Living Well in Retirement
The Lure of Living South of the Border
Tropical weather, bargain prices and a slower pace of life attract retirees to Latin America.
By Elaine S. Povich, Contributing Writer, Kiplinger's Retirement Report
Leah Dobkin, Contributing Writer, Kiplinger's Retirement Report
June 29, 2007
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Editor's note: This article is adapted from Kiplinger's Retirement Planning 2007 guide. Order your copy today.
The first time Dwight Ford visited Panama City two years ago, he was in for a big surprise. "I thought I would see guys pulling banana carts," he recalls. Instead, he found a thriving capital city and international banking center. "The value was staring me in the face." So was the prospect of a blissful retirement in a 31st-floor penthouse condominium overlooking the Pacific Ocean.
Dwight and his wife, Marciana Wilkerson, who lived outside Washington, D.C., put 10% down on two side-by-side condos selling for about $440,000 each when the luxury high-rise was under construction. Today, the condos in the fashionable commercial district of Punta Pacifica are worth close to $700,000 each. The couple plan to sell one and use the cash to pay off the other after moving in this spring. "We'll have no mortgage, and I get to choose my neighbors," says Dwight.
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Seeking a year-round tropical climate and a relatively low cost of living, U.S. retirees are flocking south of the border. Panama, Mexico and Costa Rica top the list of the most popular retirement destinations in Latin America. Moving to Panama allows Dwight and Marciana to stretch an already comfortable nest egg even further. Thanks to the explosion in real estate values in the Washington area, they were able to sell their home of 17 years in Potomac, Md., for $2.35 million in 2006, clearing $1.3 million to invest in the stock market.
The couple expect to live quite comfortably on about $10,000 a month in a country where the average cost of living is well below that of the U.S. American retirees living in Panama pay no tax on foreign-generated income and are exempt from property taxes for up to 15 years. They can import their cars and household goods tax-free and take advantage of an array of discount programs on goods and services, ranging from prescription drugs and health care to airfares, restaurants and movie tickets. However, retiring to another country doesn't excuse you from your U.S. tax obligations.
Once they settle in, Dwight and Marciana anticipate an active retirement filled with golf, tennis and some part-time work. Dwight, who gave up a full-time position in a stateside technology company, may continue running a consulting business serving some former clients. Marciana, a bilingual, U.S.-trained obstetrician who was born in Panama, may continue to practice at a Johns Hopkins hospital that recently opened near the couple's new home. If you're thinking about working part-time in retirement, investigate before you move whether your destination provides opportunities, and whether your visa will allow you to work.
A perennial favorite
Mexico has always been a popular Latin American destination for U.S. retirees. Patt Barrack, a former medical secretary, and her husband, Robert, a retired firefighter, are among the more than 155,000 Americans over 55 who call Mexico home. After reading a magazine article about retirees in Lake Chapala, 30 miles south of Guadalajara, the Barracks found a real estate agent on the Internet and paid $236,000 for a three-bedroom house. A few months after selling their home in Lake Anna, Va., for $325,000 in 2004, they moved to their new lakeside community, which is home to thousands of other American expats. "You can't beat the weather," says Patt, 65. "And you don't have the hustle and bustle you have in the States."