To live the rich life expresses a goal for most of us, but unfortunately it has become an elusive dream for many modern-day retirees.
Today’s retirement living involves more than just leaving a job; it’s the beginning of a new chapter of life. Many baby boomers have hit their retirement target age and are eager to say goodbye to the employment ball and chain and hello to leisurely pursuits of travel and recreation. Others have been forced into early retirement by business restructuring and budget cuts but are none too optimistic about reemployment prospects. A good number have saved and invested for the purpose of maintaining a comfortable standard of living in their later years.
However, as the U.S. economy has stumbled, so too have some retirement plans and investment portfolios.
To the question of how best to stretch the power of remaining savings and moderate revenue streams, one answer is gaining more acceptance: expatriate living.
While packing up and leaving the country may seem like a drastic move, foreign relocation is not quite the extreme choice it once was. With advances in technology, including the Internet with easy email accessibility and low-cost phone services like Skype or MagicJack, family and friends can remain in close contact. Low-cost airfares, even from developing countries, are more prevalent now and can facilitate more frequent visits back to the States than could be expected before.
Above all, the far lower cost of living in many foreign destinations allows retirees to live the active lifestyles they have planned and dreamed of at a standard likely not available to them currently in the States.
South and Central American destinations all have received U.S. expatriates warmly. In the East, the Philippines and Thailand have become popular retirement spots. In her book How To Retire Overseas, expatriate veteran Kathleen Peddicord lists Nicaragua, Ecuador, Uruguay and Thailand among her list of the top 14 retirement havens in the world. In most of these countries, as little as $20,000 in annual income will provide you with a rich lifestyle. Often an added benefit is the ability to afford a few unexpected luxuries, including domestic help, fine dining, recreational pursuits such as deep-sea fishing and golf, and international shopping.
Concerned about receiving your Social Security payments if you move to a foreign land? Don’t be. The Social Security Administration operates an entire Office of International Operations for the sole purpose of assisting those receiving retirement or disability benefits while out of the country. While the SSA does not have foreign offices, most issues that arise can be handled through the U.S. State Department at American embassies and consulates located in most foreign countries.
The Harleys Go South—Way South
In conducting online searches for information about retiring in foreign locales, no single destination pops up more frequently than Panama. And, no wonder. Panama’s pensionado program offers a myriad of benefits in addition to the country’s other key selling points, including a moderate climate, reasonable cost of living, stable government and low crime rate. These are just some of the reasons MSN Money puts Panama at the top of its list of best-bet locations for American retirees on a fixed income.
After considering both domestic (southern and southwestern United States) and international locations (Mexico, Belize, Costa Rica and New Zealand), George and Rachel Harley, formerly of Cleveland, Ohio, packed up their dogs, some personal belongings and made the long, arduous trek to their new Panamanian home by car. It all has been worth it, they say.
“We liked New Zealand,” says George, a former engineer for Ford Motor Co. and a real estate agent back in Cleveland. “But it was just too far away. It’s difficult to own property in Mexico. While people in Belize speak English, the country had hurricanes, crime and high humidity.”
Taxes are a major consideration for Americans contemplating an expatriate retirement anywhere. As in many other nations, Panama does not tax foreign income, preferring instead to see it stimulate the economy through spending. In fact, one of the criteria for receiving a pensionado visa is a minimum monthly foreign retirement income of $1,000 for a single person. That amount increases by $500 per month for each dependent included under the visa.
The lifetime pensionado document affords foreign retirees the opportunity to reside in Panama indefinitely with a treasure trove of discounted services and amenities offered to visa holders. It costs roughly $1,200 to $1,500 to obtain, and George highly recommends the hiring of an attorney to handle the cumbersome paperwork involved.
The Harleys use their pensionado benefits extensively.
“We get 25 percent off flights originating in Panama,” says George. “And 25 percent off at restaurants, 15 percent off for fast food. Movie tickets are half price, which discounts the cost to $2. Electricity is discounted 25 percent. Medical and dental services are also discounted. Prescription drugs are 10 percent off, routine teeth cleaning costs $15. My bridge replacement set me back $300.”
While monetary perks are nice, the Harleys have found other reasons to remain in Panama.
“The people are very friendly. There is great fishing; Panama has more than 960 miles of coastline. We live in the mountains where the year-round temperature is 70 degrees. The air is clean,” says George. “The banks are very stable, and there is little waiting. Special lines are provided for those with pensionado visas.”
In part due to past U.S. involvement with the Panama Canal, American influences in the area are prevalent, especially in Panama City where high-rise condominiums and modern shopping malls are sure to remind some of stateside metropolitan areas. As a result, most Americans assimilate into the Panamanian lifestyle easily.
For the Harleys, the biggest adjustment has been the slower pace—of just about everything.
“Paperwork is very time-consuming,” George says. “The mail is very slow. You must use a private service to send and receive mail from the U.S., and it takes about 10 to 15 days. Internet speeds can be slow, and there is some down time. We also lose electricity two to three times per month for short periods of time.”
For prospective expatriates, George recommends moving to the area temporarily, renting and experiencing the culture for awhile firsthand. He also suggests talking to those who have already made the move. In fact, he recently began offering his own informational service to those who are contemplating a move to Panama. He can be reached at panamageorge99@yahoo.com.
Another tip from the Harleys, “Learn the language.” That would be Spanish, by the way.
If Panama has begun to appeal to you as a retirement destination, you definitely will want to commit this Spanish phrase to memory:
“Descuento de jubilado, por favor.” Retired person’s discount, please.
A Checklist for Those Considering an Expat Retirement
Immigration: What visas or other documentation are necessary to establish residence, and how do you obtain them? Except for the most legal savvy, this is one place where hiring a lawyer can be a worthwhile investment.
Customs: Are duties charged when bringing household items or a car into the country? If so, are there ways to acquire exemptions? Country-specific information for many foreign countries can be found on the U.S. State Department website.
Taxation of Income: Consider the tax consequences of foreign-sourced income from businesses and retirement plans, as well as domestic taxes if you plan to earn even a part-time local income. Due to the intricacy of tax laws and their volatility, be sure to inquire with an experienced foreign tax advisor or attorney before making any final decisions.
Health Insurance: Your existing policy may cover you on vacation, but will it still be valid if you relocate? Consider costs of returning to the States for treatment versus the availability and quality of local care. Contact your current health insurance provider and discuss your options. There are agencies and companies, such as International Health and Expatriate Health Insurance, that specialize in providing coverage to expatriates. Don’t forget to inquire as to payment procedures—is direct payment available or will you need to pay out-of-pocket and then file for reimbursement? Don’t overlook a prescription drug plan.
Inflation: While the strength (or weakness) of the dollar affects any expatriate relying on U.S.-source income, the inflation rate of your targeted country also should be considered. The Central Intelligence Agency publishes The World Factbook, which includes inflation rates for 229 countries from Afghanistan to Zimbabwe. The site is updated biweekly.
Martha Fry is a freelance writer based in suburban Atlanta.
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