Can You Really Save Money by Retiring Overseas? Should You?

Are you facing the prospect of a retirement in which the defining characteristic is financial struggle?

Are you concerned that you haven’t saved enough for retirement?

If so, retiring to a country with a lower cost of living might seem appealing.

The internet is awash with stories and articles about how you can live comfortably overseas for just $1,500-2,000 a month – which is within range of most couples’ Social Security checks.

These figures typically include rent for a two-bedroom furnished apartment, meals (including some meals eaten out), utilities, and Internet service. The people who write these articles claim you don’t have to pinch pennies to achieve these results, nor do you have to live in squalor.

Can this be true? Such claims should reasonably raise a red flag and prompt you to think, “If it seems too good to be true, it probably is.”

The short answer to this question is yes – you can probably find some acceptable places to live for less than $2,000 a month. The major caveat comes with how you define ‘acceptable.’ You will need to make a lot of lifestyle adjustments to be able to pull this off.

Even in small countries such as Panama and Uruguay, there is a wide range of housing options available. Some are modest and some are luxurious, and price tags vary accordingly. There are some very desirable areas and some not-so-desirable areas. Generally, you get what you pay for.

Perhaps the better question is, should you move to a different country to achieve a significantly lower cost of living?

In order to answer this question, you need to do an honest self-assessment. Ask yourself (and your spouse, if you have one) questions such as these:

1. How adaptable are you to change?

Day-to-day life is different in other places. The pace is often slower, and service can be more leisurely. In the US, when you are expecting a delivery or repair person, you are usually given a two- to four-hour window. In many parts of the world, you’ll probably be given a two- to four-day window.

In other countries, many people don’t own a car and rely upon public transportation, walk, or ride bicycles or scooters.

Street cars

Dwellings are smaller and simpler, and most people own significantly fewer possessions.

It makes sense that if you don’t own a car, you live in a smaller home, and you own less stuff, it will cost you less to live. You will be spending less money for a scaled-back lifestyle. Could you do the same if you stayed in the US?

Familiar US stores such as Walmart, Costco, and Home Depot are present in some other countries. Local stores are generally smaller and more specialized. You won’t recognize many of the brands at first. You may be able to find some familiar brands that have been imported, but they will be more expensive because of the shipping costs and tariffs.

Local customs, political viewpoints, and religious influences may be quite different from what you are accustomed to.

2. How comfortable are you in different surroundings?

Your new environment may be noisier. One couple who lives in Ecuador reports they use a rain-noise generator at night to mask the sounds that permeate their external surroundings.

You shouldn’t expect other countries to be America Lite at a fraction of the price. If you expect to confine yourself to an expat community, speak English, and try to recreate the type of home and lifestyle you enjoy now, then not only will you be less likely to achieve cost savings, but you’ll be shutting yourself off to all the good things a different place has to offer.

Outdoor cafe

In many other parts of the world, the difference in wealth and lifestyles between the ‘haves’ and the ’have-nots’ is even more pronounced than in the US and other First World nations. Even living on $1,500-2,000 a month, you will be among the upper class. There are slums and people living in extreme poverty in many places in these countries with a cheap cost of living. Even those who earn middle-class incomes live in homes that are noticeably more modest than you are accustomed to. It’s a different standard.

Even though you won’t have to live in these areas, it will be difficult to avoid seeing them or passing through them as you live your day-to-day life. How will you feel about seeing this?

3. Do you really want to do this?

If you thrive on adventure and discovering new places, you will probably enjoy this experience.

The more flexible you are and the less you come in with expectations and pre-conceived notions, the more you are likely to enjoy your new home.

On the other hand, if you are considering retiring overseas primarily as a way to save money, it’s more likely that you’ll be miserable.

The place you move to should truly excite you, even after several visits. It should feel right. Don’t move somewhere that you think you will be able to merely tolerate.

4. How good are you at making friends with new people?

When you move overseas, you’ll be leaving your friends and family behind – far behind. While the Internet makes keeping in touch easier than ever, you can’t rely on these tools exclusively for your socialization. Seeing and talking to someone on Skype or Facetime is not quite the same as being in the same room with them.

People who enjoy the best experience abroad do so by making friends with the locals as well as their fellow expats. To do that, you need to learn the local language and customs. Are you willing to strike up conversations with people you encounter in your day-to-day life, or are you more inclined to mind your own business and keep to yourself?

Many of the most highly-touted foreign retirement destinations are in Latin America. If you are from the US or Canada (or another predominately white, English-speaking country), you will be a Gringo. You can counter this by adapting as much as possible to the local norms. You should do this not only for the benefits of socialization; there have been many cases where expats have been charged ‘Gringo prices’ for things (especially homes) that are two to three times what the locals pay, because the prices still seem cheap to Americans, and because you don’t know any better (yet). Being a Gringo may make you a higher-profile target for theft, as well.

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5. Are you willing to do a lot of research and get good advice?

The real estate market and the home renovation/contractor market, in particular, operate very differently in other countries. If you move to an area with a strong expat community, get connected with them so that they can recommend reputable people and inform you about local laws and practices. If you move to an area without an expat community, you will need to do a lot of research and learning. If you’re not fluent in the local language, you will be at a particular disadvantage.

If you have visited your potential destination only during their tourist season, you should experience or at least research what it’s like during their rainy season and learn how hot and cold it gets throughout the year. Also find out if the area is prone to hurricanes, earthquakes, or other undesirable weather phenomena.

Learn everything you can about the local system of government, the laws, and the country’s political history. Consider current events in countries such as Venezuela, Argentina, Brazil, Nicaragua, and the Philippines, and assess whether conditions exist in your new country for political upheaval and how comfortable you would feel if your new country experiences turmoil.

Talk to locals, read local news sources, and search for expat blogs to gain insight into how foreigners and minorities are accepted by the local people outside of the tourist zones. Will your religion, race, or sexual orientation be an issue?

In some countries, especially those where people are proud of their distinct heritage and traditions, most of the locals simply do not want to see foreigners move in.

6. What elements of your current environment and lifestyle would you miss most?

Write down everything you enjoy that is a part of your day-to-day life – even the most mundane things. This may include the stores you shop in, the types of food you eat, your favorite TV shows, American movies, the sports you follow, the live music and arts scene you enjoy, your favorite restaurants, and so on.

Clothesline across street

What is available at the destination you are considering? What are you willing to do without? Will local alternatives be just as enjoyable as what you’re accustomed to? For example, you might discover that you enjoy watching soccer matches as much as American football, and that the local baked goods and fresh fruits and vegetables are even better than what you eat now.

7. Will you be able to achieve the low cost of living these articles claim is possible?

To a great extent, this depends on whether you are willing to live more simply and adapt to living like the locals. The more you try to maintain the lifestyle you live now, the more it will cost you – especially if you import the products you are accustomed to using or you are willing to pay higher prices for them in the local stores that import them.

It also depends on how often you plan to travel home. Mexico and countries in Central America and northern South America are only a few hours from the US, but making very many of these flights will significantly eat into your savings.

The biggest difference in the cost of living is the cost of healthcare. The United States has, by far, the most expensive healthcare in the world, and costs continue to rise well above the rate of inflation every year. You will need to buy private health insurance to cover major medical events and pay for everything else out of pocket. It’s still far cheaper than the US, and in many countries, the quality of healthcare is quite good. There’s more information about obtaining health insurance overseas in a subsequent chapter.

For more, read 12 Questions You Need to Answer Before Retiring Overseas.

After considering all these factors, are you still intrigued by the possibilities of moving to another country to enjoy a lower cost of living, as well as embarking upon a new adventure? Here are ten great options for overseas retirement destinations.

Now it’s your turn.

Does the idea of retiring overseas appeal to you?

Where would you move?

What concerns do you have?

Please share in the comments below!

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© 2016 Dave Hughes. All rights reserved.
Updated January 8, 2020

Photo credits:
Malaga skyline: Nicole Abalde. Some rights reserved.
Street cars: POR7O
Clothesline across street: Charles L.
Outdoor café: Linh Nguyen

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