Living Offshore May Not Be the Bargain You Expect
Many articles posted online portray living outside the US as an idyllic solution to save money. It can be, but for many people, living abroad can cost more – sometimes much more – than what they envisioned.
I’m a perfect example. When I lived in Austria from 2003 to 2005, the budget I set was about 20% too low. The biggest reason was most of my income was in US dollars, and my expenses were in euros. While I was living in Austria, the euro appreciated about 15% against the dollar.
But there were other surprises as well. If I had been willing to eat like the typical Austrian, I no doubt could have saved money. But 15 years ago, when I lived there, the typical Austrian diet of fried meats, fried potatoes, dumplings, etc. wasn’t especially healthy. When I prepared my own meals, I found the ingredients to be somewhat more expensive than in the US. And generally, restaurant prices were just as expensive as at home (although it’s not necessary to tip).
I saved money by not owning a car and using the superb Viennese public transport system to get around. But it cost more to rent a car in Austria. The cost of insurance was astronomical, and gasoline was about twice as much as in Arizona.
This is a big reason I advise clients who are considering living abroad, especially in retirement, to “test the waters” first by spending a few months in the country as a tourist before moving there permanently. A US passport greatly facilitates this exploratory phase, because it provides access to more than 170 countries without a visa, or it allows you to obtain a visa-on-arrival. In most cases, you can spend up to three months in the country as a tourist.
While you might be able to find affordable accommodation in your chosen retirement destination, you won’t know until you live there if it’s a good fit.
For instance, I have legal residence in Panama and have spent a considerable amount of time in the country. On one of my first visits, I stayed in a perfectly serviceable two-bedroom furnished apartment in trendy El Cangrejo. The cost was $700/month, including all utilities. The apartment overlooked Via Argentina, one of the city’s busiest streets. Thanks to drivers constantly honking their horns below me all day and night, I scarcely got any sleep. On my next visit, I stayed in a newer condo in the posh Punta Pacifica neighborhood. It was a lot quieter, but the rent came to $1,600/month.
There are many other things to consider. Never forget that unless you retire to a place where you look, act, and speak like a local, you’ll be singled out. In some cases, they’ll try to take advantage of you. So unless you plan to live in a gated community with other expats, you’ll often pay the “Yankee price,” not the price locals pay. That’s particularly prevalent in housing, but it’s also part of everyday life. For instance, in Panama City, locals tell me I should never pay more than $2 for a taxi in the city. But I’ve only paid that once, and it was in a taxi that I never want to ride in again.
But especially for retirees living abroad, health care is the biggest concern. Most countries have national health care systems, and if you’re eligible for them, you’ll probably pay a lot less than you do in the US. When I lived in Austria, I purchased an international health insurance policy with zero deductible and paid $275/month for it. At the time, this was more than I was paying in the US for comparable coverage.
But I was happy to have it. One bone-chilling week in January, I woke up with a head cold that in a few days progressed into bronchitis. I found an English-speaking physician near my apartment and walked into a packed office lobby. When I saw how many people were there, I was sure I would need to wait for hours to be treated. I also thought the bill would be very high, since I wasn’t signed up for the Austrian national health care system. But when I told the receptionist in my fractured German that I wasn’t part of the system, she told me in perfect English that I would be the next patient the doctor would see. The fact that I would pay cash put me at the front of the line. And the bill was only €40. I didn’t even submit it to the insurance company for reimbursement.
The Austrian health care system is typical. The good news is that if you’re eligible to sign up for a national system in most countries, you’ll pay premiums that are a fraction of US rates. The bad news is that except in an emergency, you may experience a lengthy wait to be treated. Many drugs are in short supply. Counterfeit medications are sometimes administered. And while many doctors speak some English, other employees probably won’t. If you don’t speak the local language, you’ll have a hard time communicating.
Therefore, you’ll probably want to sign up for a private health insurance plan. These are relatively inexpensive if you’re under 65. If you’re not – and especially if you’re over 75 – you’ll likely have to pay premiums far higher than Medicare charges, if you can obtain coverage at all. For instance, I retrieved an online quote from one provider (Cigna International) that assigned an 80-year-old male living in Panama a minimum premium of $766.50/month. As well, premiums increase annually, and some policies can be canceled if you make too many claims and may end altogether once you reach a certain age.
I’m not trying to discourage anyone from retiring abroad. But if you want the same quality of life you have now, you might not save as much money as you think.
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