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Budgeting For Retirement Overseas

How To Afford To Retire Wherever You Want

Could you afford to retire how you want wherever you want? The opportunity for you to do just that could be greater than you might imagine.

The most important thing to understand when trying to determine how much retirement lifestyle your retirement budget will buy you is that you can control your cost of living most anywhere in the world within parameters. You choose where you want to live, how you want to live, how often you dine out, whether you have help around the house, where and how frequently you travel, where and how you shop, etc.

This is why there’s really no answer to the question, how much does it cost to live in XYZ? The more relevant question is, how much money do you have to fund your retirement? Figure that amount and then identify the destinations overseas where that budget will buy you the retirement lifestyle you’re looking for.

The bulk of any budget is given over to housing–rent or a mortgage, if you have one–so start here. Are you going to rent or to buy?

I strongly recommend that you rent at least at first, for 6 to 12 months, to give yourself a chance to try the place on for size before committing. However, if you do eventually decide to invest in a home of your own, recognize that property ownership comes with carrying costs. As a home-owner, you’ll have maintenance and repair costs, insurance, in some places property taxes, maybe grounds-keeping, etc. As a renter, you have none of these liabilities, which is why renting long term can make a lot of sense for the retiree abroad.

The other key housing consideration has to do with where in a country you want to settle. In Panama, for example, your rent could be $1,500 a month, for a two-bedroom apartment in a nice building in Panama City with a doorman and a pool…or it could be $300 a month, if you choose instead to settle in a little house near the beach in Las Tablas, on the coast of the Azuero Peninsula, a beautiful, welcoming, more remote, and therefore much more affordable region of this country.

Here are other key expenses to factor into your retire-overseas budget:

Transportation

Will you need a car where you’re thinking of relocating? If so, this likely will be your greatest expense after housing. In some places, in fact, the cost of owning a vehicle can be greater than the cost of your rent.

In the friendly, pleasant mountain town of Santa Fe, Panama, for example, you could rent a two-bedroom house for $200 or $300 a month. However, unless you’re comfortable with the idea of using your own two feet or a taxi to get around town and the national bus service to travel the rest of the country, you’ll need to invest in a vehicle. In a remote mountain region like this one, where roads can flood during the rainy season, maintaining your vehicle won’t be easy. It might seem as though you’re repairing tires and replacing shock absorbers almost as often as you’re filling the gas tank.

If you’re not up for the expense or the hassle of car ownership, consider less remote options and cities with good public transportation. Living without a car, transportation can go from being one of your biggest expenses to a negligible line item in your monthly budget.

Food

Groceries are a hugely variable expense anywhere. Your monthly food spending depends on how you want to live and eat. In Panama, Ecuador, or Nicaragua, for example, a couple could spend less than $300 a month on groceries. On that budget, you could eat well, but you’d be eating like the locals.

Or you could shop at the U.S.-style grocery stores (which exist in these countries) every week and load your cart with imported cheeses, specialty hams, wine, and prepared foods, in which case a couple’s monthly grocery spend could be as much as $600 or more.

Grocery costs also vary according to region. In Paris, we lived in the 7th arrondissement, in the historic heart of the city. We discovered that prices in the grocery stores in our neighborhood were sometimes 25% more than prices for the same items in grocery stores in the 15th arrondissement, for example, a more working-class district.

Gas

Often used for cooking and typically a negligible expense–a few dollars a month.

Electricity

The climate in the overseas retirement haven where you choose to hang your hat will dictate your monthly electric bill, which can be a big budget item in a place where you have to run your air conditioning around the clock to be comfortable. The budget-conscious should think about places like Medellin, Colombia, and Cuenca, Ecuador, where the weather is spring-like 12 months a year and you can get by most of the time without either heat or air conditioning.

Telephone

This cost varies greatly country to country and region to region. France is a big winner when it comes to telephone expense. You can buy a phone package from Orange, for example, for about $50 a month that includes unlimited free calling to the United States and Canada, much of Latin America and the Caribbean, and all Europe.

In most of the world, though, if you’re not careful, your monthly international phone bill can be a shock, even the most costly item in your entire budget (including housing and transportation). The answer to controlling this budget item is a Voice Over Internet Protocol (VOIP) service such as Skype.

For local calls, a pay-as-you-go cellphone may be all you need. These are easier to obtain than a phone with a contract with a cellphone service provider in most of the world. Depending on where you’re living and your lifestyle, a $10 calling card for your pay-as-you-go cellphone could last you all month.

Internet

Retire to a city most anywhere in the world today, and reliable Internet will cost you but $30 to $50 a month. However, if you’re interested in retiring to a more remote region, the cost of Internet can be a significant part of your budget. If you choose to settle somewhere where you have to invest in satellite Internet, for example, budget $500 in hardware and set-up and then $200 a month or more for service.

Cable TV

Again, this is a significant budget issue only if you’re living outside a city. In most areas of any population worldwide today, basic cable costs about $20 a month.

Condo/Building/Home Owner’s Association (HOA) Fee

If you choose to live in a private development community or an apartment, you’ll likely have a monthly condo or HOA fee. This is your contribution to the costs of maintaining and managing the shared areas of the development or the apartment building—things like security, grounds-keeping, internal roads, a swimming pool, sometimes a concierge in an apartment building in Paris or Buenos Aires, for example.

You can incur this expense as an owner or a renter; it’s an important thing to ask about before signing a lease.

Property Taxes

You won’t be liable for any in Ireland or Croatia, for example, nor in Buenos Aires (though you will pay annual tax on property you own elsewhere in Argentina). That is to say, not every country imposes property tax, and, for those that do, the cost to you will likely be less, perhaps considerably less than you may be paying for property tax now, either because the percentage is less, the value of the real estate is less, or both. If you intend only to rent, of course, property tax won’t be an issue for you anywhere.

Household Help

This can be one of the big benefits of living overseas. You can arrange full-time help around the house for as little as $150 a month in Nicaragua, Belize, Ecuador, Panama (outside Panama City), and Thailand, for example. And anywhere in Latin America or Asia the cost of part-time household help will make the idea of this kind of support irresistible.

Entertainment

This is one budget item that is completely controllable. Your monthly entertainment bill can be zero if you choose never go to anywhere or do anything. But that misses the point, doesn’t it? Retiring to a new country isn’t only about reducing and controlling your cost of living; it’s also about improving and enriching your quality of life.

In remote regions of any country, your entertainment cost can be minimal—say, $100 a month—largely because there may be little to spend your money on. Living in a city offering many options for dining out and filling your leisure time, you’ll want to be able to budget more generously for entertainment. Otherwise, you’ll risk begrudging the opportunities for fun all around.

Travel (within your new country of residence and for visits home)

How often will you want to return home? Your biggest related expense will be airfare. Allow for it in your budget, as well as for in-country travel. You’re taking a big step and making a big effort to relocate somewhere new and exotic. Once you’re there, you’ll want to get out and see the place.

Health Insurance and Medical Care

Depending where you choose to retire, this can be the biggest cost benefit of all. In some countries, it’s possible to arrange good local health insurance for less than $100 per month. And some places in the world, especially in Asia, for example, it can make sense not to invest in health insurance at all. International-standard medical care in Thailand and Vietnam, for example, can be so low that it doesn’t make sense to insure against it.

Kathleen Peddicord

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