Your Finance: Retiring overseas
Like many Gen-Xers, my present outlook on retirement falls somewhere between doom and gloom.
I fear a stock market collapse could decimate my investments as I near retirement -- a fate that befell many retirees following the 2008 financial crisis. I'm highly skeptical that Social Security will be much help, if any, and I fret that I won't have enough money set aside to keep up with rising costs for everything from food and gas to housing.
Recently, however, I've started to consider whether retiring overseas might be a good strategy. Moving to countries like Mexico, Ecuador and Thailand, where the cost of living can be far lower than in the United States, can turn a modest nest egg into something more substantial.
"It's really not for everybody, but there are many places where your dollar can go a lot further abroad than it can here," says Gabrielle Redford, editorial projects manager for AARP The Magazine.
Americans have been retiring abroad for many years, some seeking a more adventurous and culturally exotic experience, others looking to save money.
Many countries have established enclaves of American retirees. And the fallout from the 2007-2009 recession appears to have fueled greater interest.
Spending one's golden years abroad is a non-starter for retirees who wish to remain close to family in the United States. For it to be viable, retirees need a healthy sense of adventure and openness to another culture. But retiring abroad isn't just for those with a well-padded nest egg, either.
Someone with a modest retirement budget, even those living on Social Security alone, can do it, says Kathleen Peddicord, publisher of Liveandinvestover seas.com, which caters primarily to American retirees living abroad.
Here are steps to take before making a decision to retire overseas:
Size up your retirement income. How much you will earn from investments, a pension, Social Security or other sources will determine where you can afford to live comfortably. Experts suggest calculating monthly income, so you can compare that to likely monthly expenses, including housing, utilities, transportation, health care and food.
Research and visit a few times. You can get plenty of information online about a country's history, politics, crime rate, economy, rental and real estate listings, weather and quality of life. But also plan on making a few trips to the country before you commit to moving there.
Focus on cost of living, not exchange rates. The price of real estate, meals or a taxi are better indicators of how affordable a country is than how its currency is faring versus the dollar. That's because exchange rates fluctuate. Peddicord suggests keying on the monthly price of housing, or rent. That will be the single biggest monthly expense and help you determine what you can afford.