There’s bad news and good news about retirement.
The bad news: It can be one step forward, two steps back.
As many people are aware, America is having a retirement crisis:
- Americans need to save more than ever before in order to retire, yet a large percentage of people have very little saved.
- Due to the rapid disappearance of pension plans, more Americans are relying on social security as their primary source of retirement income.
- To borrow from an old phrase, social security “may not be dead, but it ain’t feeling so good.” According to the Social Security Administration, benefits will only cover 40% of the average wage earner’s income. In addition, the social security trust fund is now estimated to become depleted by about 2034. At that point, continuing taxes are expected to only be enough to pay 76 percent of scheduled benefits.
- The problem is exacerbated by escalating healthcare costs, which are rising faster than inflation. People are paying more for less wellness care.
All combined, these factors make people feel like they are trapped into having to work longer while retirement remains a remote dream.
The good news: There’s a hack to the program that lets you take control.
The statistics, alone, portend doom and gloom and for most Americans. If you change your perspective, however, and are willing to step outside your trench, even just a little bit, you can discover opportunities for a completely new and improved life, and at a bargain!
The trick is to look beyond your familiar, but exhausting, current life. For me, this is where growing up in another country, especially in a developing one, has had its benefits.
I know first-hand that it is possible to live well on as little as $1,000 per month in Thailand, as well as in many other places, even while living in a nice home and eating out at fine places. All it takes is two realizations:
- The “American way”of living is not the only way to get joy out of life.
- We actually don’t need more “stuff” to be truly happy; we merely need “enough.”
Geographical arbitrage can make a difference because costs are not the same everywhere.
It was about five or six years ago when Jim and I discussed the possibility of living overseas. Our two sons were in high school then, and we wanted to wait until they graduated college. The seed was planted, however, in our minds. We both wanted to retire sooner rather than later.
We saw in both sets of our parents that waiting too late to retire can mean less ability to travel physically. We wanted to reap the fruits of our labor in our third life while having the time and ability to explore the world. Whether it was hiking mountains or exploring the twisty streets of old cities, we weren’t getting out of our trenches to just sit and watch things from the front porch in rocking chairs; we wanted a third life to wander, wonder, and even reinvent ourselves along the way.
Retiring overseas checked many boxes for us. We wanted a sense of potential adventure, low cost of living, a slower pace (although I am still struggling with this), good climate, and affordable healthcare… you know, everything!
The Heart rushes in where the Head says to wait.
I came across International Living magazine while doing some early research. Every month, I read stories of people retiring in Central America, South America, Europe, and Asia with great interest. All the stories of expat retirees in the magazine sounded wonderful. Each country’s pluses was highlighted (“Peru – Low-cost Living, Vibrant, and Diverse,” “Nicaragua—Best Bang-for-Your Buck in Latin America”).
Every story evoked warm, romantic feelings appealing to the wanderlust in my heart, but I also knew that it’s the head that has to face the practicalities of daily living.
I loved growing up in beautiful Thailand, but I also remember the floods during the rainy season, 100+ Fahrenheit heat with high humidity during the summer, the frequent power outages, and water shortages that caused my dad to build a rain trap tank.
I kept these experiences of inconvenience in mind as I looked for the next place for us. I was an analyst by trade and have always evaluated every decision (big or small) by crunching the numbers.
It’s nice to read the success stories of retirees who ventured abroad, but I personally needed to see the facts and figures.
Given that, one of the most beneficial features of International Living magazine is their Annual Global Retirement Index.
Figure out your non-negotiables.
The Retirement Index served as a good starting point for us to narrow down and prioritize what we were seeking:
For the top 12 indices, (Buying & Investing, Renting, Benefits & Discounts, Visa & Residence, Cost of Living, Fitting In, Entertainment & Amenities, Healthcare, Healthy Lifestyles, Development, Climate, Government), we needed to define which were our non-negotiables, or at least highest priorities.
For us, they were Cost of Living, Healthcare, Development and Climate. We decided that the minimum score for each of those had to be 80 (or a B-).
We also knew we wanted to be close to the United States where both our sons were most likely to settle. We considered places in the Americas, but, in the end, preferred Europe as it is halfway between Asia and the US. It’s also important to note that we agreed on what we DIDN’T need, such as a place with all-night partying or job opportunities.
Our reign was to begin in Spain, and that became plain.
Jim wrote about our hearts being won over by Spain, but lest you think we sought data to confirm our emotional desires, it was the logical considerations that led us to then explore the “feel”of Spain:
- It has a low cost of living, excellent healthcare, good climate, and is optimally situated between the US and Asia.
- It gives us a home base from which to explore the rest of Europe’s history and arts.
- It provides an opportunity for learning a new language as a way to get out of our comfort zone.
“Good” is relative, and nothing proves relativity better than number-crunching.
After logic pointed to Spain, next was crunching hard numbers to make sure we could make it work financially.
I use the site Numbeo. It is the world’s largest database of user-contributed data about cities and countries worldwide and provides current and timely information on world living conditions, including cost of living, housing indicators, health care, traffic, crime, and pollution.
There are 6 indices – Cost of Living (excluding rent), Rent, Cost of Living Plus Rent, Groceries, Restaurants, and Local Purchasing Power.
The overall index is relative to New York City, which is set at 100. If another city, for example, has a rent index of 120, it means that city’s rents, on average, are 20% more expensive than New York’s. Conversely, if a city’s rent index is 70, that means that city’s rents, on average, are 30% less expensive than New York’s.
I was particularly interested in Cost of Living Plus Rent Index (not counting healthcare). The Numbeo indices ratings were: New York = 100, Dallas = 55, Bangkok = 40 and Granada, Spain = 33.
Granada was thus 67% cheaper than New York. Even comparing Granada and Dallas (our home), the difference was astounding. Consumer Prices including Rent in Dallas were 67% higher than in Granada, and that’s before factoring in healthcare (see below)!
I also used Numbeo’s Cost of Living Estimator in Granada, Spain. There are quite extensive questions one has to answer:
- Number of people in the household.
- How often will we eat out, drink coffee outside of our home, seek entertainment (cinema, clubbing), join sports memberships, even drink alcoholic beverages, etc.?
- Will we have a car or use public transportation or taxis?
- Will we rent and where (outside or inside the city center)?
- How often we will buy clothes or travel?
My results showed that we would spend $2100 per month living in Granada based on our input into the Granada Cost of Living Plus Rent. You can click the link to see our results or change the input to fit your family situation.
The biggest surprise? The elephant in the room (HEALTHCARE) turns out to be a cheap little mouse!
Spain has one of the best healthcare systems in the world. It’s ranked by the World Health Organization (WHO) as #7. By comparison, the United States is ranked on the same list at #37.
Even more, we would have to shop for private insurance for our first year, but after that, we could sign up for public health insurance, which would cost us…wait for it… ZERO! Due to a change in Spanish law as of July, 2018, all Spanish residents, including those like us on non-lucrative visas, will receive free healthcare!
Our annual private health insurance is with Sanitas, one of the most highly-recommended health insurance companies in Spain for expats. The Sanitas Mas Salud plan will be 166€ ($193) for both of us. This is a comprehensive plan with no copay, no deductible, and includes basic dental services! There were lower-cost plans, but we paid more for a company that specializes in working with expats and that provides English language assistance.
The plan also includes worldwide emergency coverage, up to 12,000€, and we pay an extra 1.50€ ($1.75) per month to increase emergency coverage in the US to 30,000€ (just over $35,000).
This is why Spain makes cents.
Bottom line, here’s what I have estimated for us to live in Granada comfortably, using a combination of our actual numbers (rent and health insurance) and Numbeo’s estimates:
I didn’t include travel here because we plan to travel to Thailand and the US twice a year, and the frequency of travel varies by family. The numbers show, in any case, not just that we can live in Spain, but that we can live WELL with a great quality of life at a bargain.
Should you go with Head or Heart?
Jim often jokes that, while he can write a love poem, I can put love into a spreadsheet. Jim uses numbers to confirm what he already wants; I use data to figure out what is worthy of wanting.
Still, while there are many things you can quantify, there are many things you can’t.
You can’t plug in the emotional, gut feeling, or the first impression you feel when you first visit a place. No amount of planning, internet research, or number-crunching can substitute for wandering around a place yourself.
Don’t spend your best and healthiest years just analyzing and planning, or even worse just saying “someday,” all the while your life is passing. You can’t recover the time of your life. Once it’s gone, it’s gone.
So pack your bag and go for it; what’s the worst thing that could happen? What are you afraid of? Perhaps it’s that your new life won’t work out as you planned and hoped? So what? You can always return home.
Perhaps you are worried that it will be a lot of hassle and work; you are right, it will be. It is easier to stay in the trenches and do nothing, but where would that leave you?
Use your head to plan and research. Data is there to be considered. Then, once you find the place where your head says you COULD live here, listen to your heart whether you SHOULD.
And then take the leap.