There is a serious problem facing many US citizens as they approach retirement. We have heard it over and over – Social Security was never meant to cover 100% of our living costs. That is definitely true in the USA, but there are lots of other choices, and many Americans have found much better alternatives.
Many of us simply haven’t saved what we need. And our expenses are higher than we expected, especially if we still have a mortgage. Also, we have expenses that we weren’t counting on (like support of children and grandchildren). We don’t have enough income to live comfortably after we stop working. But there is a way you can retire on Social Security alone. And it could be the best decision you ever made!
Is Putting Off Retirement The Answer?
Many people put off retirement and keep working, hoping that things will look better in a couple of years. But there are several problems with that.
- First, while we continue to work, we incur significantly higher expenses than we will when we retire. These include much higher housing costs, one or two late model cars and all the related costs, more dining out expense, clothing, healthcare, higher income taxes, expensive vacations, etc. All these take a big chunk out of what we are making and may not leave that much in additional savings.
- Second, we aren’t getting any younger. All those things we planned to do when we quit work get moved back to years when we may not be physically capable.
- Third, what experiences and adventures could you have if you weren’t working? Could you hike to a waterfall? Could you walk down to your favorite restaurant, meet some new friends and have a great meal for half what it would cost where you live now? Could you have the “Retirement Adventure” you have always wanted? Yes, yes, and yes! I know, because my wife and I have been doing it for the last 3 years.
Will you actually get ahead? Are you really getting closer to being able to cover your expenses when you do finally retire? Or will you look at the situation a year or two later and still not have enough?
Wouldn’t you rather enjoy retirement now than put it off for years?
Can You Retire in the USA?
What if you actually did retire on time, or even early? What would it take? For me, the clear first answer was to substantially reduce our personal living expenses. I mean a lot! I read lots of articles with titles such as:
- The 20 Best Places to Retire in the U.S.
- 15 Cheapest U.S. Retirement Destinations
- Where Can You Retire for Less?
Although those places sounded inexpensive, they all assumed that you were able to pay cash for your residence. And you owed no debt on your car(s). And you were intending to stay there many years, possibly for the rest of your life. So your housing expenses were limited to utilities, insurance, maintenance, and taxes. And your transportation expenses were only gas, oil, and maintenance. There was no public transportation and rent of housing was not included in the cost estimates.
If this was not your situation, then your monthly expenses would be considerably higher than the article estimates. And honestly, the total monthly expenses still were not covered by Social Security alone. You had to have a source of income or assets that could fill the gap between Social Security and total monthly expenses.
And what if you didn’t like your first choice? Maybe it was too hot, or too cold, too wet or too dry. Could you afford to move?
And finally, the authors apparently decided that weather isn’t important to retirees. Because over half were located in the northern half of the country, where long winters with heavy snows were common. No thank you!
Is the answer to just forget about retirement and continue working? Absolutely not! I think I have found a better solution!
What about outside the USA?
Have you ever considered moving outside the USA? I don’t mean give up your citizenship. I would never do that! But what if you change your residence?
We started to look outside the USA. We wanted comfortable temperatures, lower cost of living, good healthcare, quality of life, and places which were popular with other Americans like us. But that raised many more questions.
- Where do we go?
- How do we find the right place for us?
- Is it safe?
- Is there adequate healthcare?
- How will our family feel about us leaving? How will we stay in touch with family and friends?
- Will my spouse think I’m crazy for suggesting this idea?
- What do I do with all my stuff?
- Will we be able to make new friends?
- What is there to do in these places?
- Do I have to give up my citizenship?
- What about money? Do I leave it here or move it to a foreign bank?
- Can I receive Social Security payments in a foreign country?
- Do I have to pay US income tax if I live abroad?
- Will I have to learn a new language? What if I can’t?
These are all excellent questions, and I had to answer them all and more.
Fortunately, there are millions of North Americans living all over the world and doing quite nicely. So I at least had the comfort that many others had come to this crossroads and made the decision to move. If them, why not us?
My initial research led me to articles from International Living, Live and Invest Overseas, Money Magazine and many others. I found that the big, widely followed sites did have a lot of information. They were filled with articles about destinations, process, citizenship or residency, language, legal, banking, etc. The posts were interesting and made me want to go visit or live in some of those places.
We also saw all those shows where someone moved and bought property in a foreign country. [We actually met and became friends with one of those couples. And one of our favorite resorts, Bananarama in Roatan was purchased on one of the the HGTV shows.]
But the information in those big websites was definitely slanted toward satisfying their sponsors. And most of the sites were very much involved in selling real estate in those destinations. In other words, they were all about the money.
This past year really made that point very clear. In 2018, International Living named Costa Rica as the number one retirement destination in the world. (Of course, in 2019 it was Panama and in 2020 it will probably be Portugal!) So how can the “best retirement destination” change from year to year? You guessed it – the advertisers!
Here is our experience. We have visited Costa Rica many times. And we tried living in San Jose in February 2018. We hated it! It was the most expensive place we have lived since we left Houston. There was no convenient public transportation. Eating out was cost-prohibitive. I honestly believe I could live more cheaply in Houston, Texas than in San Jose, CR. And frankly, we didn’t feel like the “Ticos” wanted us there except for the American money we brought.
What We Found
We found that many places are far less expensive than even the cheapest places in North America. And many of them are beautiful places to live. And the weather is so much more comfortable.
Ultimately, we found many places we wanted to “check out”. And since we made no financial commitments, we could leave and try another place when we wanted. We packed a couple of suitcases and off we went. The really cool thing is that we have stayed in contact with our friends in each of those places. We have more friends now than when we left the US.
Solution – Retire outside the USA and Reduce Your Living Expenses
There are so many wonderful retirement destinations all over the world. We chose Latin America because travel to and from the US is much easier. They are beautiful, the weather is so much more comfortable, and there is an abundance of North Americans who are more than willing to help with anything you need.
In many places, you don’t need or want a car. That really reduces the monthly budget. And you would be amazed how much you can save on healthcare costs. In most of the larger cities, the locals all use public transportation. So you can generally get anywhere you want to go on the bus. And bus fares are really cheap. When we were in Cuenca, Ecuador, my bus fare was 12.5 cents USD. Paulette’s was twice that because she wasn’t over 65.
Taxi and Uber fares are also very inexpensive. Our average Uber fare is under $3. And everywhere we have been, retirees aren’t worried about “keeping up with the Joneses”. So even if you do have a car, chances are it is a Hyundai, Kia, or Renault. I can’t remember the last time I saw a Lexus SUV.
Most of our groceries and dining out expenses are slightly less than they were in the US, but this can vary depending on lifestyle choices. Almost everywhere we have been has excellent produce markets, and grocery stores. If you can’t find a local product, most of the grocery stores also carry American brands, but with a higher price due to transportation costs and duties. Restaurant quality is generally good, but better in the larger cities.
Where are these places?
Not as far as you might think. Mexico, Central America and South America have many wonderful towns and cities that are popular with North Americans. There are beaches, mountains, large cities, and small towns. At sea level, temps will be warm most of the year. Living in the mountains tends to be cooler. There are places that get lots of rain and others that get very little. In other words, there are many choices available.
For us, the nice thing is that we weren’t committed to stay in one place. In 3 years, my wife and I have tried living in 4 different countries (Honduras, Panama, Ecuador, and Colombia). We have enjoyed our time in each one. We have also visited two others (Peru and Costa Rica) for over a month. Each was different. Only one required air conditioning! That seriously reduces the monthly budget! In fact, we found Lima, Peru and Cuenca, Ecuador to be a little too cold for our tastes.
Answers to Other Questions
STAYING IN TOUCH – The internet makes it easy and inexpensive to stay in touch with friends and family back home. I don’t know about you, but even though we lived across town from our 20 year old granddaughter, we only saw her occasionally. Much more of our communication was through our smart phones. In that regard, nothing has changed – we use all the favorite apps to communicate with her many times per week. And most of our friends follow our adventures through our Facebook Group and Pages.
MAKING FRIENDS IS EASY – During our travels, we have made many new friends. It is easy to meet new people because we have so much in common. We all experienced similar thought processes in coming to the decision to move to another country. And as we move to other places, we stay in touch through the internet.
SAFETY – We have felt safe everywhere we went. We walk almost everywhere. Of course we are careful and not foolish. We don’t wave cash and fancy smart phones around. And we generally are not out late at night.
CITIZENSHIP AND TAXES – No we did not give up our US citizenship, and we don’t ever intend to. Yes we still have to pay U.S. income tax, but of course with reduced income, our tax is not very much. And although we are subject to Colombia’s income tax, our retirement income is exempt, so the tax is insignificant.
SOCIAL SECURITY AND BANKING – Yes we still receive our social security for life regardless of where we choose to live. It gets deposited to our U.S. bank account every month. We do have a bank account in Colombia, but we only transfer what we need for living expenses. And I have found a very inexpensive way to transfer dollars from our U.S. bank to Colombia.
OUR STUFF – We chose to sell or give away all of our “stuff”. Some people ship all of their personal belongings in containers. But this is very expensive, and really ties you down to one particular place. We wanted to experience many places.
LANGUAGE – We feel bad that we haven’t learned much Spanish and still intend to do so. We have tried classes, and on-line video training but so far we can only speak a few phrases and words. Google Translate works pretty well. If we really need help, we have several translators available. We get along okay. And in certain places, Spanish really isn’t necessary.
Buy or Rent?
You don’t need to buy a home. In fact, there are lots of reasons to wait to buy. Until you know for sure you like a place, you should not make any significant financial commitments. It can take a long time (in some cases several years) to sell a home. In most of these places, there is no “Multiple Listing Service”. So prices could vary widely by realtor.
The laws in these countries are much different than where you live now. Lawyers are an absolute necessity, to ensure you own the property you think you are buying. “Let the buyer beware” is an important term to memorize!
On the other hand, rents are very low. Renting gives you the freedom to go from place to place and enjoy new adventures. So rent first. You can always buy later when you know for sure you want to stay.
Two Examples of Places We Have Lived
Example 1 – Medellin,Colombia
This is our current home, and we may honestly never live anywhere else. It is a large city of almost 3 million people. We moved to Medellin, Colombia last year. We decided to stay awhile, so we rented an unfurnished apartment. We had to purchase things like appliances, TV, 2 bedroom sets, living and dining room furniture, and everything to fully equip our kitchen. So that was a large expenditure. However, the difference between “furnished” and “unfurnished” rents is significant. We believe the rent savings will cover all of our purchases after just one year. And down here, the definition of “furnished” can vary widely. So you may still need to buy many things to complete the furnishing.
Our 20th floor 3 bedroom apartment costs about $650 per month. And see below for my view! Utilities and internet add about $170.
As residents, we were able to join the national health insurance plan. Total monthly cost for both of us is less than $35 per month. In that plan, many of our prescriptions are free, and regular doctor visits generally cost $1.00. So far, we have found the doctors to be very professional and attentive. And as you might not know, many medications such as antibiotics are available without a prescription at your local pharmacy.
Also since we no longer live in the US, we have cancelled our Medicare Part B & D as well as our supplements. This saves us nearly $500 per month. (See note below on this point.)
The produce is generally fresher and less expensive. Transportation around town is unbelievably efficient and inexpensive. And we can get almost anywhere in the city on the bus or Metro. Cost is about $0.75 per ride. Our apartment is two blocks from two large malls and one block from our 24-hour grocery store. There are at least 200 restaurants within walking distance.
Medellin is known as “The city of eternal spring”. The weather is amazing. Today is February 3, 2019. (We just finished watching the Super Bowl.) The temperature will range from 60 to 78°F. And it stays this way throughout the year!
Example 2 – Boquete, Panama
Located in Western Panama near the border with Costa Rica, Boquete is a small community of about 30,000 people. But US and Canadian Expats make up almost 20% of the population. Many publications and websites have frequently called Boquete one of the absolute best places in the world to retire. Like Medellin, the weather is pleasant year-round. The rainy season is much longer and the rain can be very heavy, especially in April and October-November. But the rain really makes the area beautiful. You will feel like you have a green thumb, because everything grows.
The large Expat community makes it very comfortable to live there, and many people never try to learn Spanish. Housing cost is generally a little higher in Boquete than other places in Central and South America. And most residents have a car.
Boquete is a beautiful area of Panama, with an elevation of 3,000 – 6,000 feet. It is called “The bread basket of Panama”, because there is so much excellent farmland there. They grow fruit and vegetables that are shipped all over Panama. And Boquete produces some of the finest coffee in the world!
Because of the higher housing costs and the need for a car, Boquete has a higher cost of living than other areas of Latin America. But it is still lower than most areas of the US and Canada, so it is still worth checking out.
If you take the necessary steps, you can retire when you want to. Your Social Security will cover most, if not all of your living costs in many areas outside the USA. And you can stretch your retirement income by relocating to another country where your living costs will be much lower.
Note about Medicare Parts B and D. For every year you delay signing up for Parts B and D, there is a 10% penalty charged if and when you decide to return to the US. So you must carefully consider this. In our case, we save over $300 per month. If we stay here for 10 years, our savings is $36,000. It would take many years of additional penalty to wipe out that savings. And who knows what our circumstances and Medicare laws will be then. We decided to take the “bird in the hand” approach.
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