A reader asked a question which gave me a great idea for a post. Why is cost of living important? This may seem like a simple question, but it seems like there is a lot of confusion on this point. My goal with this post is to talk about why cost of living matters, and then explore why it is so much lower outside the USA.
You will find lots of information on the web about the cost of retiring and living both inside and outside of the USA. We have all seen articles about the best places or cheapest places to retire in the USA. There are just as many articles that talk about the low cost of retiring in other countries. Is the lower cost really going to make a difference in the long run? Are you really 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?
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 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 Colombia, total family income in USD would be $626 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 number 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 Colombia, or Panama, 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. 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.
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 really better off living in Latin America than in low-cost locations in the US?
- Is the lower cost of living really going to make a difference in the long run?
- Aren’t there all sorts of costs associated with relocating to another country?
Low-cost locations in the United States
We read many articles on where to retire for less in the US. And there are definitely 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, total cost of living far exceeds your monthly social security.
We actually looked into moving to Hot Springs Village in Arkansas. By the time we stopped counting, our monthly expenses exceeded $6,500. There was no way we could have afforded that, and we were fairly confident our actual costs would have been even higher.
Will the Lower Cost of Living Make a Difference?
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. Last week we attended 4 different events which were part of the annual Flower Festival. Each one was amazing! All but one was free. I added over 100 videos and at least 100 photos to my library. Being able to live in a beautiful place, with a great climate, wonderful people, and delicious food, makes all the difference in the world!
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. 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 $2,800 USD. A significant part of this was obtaining “Apostilled” documents from the USA.
This pensionado visa came with many benefits, one of the most important was 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 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 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 our intention is 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 and was completed much faster. They only needed one Apostilled document for each of us – our Social Security letter. We brought that with us. For about $1,000 we obtained a 3-year Pensionado Visa. We can renew that once and then apply for permanent residency after that.
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 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 crime. 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.