-year term from a bank.
I was told a few years ago about someone who was able to get a life insurance company to cover him in Panama until age 80, meaning this buyer got an added five years on his mortgage term. In general, though, life insurance companies will cover you only until age 70 or 75.
Another factor in Panama that can limit the amount of the mortgage a bank will give you is the limit that many banks now set on the per-square-meter value they will lend on.
For example, if you're buying a house or an apartment in Panama City, Global Bank will limit your loan to no more than US$1,300 per square meter. That is the amount on which they will base their 80% loan-to-value calculation.
If you want to buy a house for US$1,400 a meter, the best you'll be able to manage is a loan of US$1,040 per meter (80% of US$1,300). You'll have to put down US$360 per meter, or almost 26% of the purchase price to secure your "80%" loan.
The good news is that you can apply for pre-approval from a Panama bank before you start making property offers. This way, you'll know for sure what you can afford to spend.
In the past, an alternative was to take a second mortgage out on a piece of property you owned in the States. This was a popular and common strategy during the boom, when U.S. banks would lend to anyone with a pulse. Today, it's not a realistic option in most cases.
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Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group. With more than 25 years experience covering this beat, Kathleen reports daily on current opportunities for living, retiring, and investing overseas in her free e-letter.
Her book, How To Retire Overseas—Everything You Need To Know To Live Well Abroad For Less, was recently released by Penguin Books.
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