Retiring in a tropical paradise likely costs more than you ever dreamed
With 401(k) balances swooning and home equity squeezed by the housing crisis, millions are wondering if they'll be able to retire comfortably.
What about relocating to a developing country? Wouldn't your money go further? That condo near the beach looks awfully alluring. Yet finding that place in the sun isn't always an inexpensive proposition in developing countries. They may offer lower costs initially, but the price tag goes up if you try to duplicate your Western lifestyle there.
After a recent trip to Costa Rica, thoughts of paradise entered my mind like a gentle Pacific breeze. Here is a country 9 degrees from the equator, with political stability, national healthcare, and bountiful eco-reserves. Within minutes, you can find yourself in a rainforest, cloud forest, or on the coast of the Caribbean or the Pacific. There's no standing army and the largest industry is tourism. What's not to like?
If you are sizing up any relatively undeveloped country, you have to dig into all of the costs you would incur living there. Taxes are foremost among your concerns. Costa Rica's 13 percent sales tax is still rather stiff.
Healthcare is another revelation. What would it cost for noncitizens to purchase a health policy in Costa Rica?
Unless you are a citizen of Costa Rica, you may need to buy an overseas policy issued by an insurer in your home country. For US citizens, Medicare generally doesn't cover treatment in foreign countries, so you may have to come back for medical care.
If your former employer promises to insure you under its plan, that's ideal, but becoming rarer.
You can always buy a "catastrophic" health plan with a $10,000 deductible for a few thousand dollars, but that means you are paying for most of your expenses out of pocket.
Buying property also can get complicated. Like many other countries, Costa Rica protects squatters, or people who have claimed land by living on it for a certain length of time. Getting a clear title to a property will involve lawyers and added expenses.
Want to buy a sport-utility vehicle? Not only can auto insurance cost three times what it does in the United States, sticker prices are more than 20 percent higher.
Think you are going to save money by importing a car from a US dealer? In addition to shipping fees of $1,000 or more, import taxes are 59 percent for cars as old as four years and can be 85 percent depending on age.
While you may be smitten with the balmy breezes, you still have to do your homework. Go rent a place in the destination of your choice and see what it actually costs to live there for several months. You may find bargains in unexpected places and may not even need to cross an ocean to pare your retirement expenses.
A good place to start is the Mercer Worldwide Cost of Living Survey, which rates 143 cities on what it costs for expatriates.
John F. Wasik is a Bloomberg News columnist. He can be reached at jwasik@bloomberg.net.
