Retire Overseas Index Names The World’s Most Affordable Places To Retire

June 19, 2013, Panama City, Panama, Cebu, Philippines; Chiang Mai, Thailand; Cuenca, Ecuador; Granada, Nicaragua; Hoi An, Vietnam; and Medellin, Colombia (outside El Poblado) are the world’s cheapest places to retire well.

Dear Live and Invest Overseas Reader,

In Monday's dispatch, I promised more on our just-released Retire Overseas Index for 2013.

As I explained on Monday, for this first-ever survey, we identified the 21 best places in the world to retire for 2013 then we graded each of them in 12 categories of importance to the would-be retiree, from cost of living to climate, from infrastructure to healthcare, from residency options to taxes.

One of the primary motivators for many folks thinking about retiring to another country is cost of living, so let's start there.

Cost of living is the toughest category to dissect, because the truth is it is impossible for me (or anyone) to tell you how much it costs to live wherever you may be thinking about retiring.

First, just as you aren't going to retire to France, say, or any country neither can you consider the cost of living in France or any country. Cost of living is very localized. You know this to be the case in the United States, but you can forget it when considering options overseas. The cost of living is not the same in New York as it is in Iowa. Neither is the cost of living in Manhattan the same as the cost of living in Brooklyn. And the cost of living in Manhattan isn't the same if you call Central Park West home as it is if you live in Alphabet City (as my daughter did while in college).

You get the idea. Now transfer it to wherever you're considering retiring overseas.

Let's take Panama as an example. The cost of living in Panama City is no longer quote-unquote cheap, and I wouldn't recommend trying to retire to Panama City on less than US$1,000 per month (though I know many people living very comfortably in the Panamanian capital on not a lot more than that). Nor to Boquete, which is the most established expat destination in Panama and, as a result, also one of the most expensive places to live in this country. Limit your cost-of-living research to these two places and you might conclude that Panama is not cheap. But you'd be wrong to jump to that conclusion, because other parts of Panama (Santa Fe in the mountains, for example, or Pedasi or Veraguas on the coast) do deserve that description.

That's the first important thing to understand when trying to pin down the cost of living wherever you're considering retiring overseas—you've got to drill down to a truly localized budget. The second important thing is to recognize that you can't determine the cost of living of a place by showing up for a few days as a tourist. Yes, you can find US$10 burgers in Panama City and maybe in Boquete, too. However, you can also find decent US$5 burgers (one of our Panama City-based editors tells me he knows where to get a good US$1.50 burger), if that is your food preference, in this city. If you go to the new Waldorf Astoria bar in Panama City, you can pay US$14 for a mojito. You could go instead to a local pub in the city and pay US$4 to US$5 for the same drink (different atmosphere). Or you could go to a local bar and pay a buck for a local beer.

And the real point is that you're going to find this to be the case everywhere. You could live in Puerto Vallarta, Mexico, for maybe as little as US$1,200 to US$1,500 a month, but you could also spend US$5,000 a month or more living in this coastal town. The difference between the overseas destinations we highlight in our index and retirement locales you may be considering "back home" is that retiring on a limited budget in much of the world would likely mean relocating to an undesirable neighborhood and living a less desirable life. In our top 21 retirement destinations overseas, our low-end budget amount still buys you a quality of life that we think you'll find enjoyable.

Which brings us to the third important thing to understand when trying to budget your new retirement overseas—it depends entirely on how you want to live in retirement. Live like a tourist and your monthly budget anywhere will be much greater than it can (should) be after you've settled in and figured out how to live more like a local. Again, this speaks to how you choose to live. Will you eat dinner out four nights a week…or never? Will you fly home to visit your grandchildren four times a year…or once? Will you keep a car? Will you shop at the expat-friendly grocery store (if one exists) or at the local farmer's market? Will you run your air conditioning around the clock or only at nights for comfortable sleep? Will you be living in a place where you won't need air conditioning at all? Etc. Before you try to figure the cost of living where you think you want to live, you've first got to answer the question: How are you going to live?

That said, here is the budget template we used to grade each of the 21 destinations in our index for cost of living:

-Rent for an unfurnished, mid-range, one-bedroom apartment

-Basic groceries for a couple

-Electricity 

-Water

-Gas 

-Cable 

-Internet 

-Landline phone 

-Entertainment

This is a basic budget. You would have to build it out to include things like health insurance (depending whether you opt for international insurance, local insurance, or no insurance) and travel, especially international travel if you intend to return to from whence you came or to vacation regularly.

We feature the details of the final total budgets for all 21 of the destinations in our index in the current issue of our Overseas Retirement Letter. Meantime, if budget is a top concern, following are the destinations where you should be focusing your attention. You could live in each of these places on a budget of US$1,250 per month or less. You could spend more, maybe much more, depending, again, on how you choose to live. But, if you're in the market for a simple but comfortable lifestyle on a modest budget, here's where I'd suggest you shop:

-Cebu, Philippines 

-Chiang Mai, Thailand 

-Cuenca, Ecuador 

-Granada, Nicaragua 

-Hoi An, Vietnam 

-Medellin, Colombia (outside El Poblado)

This is a diverse list, meaning that, if your retirement budget is small, you still have good choices for different retirement lifestyles, from cosmopolitan with great weather (in Cuenca and Medellin) to more steamy and sultry in colonial America (Granada) or Asia.

Kathleen Peddicord

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