A reader asked a question that gave me a great idea for a post. Why is the cost of living important? My goal with this post is to talk about why the cost of living matters, and then explore why it is so much lower outside the USA.
The map above paints a great picture of where the low cost of living places are around the world. In this case, green is the lowest and red is the highest. You should immediately notice that there are no green markers anywhere in North America and Western Europe (North of Spain). But once you are south of the US border, virtually everything is varying shades of green. In other words, in comparison to the rest of the world, no place in the USA or Canada has a low cost of living.
What About Low-cost locations in the United States?
We read many articles on where to retire for less in the US. And there are places in the US that are more affordable than others. But in digging deeper, many of the comparisons omitted or assumed away expenses. For example, they assumed you would not have a mortgage payment. They made the same assumption about no car payment. So housing and car expenses were artificially made to look better. When you add back a reasonable monthly payment for housing and auto, the total cost of living far exceeds your monthly social security.
We looked into moving to Hot Springs Village in Arkansas. This is one of the largest retirement communities in the US. By the time we stopped counting, our monthly expenses exceeded $6,500. This was well over our monthly Social Security, and we were fairly confident our actual costs would have been even higher.
Will It Make A Difference?
Is the lower cost going to make a difference in the long run? Are you better off living in South America or Central America rather than lower-cost locations in the United States? And aren’t there all sorts of costs to relocate to another country? How can it possibly cost so much less to live and retire in other countries? If retiring to another country is so much better, why aren’t more of your friends moving?
All great questions and I hope to answer them in this post. One of the most important is to explain why it can cost so much less to live, say where we live in Colombia. But the same factors apply to other places as well. The following table compares the average annual and monthly income in the US and Canada with other countries. This is the key to understanding how the cost of living can be so much less outside North America.
Table of Average Income for Selected Countries
Why Do You Care About “Average Income”?
The reason this is important is that this is all the income locals in these countries have available to them. If you assume that both spouses work, then for example in Mexico, total family income in USD would be $970 per month. Millions of people in Central and South America cover all their living expenses, including raising their kids on this income. They even have enough for entertainment, especially attending local soccer games. Everyone in Latin America has their favorite team and they are fanatics about this sport.
According to Social Security, the average individual receives $1,461 and the average couple receives $2,448. These are 2019 amounts and are before Medicare. There is a large percentage of American retirees who have nothing else and must live off of their Social Security alone.
If families in Central and South America can live on the amounts from the table above, then imagine how well you can live on your Social Security! Even taking the average amount for a couple, this is 3-4 times what locals have to live on. And if you are in that category, can you see why it is easy to live comfortably on your Social Security in Mexico, Colombia, Ecuador, or any of these countries? In our experience and supported by this table, Costa Rica is the most expensive country in Latin America. But its average salary is still a small fraction compared to the US and Canada.
Auto and Transportation Costs
Here is some more stuff to consider. In many of these areas, you don’t need a car. Here in Medellin, we don’t need one, and we don’t want one! They can be a nuisance and much more expensive to buy than in the US. Lots of places in Latin America have public transportation that is excellent and very inexpensive because people cannot afford to own cars. In Medellin, rides on the Metro and local buses cost about $0.75. And we can get anywhere we want on a bus and the Metro. When we need other transportation, Taxi and Uber fares are generally less than $3.00. Think about how much your car costs. Then erase that from your monthly budget.
Healthcare and Insurance
Another key cost area is health insurance and healthcare. We are part of the national health insurance program in Colombia. Many of the countries have similar plans. We pay about $35 per month total for both of us. Our doctor visits and labs cost about $1.00. Our prescriptions are free. I have one prescription that was costing me USD 55 per month over the counter before we joined the National Plan. Now, I pay about USD 1 for a 3-month supply of that medication plus another prescription. These savings make a big difference in our cost of living.
Because of our current status and plans, we chose to terminate our Medicare coverage in the US. That decision is saving us $270 per month. We also terminated our medicare supplements. That decision is saving us about $200 per month. Medicare and those supplements only work if you are getting treatment inside the US or one of its territories. There could be potential future costs with this decision if one or both of us ever decide to return to the US. However, for the time being, we are saving nearly $6,000 per year, so we will think about potential additional Medicare costs if and when we need to. Meanwhile, we are very satisfied with the quality of care we have received, and our friends tell us the same thing about their experiences. I have used a private dentist for crowns, a root canal, and even a 3 tooth bridge. The cost was about one-third what it would have been at my dentist in Houston. Even if you decide to use private care, the cost is much lower than even your out-of-pocket costs in the U.S.
This is our terrific, really inexpensive apartment in Medellin.
One more big cost difference is housing. The climate in many countries in Latin America is much more moderate than in the US. The primary reason is the altitude. Even though we are much closer to the Equator, there are mountains everywhere. Unless you live on the coast, your weather will be very comfortable.
Here in Medellin, Colombia our temperatures range from 60 to 85 degrees Fahrenheit, EVERY DAY OF THE YEAR! We don’t need air conditioning and most places are not built with air conditioning or heating. Therefore our utility bills average only about $125 per month. The picture to the right is our apartment in Medellin. We live on the top floor, have 3 bedrooms and 2 baths, and a “killer” view of half the city and surrounding mountains. And we also have a nice pool, workout room, stationary bike room, sauna, and steam room. We are 2 blocks away from 2 large, modern malls and 1 block from our 24-hour grocery store. Our rent is very affordable.
What Are The Costs To Relocate?
The other questions from above were:
- Are we better off living in Latin America than in low-cost locations in the US?
- Is the lower cost of living going to make a difference in the long run?
- Aren’t there all sorts of costs associated with relocating to another country?
Will the Lower Cost of Living Make a Difference?
The Tag Line for this website answers that question. “Spend less and enjoy life more.” We have been living outside the USA for over 3 1/2 years in 4 different countries. Our lives are very enjoyable. We eat out regularly, we do many interesting things, we have best friends we didn’t know 3 years ago, we are healthy and active, and we live on less than we receive from Social Security.
As an example, let’s say you receive a net of $3,000 per month from retirement sources. You find as we have that we can live comfortably on $2,500 and all our needs are met. On the other hand, you stay where you are and figure out the true monthly cost is $4,500. There, you are constantly faced with anxiety and work to find an additional $1,500 per month. And if something unexpected happens, more worry about how you will cover that. But here, you can put that extra $500 away for a rainy day when the unexpected happens. Meanwhile, you realize all your needs are being met and enjoy a much more peaceful life. For Paulette and me, this is our reality, and our lives are much better for having made this move.
Are there costs Associated With Relocating Outside the USA?
Not as many as you think. You can travel to most countries and stay for up to 90 days with a simple tourist visa based on your passport. And there are many inexpensive flights especially since you can plan your travel to take advantage of discounts. Many of those countries have provisions for extending your tourist visa for some period. There are AirBnB’s everywhere. If you decide to stay longer, you may need to obtain permanent residency. This doesn’t mean you have to give up US citizenship! It just means you are choosing to reside in their country. We have gone through this process twice.
Because we stayed so long in Panama, we had to become legal residents of Panama. We have a “Pensionado” Visa. The entire process cost us about USD 2,800. A significant part of this was obtaining “Apostilled” documents from the USA.
This pensionado visa came with many benefits, including 25% off of all airfare to/from Panama. The trip we took after leaving Panama involved 7 different destinations. We received the 25% discount on the entire trip. So the net cost of the residency was much less. We still have that residency, even though we live in Colombia. As long as we visit Panama for at least 72 hours every 2 years, it will last for the rest of our lives. And since we never know what will happen, we are planning to return to Panama for a few days next month to retain our residency for another 2 years.
We moved to Boquete, Panama and stayed for 17 months. But we were anxious to see more of the world. So in the last 3 1/2 years, we have also lived in Roatan Honduras (3 months), Cuenca, Ecuador (3 months), and San Jose, Costa Rica (1 month). We have now lived 14 months in Medellin, Colombia and we intend to live here for the rest of our lives. It is the perfect place for us. And with our work trying to establish an English-speaking Church, we have a very fulfilled life.
Our residency in Colombia cost much less than Panama and was completed much faster. They only needed one Apostilled document for each of us – our Social Security letters. We brought those with us. For about $1,000 we obtained a 3-year Pensionado Visa and our Cedula. This allows us to open a Colombian bank account, have contracts for phone service and utilities in our name, pay bills online, and very easily transfer US Dollars for use here. We can renew that for 3 more years and then apply for permanent residency after that.
One other benefit – the Exchange rate between US Dollars (USD) and Colombian Pesos (COP). When we moved here in May 2018 the rate was 2,860 COP per 1 USD. Our rent was 1,950,000 COP which translated to USD 681. In July 2019 our rent increased to 2,060,000 COP. But the exchange rate is now 3,440 COP per 1 USD. So our rent is now equivalent to USD 596, a 12.5% decrease! This trend has continued for several years and has no signs of stopping anytime soon.
What About “Your Stuff”?
We were not sure where we were going or how long we would be there. And a good friend advised us not to ship anything from the US. That has proved to be very good advice. We have rented housing everywhere we have lived. And we have no interest in buying a property. Everything we decided we couldn’t get rid of in the US fits in a small storage unit that costs us $42 per month. When we decided to live in Colombia, we rented an unfurnished apartment, and we bought what we needed here. We saved a lot by buying some used items, including two beds with end tables, refrigerator, washer/dryer, my desk and out TV table. Mattresses and other things were new. If and when we decide to leave, we will sell it all. But since we have been here longer than a year, the difference in renting furnished versus unfurnished has paid for everything we bought.
Until you do find someplace you want to stay, keep your life simple and rent. Having “stuff” just ties you down and keeps you from enjoying new adventures.
Last Point – Safety
We all had to get comfortable with our new environment. One question on everyone’s mind is “Will I be safe?” As I mentioned before, we have lived and visited in 6 different countries. In every one of them, we have taken relatively long bus rides and walks both during the day and night. Occasionally we read about robberies and other crimes. But there is nothing here that is not found anywhere in North America. We aren’t foolish. Going to outdoor ATMs late at night after having a few drinks is just as dangerous here as it is anywhere in North America. We are careful. Pedestrians don’t automatically receive the right of way here, so we wait for the walk light to turn green. We have felt very comfortable and safe everywhere we have gone.
Conclusion and Recommendations
For all the above reasons, you really should check out these countries in Latin America. The cost of living is important because it is so much lower than where you are living. The “Tag line” to my Website is “Spend Less and Enjoy Life More”. It is true!
Before we retired, we read this same kind of information and honestly, it sounded too good to be true. We talked about it with some of our family members, and they were not excited about us moving to another country. So to complete our research we decided to visit Panama and see for ourselves. My sister decided she would go with us because she thought the whole idea was crazy. The bottom line was that everything we had read was true. My sister even agreed that we should try it.
I recommend that you consider a visit to several places that interest you including Colombia and see for yourself. Do a “check-it-out” trip. Or visit several countries for a few months each. That is a nice thing about being retired – you can stay gone as long as you like. Thanks for reading and I wish you good travels.
Please leave a comment below. Thanks for your visit.