Retirement Cost Of Living

But Isn’t It Expensive To Live There?

Jan. 15, 2012, Panama City, Panama: Cost of living in retirement is a relative, highly controllable idea that depends greatly on how you decide to live in retirement.

Also This Week: Why Would An American Want To Leave The United States?...Medellin Versus Panama City—Two Top 2012 Havens Compared…Three Best Colonial Cities In Colombia Compared…

Dear Overseas Opportunity Letter Reader,

"But I'd think that France would be more expensive," remarked my interviewer Friday afternoon.

"More expensive than what?" I had to ask.

Few things in this world are absolutely expensive. Most things are only relatively so, compared with something else.

The gentleman interviewing me on Friday for the book he's writing was wondering about the reasons an American would think about leaving the United States and living or retiring overseas. Cost, I explained, is a big motivator...the need to escape a high cost of living and the desire to go in search of a more affordable one.

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.

Kathleen Peddicord

----------

Live Overseas in 2012

It's time to stop thinking about it...time to stop dreaming about it...time to make it happen.

Get out of your armchair and get moving.

Discover what millions of expats already know: In the right destinations, the values are great, and the lifestyle is extraordinary.

Here is the help you need, the top resource available anywhere to help you map out a plan for your new life in the overseas haven with your name on it.

From France to Belize, from Malaysia to Ecuador, from Mexico to Thailand... complete and in-depth reports on the world's top retirement havens for 2012, including full details on residency, health care, taxes, and itemized monthly budgets.

Go Here Now For Our Brand-New Guide To 2012's Top Retirement Havens

----------

P.S. What else this week?

• People ask us all the time...and, on our recent extended U.S. tour, we got the question a lot, from family, old friends, people we met at cocktail parties:

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 the spirit of our New Year's comparative analysis agenda, let's look today at Medellin, Colombia, versus Panama City. Panama City is my current home base, the headquarters for our Live and Invest Overseas business, and a long-standing top retire-overseas choice. Medellin is an emerging option that has captured my attention completely over the past 18 months.

In many ways, these two places are the retirement haven yin and yang of each other...

• "There's almost never any debate, when the subject comes up, over which is the finest colonial city in Colombia," writes Latin America Correspondent Lee Harrison. "Nine out of ten people will tell you it's Cartagena...and with good reason. But in my travels around the country, I've come across some small but quite-vocal pockets of disagreement on this point. And the dissenters make a good case.

"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.

----------

Live Overseas in 2012

It's time to stop thinking about it...time to stop dreaming about it...time to make it happen.

Get out of your armchair and get moving.

Discover what millions of expats already know: In the right destinations, the values are great, and the lifestyle is extraordinary.

Here is the help you need, the top resource available anywhere to help you map out a plan for your new life in the overseas haven with your name on it.

From France to Belize, from Malaysia to Ecuador, from Mexico to Thailand... complete and in-depth reports on the world's top retirement havens for 2012, including full details on residency, health care, taxes, and itemized monthly budgets.

Go Here Now For Our Brand-New Guide To 2012's Top Retirement Havens

----------