Retiring abroad as a pensioner is truly living a second, more fulfilling life. It’s like your do-over. And I think people need to approach it that way.

After figuring out my FIRE number, I realized I’m on track to retire by age 59.

If you haven’t heard of FIRE, it stands for financial independence, retire early — a movement within the personal finance community that encourages frugal living with the goal of putting more funds toward investing. The more we invest, the faster we become work-optional or retirement-optional.

If I continue to contribute 20% of my income and invest by way of index funds using a 401(k), Roth 401(k), and a Roth IRA, using a conservative 7% rate of return and having my retirement end-goal of $1.2M already calculated, age 59 is when I become work-optional.

But I want to retire even sooner than 59. And I can — without having to increase my investing contributions at all.

The secret is geo-arbitrage: moving somewhere with a lower cost of living to make my retirement dollars stretch further and reach financial independence sooner.

I have my sights set on Panama as my retirement destination. I was drawn to Panama for its large expatriate community, tropical climate, and first-world amenities. Dubbed “the hub of the Americas,” the Panama Canal helped boost the country’s economy. Panama is also outside the hurricane belt, and close enough to home with a major airport.

But it was Panama’s low cost of living that I found the most attractive.

Applying this concept to my family’s finances: moving to Panama means retiring five years sooner — reducing my retirement age from 59 to 54.  Here’s how I evaluated Panama as my future home, and how you can apply the same thinking to your financial future.

• A Winning Strategy: Geo-arbitrage
• How to Find the Best Place to Retire Outside the U.S.
• Feliz Retiro

A Winning Strategy: Geo-arbitrage

My first geo-arbitrage success was when I relocated from the expensive New York area to the Carolinas eight years ago to save on living costs. That move is one of the reasons I’m now able to save 20% of my income for retirement. Before the move, I was saving 5%.

There is a lot to consider before making a geo-arbitrage move—especially an expat move. With any relocation, there are tax implications to consider, as well as distance from family and friends, and also potential language and cultural barriers.

But retiring abroad to any country with a lower cost of living can shave years off your timeline to financial independence.

Jim White left his IT management job at age 43 and moved his family from Ohio to Panama in 2019. “I wanted to spend as much time with my family as I could and not at work. I realized I didn’t have to be rich,” White told me. “I just had to make enough money to carry my expenses.” White did this by saving an incredible 60% of his income. But even saving 60% over 10 years wasn’t enough to retire at 43 in the U.S., said White. The cost of living is simply too high.

The Whites looked at cheaper places to live, and their research led them to Panama. “It’s not the absolute cheapest place to live, but it is less expensive than America, with similarities to the U.S. that we liked, with a good healthcare system, and close enough to home,” said White.

There were enough advantages that he was able to change his entire timeline. “If we didn’t relocate to a cheaper place to live, we couldn’t have retired when we did. I would have had to keep working longer,” said White.

The fact is, you can live on less in other countries. “The true benefit [to retiring abroad] is a person’s cost of living can decrease significantly depending on where they live,” says Mark Henry, founder and owner of Alloy Wealth Management based in Charlotte, NC. “Depending on the country, the value of the dollar will go further.”

How to Find the Best Place to Retire Outside the U.S.

Moving to another city can be scary, let alone another country. The financials have to add up along with feeling comfortable with the big change. For me and my family, we combined our retirement goals and values to create these four things to help us evaluate our retirement destination.

1. Low-Cost, But High-Quality Health Care

Healthcare in America is expensive, especially for aging seniors living on a small retirement income. If making a geoarbitrage move, low-cost and quality health care is the first benchmark I looked at.

Currently, my South Carolina-based health insurance costs $581 a month for our family of three, and this is considered inexpensive and quality coverage by American standards. This equates to $6,972 per year. For many years I did not use the insurance. But it was important to have it just in case of hospitalization, which would result in major medical bills.

Many other countries’ health care systems are easier to access, have less limitations, and are cheaper, says Vanessa Menchaca-Wachtmeister, the creator of Wander Onwards, a finance and travel blog. “I think it’s really important for people to understand how health care works outside of America, because it truly is this simple,” says Menchaca-Wachtmeister, who is originally from Los Angeles and has since lived in the U.K., China, and Germany. Residents of some other countries can afford to pay out of pocket; some non-U.S. health care insurance networks have no yearly caps, no deductibles, and no copays, she says.

The health care system is one of Panama’s main attractions. There, health insurance isn’t a must, according to expats who live there now, because medical costs are affordable. But it’s still available if you expect to have high medical bills or expensive medical treatments.

Jackie Lange, 66, is an expatriate from Texas who moved to Panama in 2010. Lange, a real estate investor, says the stable government, strong economy, lower cost of living, and spring-like weather attracted her and her husband to relocate to the Boquete mountains of Panama. They now own and operate a local business called Panama Relocation Tours which provides transportation, lodging, and tour guide services for potential expat retirees visiting the country.

Lange was paying around $1,000 a month in premiums for health insurance while living in the U.S. After converting to Panama insurance, Lange’s premium dropped to $102 a month ($1,224 a year). Through the Panama relocation tours, Lange learns of similar situations from other aspiring expat retirees.

Lange named two popular Panamanian insurance companies. MAPFRE and Family Medical Care. Depending on age and coverage, you could pay anywhere from $30-$180 a month. No matter what type of plan you choose or what age bracket you fall into, your premium will always be cheaper than what is available in the U.S.

In Panama, many people opt out of buying insurance completely, says Lange. “If you go to one of the public clinics or the public hospitals, it’s only $2 to see a doctor,” she says, which might sound unbelievable to a U.S. resident. “If you need to see a specialist like a cardiologist or ophthalmologist, it’s $5.”

“My neighbor had a heart attack a couple of years ago,” Lange recalls. “He was in the public hospital for 10 days, and after all the tests and the cardiologists, they put a stent in his heart. It was $895.” For that type of care in America you would need to add a couple of zeros to that number, Lange says.

2. First-World Housing Amenities, for Less

Geo-arbitrage doesn’t work if you can’t reduce your cost of living. That’s why it’s important to look at housing costs. Menchaca-Wachtmeister, for example, has a two-bedroom penthouse apartment in Germany with a 300-square-foot balcony. Including her food, transportation, and phone bill, she pays $1,500 a month.

Here are some U.S. statistics for comparison:

• The national average monthly rent cost 2018-2020:
  • $1,691 (Studio)
  • $1,878 (2 bedroom)
• The median U.S. 2021 home sale: $293,349.
• U.S. Property taxes can vary based on where a home is located, but range between $200 to $10,000 per year.

Housing is less costly in Panama. “A couple can live comfortably on $2,000 per month in a $700 rental,” says Lange.  As a real estate investor, Lange provides a few housing scenarios to help illustrate how much home you can get:

Rental examples provided by Lange:

• Two-bedroom, two-bathroom, fully-furnished house, in a beach community on the Pacific Ocean: $600 a month.
• Three-bedroom, two-bathroom, fully-furnished Pacific-side beachfront house, with a swimming pool, patio, and fire pit. Includes maid and gardener services: $1,000 a month.
• Two bedroom, two-bathroom, fully-furnished house. All utilities included and gardener service: $700 a month.

Rental example provided by White:

• Three-bedroom, two-bathroom, condo in the Boquete mountains. Fully furnished, gated community, golf course views and access, access to the swimming pool and gym, water and garbage services included: $1,100 a month.

Home purchase examples, provided by Lange:

• 1,400-square-foot home, five acres, in the Boquete mountains: purchase price in 2012 was $125,000. That same property type would cost around $150,000 to 160,000 in 2021, says Lange.
• 2,000-square-foot, two-bedroom, two-bathroom, home, on one acre, in the Boquete mountains: Valued at $150,000.
• “I have seen smaller houses for sale for $50,000 to $60,000 too,” says Lange.

Property taxes:

Under current Panama government guidelines, If you purchase a home under $120,000 you are property tax-free. For houses valued at $120,000 to $750,000, property taxes cost 0.5%% of the value of the home at the time of purchase. For example, a home purchased now in Panama for $180,000 at an estimated tax rate of 0.5% will cost $900 a year.

3. Long-Term Elder Care

While this expense is not in my budget today, I’m trying to prepare for the future — and the fact is that as we age, we will eventually need help, whether that is provided by a family member, care facility, or in-home care. Elder care is very expensive in the U.S. and can drain a retirement fund fast.

According to a 2016 report from the National Association of Insurance Commissioners (NAIC), roughly 15.2% of aging persons 65 and over will spend more than $250,000 on long-term American care. My nest egg breaks a little when I read that number.

When I calculated my FIRE number, I did not account for this giant cost possibility. I prefer not to put the burden on family members to take care of me and pay for home care costs myself. And you guessed it: in-home senior care is affordable in Panama. Paying less for it can help protect my retirement assets.

Based on Lange’s experience networking with retired seniors, she was able to give an approximate estimate of elder care costs in Panama:

• Assisted living facility: $750-$1,500 per month
• Live-in care: $700-$800 per month
• Two-three home visits per week: $30-$40 per day ($360-$480 per month)
• Daily assistance (not live-in): $400-$500 per month

Assisted living or nursing homes aren’t as popular in Panama, but they do exist, according to Lange. Home health care is more common. “You can have a registered nurse come in during the day once in a while, or every day. You can also have live-in help,” says Lange. “That includes cooking, cleaning, medications, assistance with bathing or other needs, shopping, etc.,” says Lange.

Comparing this to the U.S. on a monthly basis, the national average costs for long-term elder care in the U.S., according to 2016 data from the Administration for Community Living:

• Private room in a nursing home: $7,698 per month
• Assisted living facility: $3,628 per month
• In-home health aide: $20.50 an hour ($3,280 per month) for a 40-hour work week
• Adult day health care center: $68 per day

4. Accessible Visa

Lastly, I judge where to live based on how much I perceive the receiving country wants me there. One way to do this is by taking a look at their visa programs. And by the look of it, Panama really wants retirees to move there.

Menchaca Wachtmeister cited Panama as one of her top six easy countries to move to because of its Visa program. Inversely, Australia is known to have more restrictive visas with age requirements. “They [Australia] want to persuade younger people to come and pay into the system and dissuade older people,” says Menchaca-Wachtmeister.

To get residency status with this visa, the applicant must prove they have a minimum income or a pension of $1,000 a month, and $250 per month for each dependent or spouse, according to the Panama embassy website.  For senior couples that rely on fixed income, like Social Security, $1,250 per month is the requirement for this visa. According to the AARP, the average estimated Social Security retirement benefit in 2021 is $1,543 a month. “You can actually live here on that, that’s what’s even more amazing,” says Lange.

Panama’s Visa Pensionado program is specifically marketed to entice seniors with retirement income to move to and spend their retirement dollars in Panama. Women over 55 and men over 60 who have the visa are eligible for the following perks and discounts:

• 20% off doctor bills
• 15% off hospital bills
• 25% off utility bills
• 25% off airfare
• 50% off entertainment anywhere in the country (including movies, concerts, sports)
• 10% off prescription medicines

When doing your expat research, make sure to check your destination country’s embassy website for the accessibility of its Visa programs. I recommend comparing a few before making any big decisions.

Feliz Retiro

Feliz Retiro — or “happy retirement” in Spanish, the primary language spoken in Panama — is my ultimate goal. One way I found I can achieve this goal is through downsizing my cost of living. And it wasn’t until I visited a few other countries, talked to locals and other U.S. expats, and read up on the subject that I realized the grass may actually be greener on the other side.

“Retiring abroad as a pensioner is truly living a second more fulfilling life. It’s like your do-over. And I think people need to approach it that way,” says Menchaca-Wachtmeister.

“A lot of people are concerned that they’ll leave the country and miss out on life or relationships in the United States. And I don’t think people realize how much of a beacon you are for people to come visit and to come explore,” says Menchaca-Wachtmeister.

I have a lot to be thankful for as a privileged American. Investing in the American stock market is what’s giving me the ability to even consider retiring early. But at age 54 (or sooner) you know where to find me.

If you haven’t started your retirement plans yet, it’s never too late. To learn more about retiring and investing, visit NextAdvisor’s library of resources.

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