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Budgeting Your Overseas Retirement

Kathleen Peddicord by Kathleen Peddicord
May 10, 2010
in Retirement/Living
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Retirement on a Budget doesn't have to mean smashing the piggy bank.
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Brass Tacks–How To Budget Your New Life Overseas

How much will it cost you to live in the overseas Shangri-la that’s calling your name?

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 US$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 US$200 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.

In addition to housing, here are the other expenses to factor into your budget:

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

The monthly condo or HOA fee is your contribution to the costs of maintaining and managing the apartment building or private development community where you’re living. It covers your share of shared expenses, including security, grounds-keeping, internal roads, the swimming pool and other amenities, sometimes a concierge in an apartment building in Paris or Buenos Aires, for example. You may incur this expense as an owner or a renter. It’s called different things in different places. In Paris, for example, the building fee is the “syndic” fee, and it covers the costs of maintaining the courtyard, the lobby, the elevator, the building façade, etc.; in Panama, it is referred to as the “PH” fee (that is, the propiedad horizontal), and, again, it’s to pay for the cost of maintaining and improving public areas, the elevators, and, important in Panama City, the building’s “Area Social” (or Social Area), which typically includes a pool, a game room, sometimes a gym, a children’s play area, and a bar-b-que.

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.

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 mountain town of Santa Fe, Panama, for example, you could rent a two-bedroom house for US$200 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 in many of the places I introduce you to in these pages, the cost of transportation could go from being one of your biggest expenses to a negligible line item in your monthly budget.

Gas

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

Electricity

We’re spending as much for electricity living in Panama (where we run the air conditioning day and night) as we did for gas and electricity in Paris (where we needed both heat and air conditioning, depending on the season). The truly budget-conscious should think about places like Cuenca, Ecuador, and Santa Fe, Panama, 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 US$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 phone bill can be a shock, even the most costly item in your entire budget (including housing and transportation). Over the years, we’ve had phone bills of more than US$1,000 a month.

Finally, Lief put his foot down. Fortunately, this didn’t mean we could no longer stay in touch with family back in the States, because, by this time, Voice Over Internet Protocol (VOIP) technology had advanced to the point where it’s possible to use this strategy almost anywhere in the world. It is by far the most cost-efficient approach. Many providers now offer VOIP service, but I recommend Skype, which I’ve found to be the most reliable. The only limitation is your Internet connection. If you have a good one, your Skype service will allow you to chat at will with friends and business associates anywhere in the world. You can call from Skype to a telephone for a few cents per minute, and Skype-to-Skype calls are free. Set your kids and grandkids up with Skype accounts (if they don’t already have them!), and you can speak with them whenever you want for as long as you like.

For local calls, maybe all you need is a pay-as-you-go cell phone. These are easier to obtain than a phone with a contract with a cell phone service provider. In Panama, a US$10 calling card for my pay-as-you-go cell phone lasts me all month.

Internet

The cost of Internet can be a significant part of your budget if you need uninterrupted access 24/7 and aren’t relocating to a city. In Panama City, for example, you can have wireless Internet for as little as US$30 or US$40 a month. But for reliable service in the interior of the country, at the beach or in the mountains, you’ll have to invest in satellite Internet. This would cost you about US$500 in hardware and set-up and then US$200 a month or more.

Cable TV

Again, this is a significant budget issue only if you’re living outside the cities and developed regions of most countries. In a main city, such as Panama City, for example, basic cable costs about US$20 a month.

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 US$150 in Nicaragua or Uruguay. The going rate for a good maid who’ll also cook for you and do your laundry in Panama City is US$300 a month, half as much in the interior of the country. A gardener can cost as little as US$100 a month (in Uruguay, for example). In Panama, you’ll spend US$300 a month for a full-time driver/Guy Friday.

Food

Groceries are a hugely variable expense anywhere. Your monthly food spending depends on how you want to live and eat. Here in Panama, a couple could spend less than US$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 Riba Smith super-store 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, say, US$600.

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.

Entertainment

This is another big variable that you control. Sticking with Panama as an example, you could budget US$100 a month for entertainment. That’d allow you two or three dinners out at modestly priced restaurants (Panama City boasts many good ones) and a couple of nights out at the cinema each month (a ticket for a first-run movie in English costs as little as US$3, depending on the day of the week). On the other hand, you could spend US$100 on a single dinner for two at Market, Panama City’s best steakhouse. You get the idea.

Miscellaneous (dry cleaning, haircuts, household bits and pieces, etc.)

In the places I recommend to you in these dispatches, these little everyday expenses can cost a fraction what they’re costing you now. In Panama City, my husband has his hair cut at the barbershop down the street for US$3 (and, no, I’m not embarrassed to be seen with him). I have mine trimmed at the salon on the corner for US$7. Dry cleaning costs an average of US$1.25 per item (compared with US$12 per item in Paris, for example).

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.

Kathleen Peddicord

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Kathleen Peddicord

Kathleen Peddicord

Kathleen Peddicord has covered the live, retire, and do business overseas beat for more than 30 years and is considered the world's foremost authority on these subjects. She has traveled to more than 75 countries, invested in real estate in 21, established businesses in 7, renovated historic properties in 6, and educated her children in 4.

Kathleen has moved children, staff, enterprises, household goods, and pets across three continents, from the East Coast of the United States to Waterford, Ireland... then to Paris, France... next to Panama City, where she has based her Live and Invest Overseas business. Most recently, Kathleen and her husband Lief Simon are dividing their time between Panama and Paris.

Kathleen was a partner with Agora Publishing’s International Living group for 23 years. In that capacity, she opened her first office overseas, in Waterford, Ireland, where she managed a staff of up to 30 employees for more than 10 years. Kathleen also opened, staffed, and operated International Living publishing and real estate marketing offices in Panama City, Panama; Granada, Nicaragua; Roatan, Honduras; San Miguel de Allende, Mexico; Quito, Ecuador; and Paris, France.

Kathleen moved on from her role with Agora in 2007 and launched her Live and Invest Overseas group in 2008. In the years since, she has built Live and Invest Overseas into a successful, recognized, and respected multi-million-dollar business that employs a staff of 35 in Panama City and dozens of writers and other resources around the world.

Kathleen has been quoted by The New York Times, Money magazine, MSNBC, Yahoo Finance, the AARP, and beyond. She has appeared often on radio and television (including Bloomberg and CNBC) and speaks regularly on topics to do with living, retiring, investing, and doing business around the world.

In addition to her own daily e-letter, the Overseas Opportunity Letter, with a circulation of more than 300,000 readers, Kathleen writes regularly for U.S. News & World Report and Forbes.

Her newest book, "How to Retire Overseas: Everything You Need to Know to Live Well (for Less) Abroad," published by Penguin Random House, is the culmination of decades of personal experience living and investing around the world.

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