Is a low cost retirement possible? The average American household spends US$66,928 per year, according to the latest Consumer Expenditures report from the Bureau of Labor Statistics.
Over 70% of this amount goes to necessities—things like housing, transportation, food, and health care.
With inflation currently running at 6.4%, costs are only going up, which makes it increasingly difficult for people to afford the necessities.
Some 67% of Americans are worried about being able to cover their basic, ongoing expenses. The level of concern is even higher for people on fixed incomes, like retirees.
For many Americans, the reality of living paycheck to paycheck is that they have no budget for discretionary expenses—things like travel, entertainment, and goods and services that are deemed nonessential but that may affect how much they actually enjoy life.
Though it’s waning, inflation is still high by historic standards.
It continues to be a threat to retirees’ long-term quality of life, but there’s a solution that can help mitigate it… and, as you’re a reader of these dispatches, I’d suspect you already know what that is.
Retiring overseas
Costs are so much lower overseas that you can reduce the amount you spend on necessities by 50% or more simply by relocating.
This creates more room in your budget for discretionary spending, which can be used to create a lifestyle of great restaurants, unique cultural experiences, and adventure.
Here are three top examples of places where you can invert your budget allocation to spend less on basic necessities and more on the things you enjoy.
Medellín, Colombia
Medellín is one of the world’s most livable cities thanks to its efficient public transportation system, strong infrastructure, friendly locals, ample green-spaces, and agreeable year-round weather.
This high standard of living doesn’t cost a premium. Housing alone provides an opportunity for savings of up to 80% compared to what the average American household spends on housing (US$1,885 per month).
Housing prices vary across Medellín, but about US$550 per month is standard for a mid-range, 80-square-meter, two-bedroom apartment in a central area. A local-style apartment of similar size in a less central area is about US$360 per month.
Utility bills stay low in “The City of Eternal Spring” because temperatures are always in the 60- to 80-degree Fahrenheit range. Because it’s never too hot or cold, there’s no need to heat or cool your home. Expats spend about US$55 per month on utilities.
Living in Medellín, Colombia, also allows you to save money on transportation, which was the second largest expense for the average American household after housing.
Medellín has Colombia’s only metro rapid transit system. It’s efficient, easy to use, and inexpensive. The standard fare is 2,880 Colombian pesos—about 60 cents.
The average American household spent about US$913 per month on transportation in 2021. A monthly transportation budget of about US$100 per household would be plenty in Medellín.
Another necessity you can save on in Medellín is health care. Health care services in Colombia cost 20% to 25% as much as in the United States, and the care is higher-ranked.
Colombia is ranked 22nd for performance by the World Health Organization while the United States is ranked 37th.
With the same budget as the average American household (US$66,928 annually or US$5,577 monthly) available to you in Medellín, only 16% to 20% of it would need to be allocated to basic expenses, as opposed to over 70% in the United States.
This would leave you with at least US$4,437 per month for discretionary expenses, and in Medellín, there are countless opportunities for diversion. It’s a cultural hub, a place where you can enjoy gastronomy, orchestra and theater performances, museums, festivals, and a generally sophisticated art scene.
Pattaya, Thailand
Pattaya is a seaside resort city located a two-hour drive south of Bangkok on the Gulf of Thailand’s eastern seaboard.
It’s a sprawling area that’s home to everything from sleepy fishing villages frozen in time to modern zones with high-quality infrastructure and international flair.
Pattaya offers something for everyone, which is part of the reason it’s home to such a big, diverse expat community. Many are retirees who came here on holiday and stayed for the warm weather, low cost of living, and easy beach lifestyle.
Housing prices depend on where you live, how big your space is, and the duration of your rental contract. US$515 per month will get you an 80-square-meter, two-bedroom condo in a desirable area about 10 minutes from the beach.
Having a car isn’t necessary in Pattaya, helping you save on your monthly transportation costs. People get around using ride-hailing apps like Bolt and Grab.
Using a mix of these and public transportation and taxis, transportation costs come to about US$115 per month for two.
Start Your New Life Today, Overseas
When it comes to food, there are diverse shopping options and associated price points. At the low end of the price spectrum are open-air Thai markets that sell fresh meat and produce; at the high end are boutique grocery stores and Costco equivalents that exclusively sell international brands. Imported goods always cost a premium.
Monthly groceries for two, including a mix of national and imported products, cost about US$430. This is a savings of almost 40% relative to the amount the average American household spends on food.
High-quality and affordable health care is one of the top reasons to live in Thailand, and the Pattaya area boasts some of the best health care facilities in the country.
Comprehensive health coverage for two people costs about US$300 per month. Even major procedures are priced 50% to 70% less than in North America, and many physicians are trained at top medical schools in Asia, Europe, and the States.
In Pattaya, you could cover your basic expenses with about US$1,385 per month, or 25% of the average American household’s monthly expenses. This would leave US$4,192 per month for discretionary expenses.
This amount would go a long way in Pattaya. You could indulge in a lifestyle that includes going for drinks and nice meals regularly, shopping at the luxury malls, and hiring household help.
The beautiful and diverse beaches plus the associated watersports are the main appeal. World-class golf courses and wellness treatments and practices are other top attractions.
Chitré, Panama
Chitré is a beach town along Panama’s Pacific Coast, about a three-and-a-half-hour drive west of Panama City.
A small town with a population under 10,000, it’s a local hub of commerce and transport, it offers the conveniences of a much bigger city, including shopping, banks, health care, legal services, real estate agents, and more.
Chitré receives limited tourism attention, and it has a small expat community relative to other parts of Panama, so prices for everything are low.
The cost of living is highly customizable and depends on your lifestyle preferences.
Rent for a two-bedroom home ranges from US$450 to US$800 per month, which is 55% to 75% less than the housing expense for the average American household.
One thing you can’t skimp on here is air conditioning for your home, which will run up a monthly electricity bill of about US$125 depending on use and the size of the space you are cooling.
If you shop for local produce and seafood at the open-air market, you’ll spend about US$100 per month on groceries versus about US$425 shopping at supermarkets for imported goods, which cost a premium.
Even at the high end of the spectrum, this is almost 40% less than what the average American household spends on food.
Owning a car will cost about US$60 a month for gas and maintenance, but you can get by without one if you live in a central part of town and walk or cycle from A to B.
With several public hospitals and private clinics in the region, Chitré has high-quality health care available. A local health insurance plan that covers two people costs about US$200 per month.
This adds up to a monthly budget of US$1,215 to US$1,565 for basic necessities in Chitré, which amounts to just 22% to 28% of the average American household’s monthly expenses.
This would leave at least US$4,012 per month left over in your budget, which you could save, invest, or spend on enjoying Chitré’s unique lifestyle opportunities.
This low-key town is paradise for lovers of the outdoors. It’s close to some of Panama’s most beautiful beaches as well as national parks, golf courses, ballparks, and trails for biking, running, and walking.
Until next time,
Kathleen Peddicord
Founding Publisher, Overseas Opportunity Letter
