Daily Gains Letter

The Top-Three Foreign Retirement Destinations

By for Daily Gains Letter |

DL_John_8Retiring doesn’t mean staying put, living frugally, and stretching your investing dollar. If you’re more adventurous or not tied down geographically, there is an almost endless number of foreign destinations to consider retiring to. That said, some foreign countries are more suited to retirement than others.

While warmer climes, cheaper taxes, and cultural discoveries are major reasons why some Americans have chosen to retire outside the U.S., for many, the point of packing up and moving away after retirement is about finding a destination that offers something that’s become increasingly difficult to find here in America—a good quality of life for a reasonable price.

With the state of the economy, more and more Americans are looking elsewhere to park their retirement dollars—and for good reason. A recent report shows that Americans’ confidence level in their ability to retire comfortable is at an historic low.

Just 14% are “very confident” they will have enough money to live comfortably when they retire; on the other end of the scale, 23% say they are “not at all confident.” (Source: “The 2012 Retirement Confidence Survey; Job Insecurity, Debt Weight on Retirement Confidence, Savings,” Employee Benefit Research Institute, March 2012.)

American baby boomers nearing retirement could also be looking outside the borders. The same report shows that 60% of workers report that the total value of their savings and investments (excluding primary home and defined benefits plan) is less than $25,000. Almost 20% say they are “not at all confident” that they have done a good job preparing for retirement.

Roughly 60% of middle-class retirees will likely run out of money if they maintain their pre-retirement lifestyle and don’t cut spending by at least 24%. Unfortunately, it’s difficult for many to curb their spending and cut back on lifestyle choices.

Fortunately, there are some foreign destinations where those wanting to retire with limited income can lead very comfortable lives. There are countries where Americans can save thousands of dollars on world-class health care provided by English-speaking, U.S.-trained doctors. There are places where retirees can also find beachfront condos for under $100,000 and places to live for less than $1,000 a month (excluding rent). (Source: “The World’s Top Retirement Havens in 2013,” International Living, December 14, 2012.)

Granted, everyone has different priorities. For you, maybe warm climates aren’t important, but inexpensive health care is. Everyone needs to decide what the most important factors for moving are to determine any potential pitfalls or deal-breakers.

So, without further ado, here are the top-three foreign retirement destinations:

1. Ecuador

Thanks to the low cost of living, warm climate, and cheap property prices, Ecuador has ranked as the top foreign retirement destination for North Americans for the fifth consecutive year (2008–2012).

While its inexpensive real estate and warm equatorial climate are major draws to retiring in Ecuador, the real attraction is being able to retire well on a limited retirement budget, or even on a Social Security check alone.

Ecuador is home to modern hospitals, clinics, and well-trained physicians. All retirees are eligible to participate in the country’s Social Security healthcare system. And out-of-pocket expenses for doctor’s visits, procedures, and drugs are a fraction of what you would pay in the U.S.

2. Panama

A close second, Panama is home to year-round sunshine and warm weather; a low cost of living (even lower outside Panama City); and a tax system that’s geared toward foreigners—it’s possible for retirees to live and do business in Panama 100% tax-free.

Through a series of presidential decrees beginning in May 2012, Panama’s Pensionado Program makes it easier for citizens of the United States and other countries to obtain permanent residency status. While Panama’s official currency is called the “balboa,” it’s actually just the U.S dollar under a different name.

Panama also wins praise for its retiree discounts on medicines, entertainment, and restaurants, and its friendly people. Panama City is even home to the country’s new John Hopkins Hospital.

3. Malaysia

Malaysia may be further away, but it has similar draws, including a tropical climate, low cost of living, and cheap rent. Malaysia has a stable government and economy, and a rich cultural history. Unlike other nations in Asia, in Malaysia, retirees can buy freehold property, land, houses and condominiums.

Malaysia is also home to one of the best healthcare systems in the region. While the healthcare system is divided into public and private sectors, foreigners only have access to the private system. Even the private system is inexpensive compared to what you would pay in the United States.

The Malaysia “My Second Home” program allows foreigners to stay in Malaysia for as long as possible on a multiple-entry social visit pass, with an initial expiry period of 10 years, with the option to renew.

Although the country’s official language is Bahasa Malaysia, or Malay, the predominant language is English. Even the government’s web site is in English.

Thousands of Americans have decided to live their retirement years in another country, perhaps with a more moderate climate, more affordable standard of living, or a closer proximity to family and friends. Many do so year-round, while others spend a few months abroad at a time.

While retiring abroad isn’t for everyone, it is becoming a reality for an increasing number of people. Whatever your reason for wanting to retire outside the United States, it’s important to make careful preparations and understand tax laws, medical care, and residency.

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