Is It Really Cheaper to Retire Abroad?

The claims are enticing, even seductive:

"Retire to Panama for $975 a month!”

“Live like royalty in Belize for $1,150 a month!”

Here’s my favorite:

“Imagine, you’ve just gotten a one-hour massage for $12. Completely relaxed, you’re sipping on a smoothie made of the freshest tropical fruit you’ve ever experienced. Your toes are in the warm, fine, white sand as you contentedly gaze upon the brilliant reds and yellows of yet another magnificent ocean sunset. Get this, and more, for $1,386 a month.”

Just how true are these claims?

After reading more than 5,000 answers and 200 stories written by 400+ expats on our site, Best Places in The World To Retire, here’s what I’ve learned:

• Of course, some of the more outrageous claims are exaggerated.
• For some people, the cost of living overseas is just as much or more than living in the U.S.
• Many people can dramatically reduce their cost of living by moving overseas while substantially improving their quality of life, but only if they live a certain way.

What is that “certain way?” In order to understand, it helps to divide living-abroad expenses into three categories:

Living-abroad expense category No. 1: Expenses that can be less than in the U.S., but only if you live like a local  If, when living overseas, you need to buy the exact same items you buy in the U.S., you’ll actually pay more, not less.

Here’s an example: If you lived in any of the better-known expat locations in Nicaragua, you could visit the town of Masatepe and get fabulous, custom-made wooden furniture created by skilled artisans for about a tenth of the cost in North America (the same holds true in Panama and Belize), but if you lived in one of those places and needed an Ethan Allen couch, you’d pay more than in the U.S.

The same is true for food. Want a mango in Panama? In season, there are so many that one may fall of a tree and hit you in the head. Bananas in Belize? You could use your new macheté and hack them off a tree or pay 5 cents each (which may be safer).  However, if you simply must have that Washington state apple, you’ll pay lots for it.

Living-abroad expense category No. 2: Expenses that are less or the same in all circumstances  In Central America, for example, you could have a full time live-in housekeeper/cook for about $200 to $300 a month. (Just let that sink in for a moment the next time you’re scrubbing the toilet.) Very few of the expats on our site do housework, ever.

Did you enjoy reviewing your last property tax assessment? You would have if you lived in Belize, where the average property tax on a very nice home would be about $30 per year. Yes, you did read that right.

In Panama, you could go to a Johns Hopkins-affiliated hospital for a small fraction of what that costs in the U.S.; in Nicaragua, you could go to a hospital certified by the Joint Commission International for even less. In both countries, a house call will run you about $20.

You could buy a 2,000-square-foot home living among Panamanians in a beautiful, rural setting for $135,000. If that would be going “too native” for you, a similar house in the popular, well-developed expat community of Boquete, Panama might cost the same as one in Tucson, Ariz. But the Tucson house is 400 miles from the ocean and is in a place where the high temperature can exceed 95° for four months at a time. Boquete has an average high of 75° year-round (no heating or air conditioning needed) and is one hour from the Pacific Ocean, three hours from the Caribbean.

Which house you would you choose?  Your answer will tell you a lot about if you would benefit from the last expense category.

Living-abroad expense category No. 3: Expenses that depend on your attitude  As with most things in life, when it comes to living abroad, your attitude will, in large part, determine your success. One of the most important, and interesting, ways expats on our site reduce their expenses is through a change in lifestyle and a willingness (or even eagerness) to live differently than before.

Many expats have told us that, as a result of moving overseas, they have dramatically reduced their need for: expensive cars, big homes, going to the movies once a week and brand-name clothing. They’ve also cut the need for medical care and medicines because they’ve lost weight and reduced their stress. They even report a better social life and overall sense of well-being, which is difficult to put a price on.

Would they have done all this if they had stayed where they were?  Perhaps, but not likely.

So, are you willing to live more like a local and give up a new, leased car and $75 dinner-and-a-movie nights in favor of meeting friends at a local hangout? If so, enjoy your much lower cost of living… and that beach sunset.