Cheap and Colorful, an Overseas Home Beckons
New York Times
by Phyllis Korkki
They might have to contend with a monsoon season. Their electricity may go out on a regular basis. And they probably won't have the choices they once had at the grocery store. But some people are trading the conveniences of American living for retirement in another country.
And far from being ultrarich, many are people who, after doing the math, find that they can actually stretch their dollars farther if they move abroad.
Take Wendy Justice, a 58-year-old retired nurse from Knoxville, Tenn. She and her husband, David Justice, also a retired nurse, lived for a year in Nha Trang, a seaside resort in Vietnam, for less than $900 a month. That included $350 for a one-bedroom apartment two blocks from the beach, with 24-hour security and twice-a-week housekeeping.
To be sure, that's on the low end of the cost spectrum. But retirees are finding places to live in Latin America, Asia, and even parts of Europe for $1,000 to $3,000 a month, including rent, utilities, food, some entertainment, public transportation, and in some cases household help.
Kathleen Peddicord, founder and publisher of Live and Invest Overseas, said she had seen a steady increase in the number of retirees moving abroad. Although exact numbers are hard to come by, nearly 550,000 people collected Social Security while living abroad in 2010, a 38 percent increase compared with a decade earlier. That gives a sense of the rising popularity of foreign retirement, though some expatriate retirees may not collect Social Security for various reasons.
"Twenty-five years ago, living abroad was kind of a crazy idea," said Ms. Peddicord, a 48-year-old American. "This current generation is embracing the idea at a much greater rate."
Today's retirees are much better-traveled than previous generations, she said, and thus more open to the notion. Also, the recession ate into their retirement portfolios, making a move abroad a practical way to conserve money. And technology has made it much easier to research destinations and conduct financial transactions.
Panama, where Ms. Peddicord lives with her family, is one of the most popular destinations, offering a combination of services, amenities, low cost and proximity to the United States. It also offers tax incentives to foreigners, and its use of the American dollar as the local currency makes a move more seamless.
Other affordable countries popular with retirees include Belize, Ecuador, Malaysia and France, Ms. Peddicord said. (Yes, certain areas of France, like the Béarn area in the southwest, can actually be affordable.)
But retiring abroad is not for everyone. Those accustomed to visiting family and friends regularly may not be good candidates. Still, many retirees manage to visit the United States at least a few times a year, and their new homes can be attractive vacation destinations for friends and relatives.
To retire abroad, Ms. Peddicord said, you need an open mind and a sense of humor. Otherwise, "you'll be banging your head against a wall every day," she said. "You're going to have to adjust your expectations."
Loreta Randall, who retired to the Corozal district in northern Belize with her husband 10 years ago, can attest to that. Last month the pump they use to deliver their household water from a lagoon broke, and they had to use bucket water instead.
Services and products have improved in the time they have lived there, but grocery shopping still resembles a scavenger hunt, she said. When she lived in Bend, Ore., she said, she was a wine and cheese snob, but no more. Now if she can find a slab of some kind of Cheddar and a bottle of ordinary red, she's fine. In fact, she's overwhelmed by the choices in the stores when she visits the United States.
Be aware that hours of business in foreign countries may be limited, Ms. Peddicord said. Utilities may be unreliable. In many Latin American and Asian countries, you must stand in line to pay your electric bill in person (on the other hand, you might be able to afford to pay someone to stand in line for you). Workers might have a much more flexible notion of time than in the United States. In short, you must gracefully accept that people in other countries do things differently.
The idea of leaving the country can be intimidating, so many people retire in stages, Ms. Peddicord said. They might keep their homes and rent them out for half the year, while renting abroad for six months. If it doesn't work out, the worst that happens is they have taken an extended vacation.
As you consider places to retire, ask yourself what you can and can't tolerate, Ms. Peddicord said. Will it bother you if the electricity goes out, or if the access to your road washes out during the rainy seasons that are common in many parts of the world? What do you like to do on a weekend night or a Sunday afternoon? Do you hate humid weather? What about bugs?
And "you have to answer them honestly -- you can't give the answer that makes you sound good," Ms. Peddicord said.
Also ask yourself how local you want to go, she said. The more you live like the local people -- speaking their language, buying food at their markets, living in their typical housing -- the cheaper your retirement can be, she said. By going this route, "you can retire to another country on a budget of $700 a month," she said. It would be a very modest lifestyle, "but it could also be the adventure of your lifetime," she added.
On the other hand, if you have more money to spend and don't want to immerse yourself as fully in the local lifestyle, more countries offer American-style retirement communities, with English the main language spoken, she said. (Boquete, Panama, which is surrounded by mountains and has a temperate climate, is one such place.)
It's often a good idea to rent first to make sure that you will be comfortable in your adopted home, Ms. Peddicord said. But once you are sure you have found the right city or town, there may be excellent deals on real estate -- just be prepared to contend with the complicated tax issues that come with buying property abroad.
Many affordable retirement spots are in Latin America, where reports of crime, especially in Mexico, can be alarming. Do not write off an entire country, or even a city, because of such reports, Ms. Peddicord said. State Department warnings cast very wide nets and may not reflect the reality, she said.
Once you have narrowed your options to a few places, visit them, and "pay attention to your gut reaction to the place," she said. Many people have the feeling, " 'I'm home,' even though nothing is familiar," she said.
That's what Ms. Randall and her husband, Bill Hunt, felt when they first visited Belize in the late 1990s. "We did our research on the whole country, but Corozal had just what we wanted: friendly people, clean air, fresh fruits and veggies, affordable property and a few North Americans thrown in for good measure," she said in an e-mail.
The number of North Americans living in Belize has swelled, she said -- English is the official language -- and the word keeps spreading about how inexpensive it is (which, of course, has made it more costly than it was a decade ago).
Ms. Randall and her husband bought property on a freshwater lagoon a few miles from Mexico. They built a five-unit condo and live in one unit; they hope to rent out the others in the future.
The Justices have been more nomadic. Since retiring in 2005, they have lived in Thailand and Malaysia as well as Vietnam, while touring throughout Southeast Asia and in China (Ms. Justice is a freelance writer for Live and Invest Overseas, specializing in Asia). And so they have had to keep track of passport and visa requirements -- a good practice in general for retirees abroad.
Rules vary from country to country, but many expatriates need to obtain a visa and have it renewed periodically for a fee. Some countries offer a longer-term retiree visa, which requires some proof of income as a way of showing that you will not become a financial burden on the government.
Most people who stay in one place become permanent residents while keeping their American citizenship, Ms. Peddicord said. This enables them to keep their Medicarecoverage; while it cannot be used abroad, they can return home to use it if a severe health problem emerges.
People with serious health problems should not, as a rule, consider an international move, said Gabrielle Redford, editorial projects manager of AARP The Magazine, which has published an expatriate retirees' starter kit.
But keep in mind that "health care in many parts of the world is much less expensive and can be just as good," she said. Medical tourism, after all, is a big business. Private clinics can often provide excellent service, and they can be affordable even without insurance.
One downside of moving abroad is that financial transactions and taxes can be much more complicated. You do not want to run afoul of authorities in either the United States or your new place of residence.
Ann Reilley Gugle, a certified financial planner and certified public accountant at Alpha Financial Advisors in Charlotte, N.C., advises retirees to find a lawyer and C.P.A. in the new country who is familiar with the nuances of its tax code, tax treaties and local law. The lawyer should have a strong alliance with an American counterpart to help resolve legal and tax issues, she said. Documents like wills and trusts will need extra attention on both ends.
It is wise to have an account at an American bank and a local bank, she said. Many retiree destinations rely on cash, and you need to have local currency on hand. Especially in a country where the currency is volatile, you may want to buy a foreign currency contract that locks in your exchange rate, for your fixed local expenses, she said.
Watch out for unexpected fees. Obtain a credit card based in local currency or use a dollar-based credit card that does not impose fees, she advised. Otherwise you may be charged hefty transaction fees.
Long-distance phone charges can also be high if expatriates aren't careful. The cheapest way to communicate long-distance is via Skype or a similar Internet-based system, Ms. Peddicord said. To avoid high cellphone charges, buy a pay-as-you-go phone in the new country, she advised.
For people like the Justices, the financial complications of living abroad are worth it for the experiences they have had. Now back briefly in the United States, they are planning to return to Vietnam, perhaps to stay in Hanoi, where they have already lived for six months.
They have fond memories of Nha Trang, where "it was cheaper (and more fun) to eat out than it was to cook for ourselves, even with the low, low price of fresh market food," Ms. Justice said in an e-mail. "We spent our days relaxing at the beach, socializing with our friends in the cafes, taking leisurely drives through the pretty countryside and taking private lessons in Vietnamese" -- at a cost of $5 for a two-hour session.
At this point, she said, "Southeast Asia feels like our home and the U.S. feels like the foreign country."