Retire in Malaysia With $200,000 of Savings?

October 25, 2016 — 4:42 PM EDT

If you’re looking for Xanadu on a budget, Malaysia may be the retirement destination for you. This multifaceted and multicultural federation of former British territories in Southeast Asia was once known to few Westerners. But its appeal is growing among expats seeking a tropical climate and a relaxed lifestyle.

Malaysia has both, plus a mind-blowing mix of exotic jungle, unspoiled beaches and urbane city centers. You may never have heard of George Town, but this city in the state of Penang just made it onto a “Top 10” list of best retirement cities in the world. (For more about George Town, see Finding The Top Retirement Cities In Malaysia.)

The Two Malaysias

The federation of Malaysia consists of two regions split by the South China Sea. Peninsular Malaysia, to the west, is home of the capital city of Kuala Lumpur and, on an island just off its shores, George Town. (The island city state of Singapore, no longer a member of the federation, sits just off the southern tip of the peninsula.) Malaysian Borneo, to the east, has a string of towns along the coast and a rainforest interior that is home to orangutans, Sumatran rhinos, proboscis monkeys and a bewildering variety of other mammals, amphibians and insects, according to the World Wildlife Fund (WWF). Parts of its wilderness are open to tourists, but vast areas remain untouched by humans. A new mammal (an unknown variety of slow loris) was discovered in Borneo as recently as 2012, the WWF notes.

It would be an understatement to say that Malaysia’s population and culture are diverse. Throughout the federation, the core of Malay native culture is overlaid with strong influences brought by Chinese and Indian immigrants. Add to that a lingering whiff of British colonial influence in manners, law and architecture. It makes for a heady stew, figuratively and literally. Expats brag constantly about the high quality and low price of the street food in Malaysia’s cities.

Malaysia has been independent from Britain since 1957, and has an elected constitutional monarch, a prime minister and a British-style legal system. Islam is the official state religion, but in the cities Muslim mosques jostle up against Buddhist temples and Anglican churches. One result is that an unusual number of religious holidays are observed.

Independence has been good to Malaysia. It has had an economic growth rate of 6.5% for 50 years. Currently, the island of Penang is in the running for the title of “Silicon Valley of Asia.”

The Great Outdoors

One word of caution: Malaysia is for people who like it hot and humid – because that's what you’ll get for eight months of the year, from March through October. The rest of the year it’s monsoon season. Expats who can’t take the heat tend to spend a lot of time in air-conditioned complexes, which are common in the modern city centers.

On the other hand, it could be ideal for those who want world-class outdoor activities in their backyard. Malaysia is home to two World Heritage sites that are national parks, dedicated to preserving unique and endangered animals and plants in their rainforest homelands. Adventurers can follow jungle trails or visit tea plantations in the Cameron Highlands. They can climb the limestone pinnacles of the Gunung Api or scale the summit of Mount Kinabalu. And, of course, there are those endless miles of unspoiled beaches for surfing, swimming and scuba-diving.

But most of us don’t want to live in the wilderness full-time. Malaysia’s cities offer the modern amenities that Westerners demand, in exotic surroundings made for outdoors gawking, browsing and noshing.

All this for eye-opening prices. According to Numbeo’s cost-of-living figures, a one-bedroom apartment in George Town averages $175 in the city center, and $140 in the suburbs. A centrally located three-bedroom apartment runs around $465. For buyers, condo prices run $136 per square foot. (Overall cost of living in Kuala Lumpur will be 20% higher, with rents costing three or four times as much.)

Pocket money goes farther in Malaysia, too. A meal at an inexpensive restaurant runs as little as $2, and a three-course meal for two at a mid-range restaurant averages $15. A trip on an efficient mass transit system is 56 cents. 

Estimating your Cost of Living

The cost-of-living site Numbeo provides a breakdown of consumer prices, including real estate costs, in the Malaysian cities and towns most attractive to expats. You need to run the numbers for yourself to determine whether you require expensive or moderate shoes and booze. But it shows that a couple can live a “moderate” lifestyle in a one-bedroom apartment in the center of George Town for as little as $1,065 monthly, even if they eat Western food at home, dine out fairly often and keep up a health club membership. Add in several vacations a year and a few other amenities like taxis, and costs could go to $1,565 a month. Upgrade to a three-bedroom centrally located apartment and it rises to $1,870 monthly. 

At the lower limit for a couple in George Town some basic math suggests that your $200,000 savings would last more than 15 years, though only eight at the upper limit as described.

This is just a back-of-the-envelope example, of course. It doesn’t include taxes or medical costs, and only you know what other unavoidable expenses you may incur. It also assumes your monthly expenses stay exactly the same, that your retirement savings don’t grow and that you won't have any other source of income. 

Add in Social Security

Most Americans get Social Security payments, of course – an average $1,328 a month ($2,176 for a couple). These will cover a good chunk of your monthly expenses, stretching your savings further. Ditto if you find a place out of a city center or share the apartment.

(For more tips on retiring abroad, see Plan Your Retirement Abroad and What Americans Need To Know About Living Abroad.)

The Bottom Line

For British expats, Malaysia may be a distant but welcoming corner of their country’s former empire. Plenty of traces of the colonial past linger. To Americans, it may well appear more truly exotic and otherworldly. It’s certainly worth a visit to determine if this is the other world for you. 

You may also be interested in reading Retire In Vietnam With $200,000 Of Savings? and Retire In The Philippines With $200,000 Of Savings?