For many Americans, the appeal of retiring abroad is the opportunity to experience a different—perhaps very different—place and culture. For others it's a more practical matter of dollars and cents.
Whatever your motivation, it's possible to achieve both goals with some proper planning: an immersive foreign adventure plus a significantly lower cost of living.
Just how much might you save by heading abroad? The answer depends on where you want to retire, as well as the lifestyle you envision for yourself.
If you are willing to give up certain conveniences, you could live very well in a number of developing countries throughout the world. It’s possible to retire in Nha Trang, Vietnam, for example, for less than $900 a month, including rent. You’ll find a welcoming community of expats and locals, beautiful beaches, comfortable weather and reasonably priced healthcare. But at 7,228 miles from Seattle or 8,767 miles from New York City, a retirement destination like Nha Trang might be a little too far off the beaten track for some. For other low-cost destinations around the world, see Investopedia's article on the Best Countries for Retirement Abroad.
- Retiring abroad can be less expensive than staying in the U.S., if you choose the right spot.
- To save the most money, learn to live—and spend—as the locals do.
- Unless you're planning to leave the U.S. entirely behind, don't forget to budget for some trips back home.
What It Costs: An Example
For the purpose of illustration, we’ll look in more detail at the costs of retiring in one popular Central American city. Panama City, Panama, situated at the Pacific entrance to the Panama Canal, is comparable to many a U.S. and European metropolis in terms of culture, atmosphere, and modern conveniences.
Its skyline is predominantly high-rise, but the old quarter of the city (Casco Viejo) features traditional architectural styles, including well-preserved Spanish colonial buildings. A vibrant arts scene with an impressive variety of art shows, dances, plays, and festivals keeps retirees entertained.
Although it's certainly not the cheapest place to retire in Panama, retirees can live modestly for as little as $1,500 a month in Panama City, including rent, which might run about $1,000. Living more comfortably could up the bill to around $2,500 a month.
Healthcare costs are considerably cheaper than comparable care in the U.S. That's important because Medicare generally won't cover you outside the United States or its territories, with rare exceptions. What you'll spend, and the standard of care you'll receive, will vary depending on where you go. A major hospital in downtown Panama City, for example, offers facilities and services similar to what you’d find in most U.S.-based hospitals, for about half the cost; smaller clinics offer a variety of services at about a quarter of the cost.
Panama’s Pensionado program gives retirees, including expats, access to wide-ranging discounts, which can save you money on everything from entertainment (50% off) to medical expenses (10% to 20% off), airline tickets (25% off), and utilities (25% off). Foreign pensionados also get a one-time import tax exemption for household goods and a tax exemption every two years for importing a new car.
It's possible to spend a lot less if you’re willing to settle outside the big city. Travel a few hours down the coast to the Azuero Peninsula, for example, and you’ll still be able to take advantage of the Pensionado program, but you’ll pay under $800 a month to rent a house on the beach.
With direct flights from many U.S. cities, travel to and from Panama City is easy and affordable. (At the time of writing, for example, a nonstop, roundtrip flight between Atlanta and Panama City cost as little as $358; travel time: 65 minutes).
Medicare rarely covers Americans outside the U.S., but other countries often have high-quality healthcare at affordable prices.
Other Expenses to Consider
When you're budgeting, remember to factor in air travel to and from the U.S.A. for as often as you expect to return The cheapest flight (at the time of writing) between Atlanta and Nha Trang, for example, was listed at $1,368, one-way. If you and a partner fly home twice a year, that will add $5,472 to your annual bills, not including ground-transportation costs and any hotels.
You’ll also need to consider your one-time, upfront costs, such as relocating your household and moving yourself, your belongings, and any pets to your new home. Depending on the destination, you might also have to factor in the price of a retirement visa, allowing you to remain in the country for an extended period. Some countries charge a considerable fee for this type of visa and/or require you to deposit a substantial amount of money in a local bank. To get a temporary retirement visa for New Zealand, for example, you’ll need to invest NZ $750,000 (about $495,000 in U.S. currency) in the country over the two-year term of the visa and have another NZ $500,000 ($330,000 U.S.) to live on, which could obviously be a deal breaker if cost is key.
Balancing Cost and Comfort
Retiring abroad can make your dollar go further in almost every budget category, but you shouldn’t (and, one hopes, won’t have to) move somewhere you hate just to save money. It will take some time and research, but it should be possible to find a location that matches your needs in terms of both costs and comfort.
If you enjoy the serenity of white, sandy beaches, simple meals, and a quiet lifestyle, for example, you might be right at home in a place like Nha Trang. But if your ideal retirement involves something a bit more urban—with shopping, museums, fine dining, and access to music and the theater—a cosmopolitan destination like Panama City might be a better bet. The trick is to spend the time to find a place you’ll enjoy, and that you can afford.
Remember, You’re Not on Vacation
Even if you retire to an affordable spot, it’s easy to spend too much. One mistake that many new expats make is acting—and spending—as if they’re on vacation. If you live like that every day, spending lavishly on restaurants, local attractions, and the like, you can quickly burn through your budget.
One way to prevent overspending is to find out where the locals dine, shop for groceries, and entertain themselves. Get to know the local vendors and farmers, and find out where you can buy things at the “local” rate instead of the “tourist” rate. You probably already do this at home (without even thinking about it), and know where to find the best deals as well as which places to avoid because they are overpriced. Do the same thing abroad and your money will last much longer.
The Bottom Line
In many cases, retiring abroad costs significantly less than retiring in place or even moving to a smaller home in the U.S. It won’t be the right choice for everyone, but it provides an alternative for retirees looking for a change of scenery, new experiences, access to affordable healthcare, and a lower cost of living.
It should go without saying that before retiring abroad, you need to do some serious research. Rules and regulations vary by country, including visa and residency requirements. In addition, taxes for those retiring abroad can be quite complicated. Work with a qualified attorney and/or tax specialist when making your plans and consider talking to a local attorney in your proposed new location as well.
Above all, invest in several trips to your potential new home before making the final move. Try to visit in different seasons and spend time in a variety of settings to see whether it's just a nice place to visit or you really want to live there.