10 Tips to Consider Before Retiring Abroad

Nicaragua Coast

1. Investigate the crime rate. Places like Brazil and Mexico can be extremely dangerous. There are safe places in almost any country, but consider how much you might be restricted in your daily activities.
2. Can you take living far away from friends and family? Losing contact with these people is the number 1 reason why people return to the USA.
3. Consider what medical care is available, and at what cost. In many countries it’s a pleasant surprise that you can buy affordable insurance and quality care. In others you might be disappointed in the quality of care, and face an expensive medical evacuation back to the states. This is particularly true for some of the medical specialties Americans have come to expect.

4. Will you have to live in a gated enclave? For many folks, this is OK. For others, it might be too restricting a lifestyle.
5. Check out the tax situation. This is perhaps the most complex area to investigate. The Forbes article explained how living in France can be affordable from a tax standpoint, if you take the right steps like putting your assets into a trust and distributing money to yourself in a certain way. For the unwary, however, double taxation and steep inheritance taxes might take away the bargain status.
6. Evaluate the political situation. Some countries in Latin America have a changeable political environment. The situation might be peaceful one day, but a new dictator could change all of that. You don’t want to a resident on the day the government is overthrown.
7. Are you OK with widespread poverty. The reason why you can hire a maid for $50 a week in some countries is because of the grinding poverty in your new country. Some people find they are not comfortable living in a place feeling like they are the feudal barons among the serfs.
8. Will you be welcome as a resident? Some countries like Australia only want high asset or high income residents, so budget seekers might be unwelcome. Obtaining a visa might be harder than you think.
9. How will you get money sent to yourself. Forbes reports that the U.S. prohibits direct deposits into accounts in certain countries like Vietnam. As a result you must follow tight restrictions on how your social security payments are made to you, and processing fees can take a big hit of your income.
10. Just how adventurous are you. In our experience the happiest expatriates fall into 2 classes. Those who love immersing themselves in another culture, including learning the local language, make up the first group.The other group is very happy to live in a gated community and embrace the lifestyle there. Those who retire abroad just to save money are rarely the happiest.

Forbes also came up with its list of the friendliest countries for retiring abroad. Making the Forbes cut of the best places to retire in the world were Austria, Thailand, Italy, Panama, Ireland, Australia, France, Malaysia, Spain, and Canada.

Bottom line: Retirement abroad requires careful research. Talk with people who have done it. Read the books. Hire a tax expert. Determine your priorities and carefully investigate the places you are considering. Lastly, go ahead and visit your new paradise. If you like it, rent for a while. Ultimately that’s the only way to be sure.

The Affordable (and more) Best Places to Retire List

In our recent article, “Whackiest Best Places to Retire List“, we poked a little fun at some of the “Best Places to Retire” lists our big named publishing brethren keeping come up with. In so doing we promised to come up with our own “Best Affordable List”, and here it is.

St. Petersburg Harbor

The exercise of identifying our “Affordable” List proved to be very interesting, and challenging, on many levels (see end of article for further explanation). The major challenge was exactly what criteria would we apply? Would our picks simply be the cheapest places in the U.S. (or the world)? Should we add other selection criteria like culture, crime rates, etc.? In the end we tried to think about what the average Topretirements visitor would be interested in. Since our visitors are a very discriminating group, we decided to use these selection factors:

- Affordability. Median home price in the community should be at least 15% less than the U.S. average of $174,100 (2nd quarter 2009, National Association of Realtors).
- Low tax burden. Only the 25 states with the lowest tax burden (per the Tax Foundation) were considered
- High culture. We weren’t going to pick just any cow town - our selections have all earned a “high” culture rating (110 or above in the system used on our review pages).

The other big challenge was how were we going to select the most affordable candidates from the 450 retirement towns profiled at Topretirements. Doing a manual sort would be quite a task. But relying exclusively on a computer to do the work could end up with some of the same strange results we made fun of in our “Whackiest List” article. Obvious solution: We used our free Retirement Ranger selection tool as the first pass, then made a careful review of the results to make sure the final selections were indeed “best places to retire”. The Retirement Ranger provided 20 towns that met our criteria. From those we chose the top 10, purely on the basis of lowest median home price in mid 2009. (all 20 selected are listed below).

The Top 10 Affordable (and more) Best Places to Retire from Topretirements (with median selling price of a home):
1. Fort Myers, FL $84,000
2. St. Petersburg, FL $120,000
3. Phoenix, AZ $132,000
4. Corpus Christi TX $133,000
5. Tampa FL $140,000
6. Aiken SC $140,000
7. Clearwater FL $142,000
8. Morgantown WV $142,000
9. Las Vegas, NV $142,000
10. Knoxville TN $145,000

These are the remaining 10 making the cut for “Most Affordable (and More)”:
Mesa AZ $145,000
Sioux Falls SD $146,000
Myrtle Beach SC $147,000
Pensacola FL $148,000
DallasFort Worth TX $150,000
Branson MO $150,000
Tallahassee FL $150,000
San Antonio TX $153,000
Clemson SC $155,000
Columbia MO $159,000

Comments about the 22 “Most Affordable” Towns on this list
Topretirements feels really good about the towns making this list. All are relative bargains compared to many other best places to retire. All are interesting places to retire where there is plenty of culture and where there are nice neighborhoods to live in. That said, some people will find places on the list that are more or less appealing than others. The point is, if you are looking for an affordable place to retire that is also an interesting place to live, this list is a good place to start.

Real estate prices have fallen tremendously in the last 2 years. In much of the country they are at 2003 levels, in some depressed parts of the midwest, they go even farther back. Here is what Karl Case, a professor at Wellesley College and co-founder of the Case-Shiller real estate price index had to say about current conditions in the New York Times: “there are…dangers…(but) housing is as affordable as its been in 20 years….I think we’ve seen the bottom”.

One of the most interesting outcomes of this list is that the affordable regions have shifted. Until this year the interior states tended to be offer the biggest bargains in real estate. With the collapse of prices in markets like South Florida, Nevada, and California, this is not nearly as absolute the case as it was a few years ago.

Notes About the Selection Criteria
1. Thanks to our current recession, real estate prices, the major component of affordability, are utterly chaotic in a big portion of the U.S. Using recent data is extremely important because in certain markets the average selling price in mid 2009 is one half (much of south Florida and Nevada) to one fourth (Ft. Myers) what it was in 2006. The market is so volatile that using the same criteria in 2008 would have produced a very different list - chances are the 2010 list will be different yet.
2. Related to the above, foreclosures and short sales are distorting prices in certain markets. The median sales price in Las Vegas might be $142,000, but that doesn’t necessarily mean you can buy into the average 55+ community for that little.
3. We used figures from the National Association of Realtors (NAR) whenever possible to determine housing prices in mid 2009. Smaller towns, however, are not included in that data. In those cases we used a combination of data from Zillow.com and City-Data.com. As a result the sales price comparisons are approximate and should not be taken as absolutes.
4. Taxes are not that important an consideration for most retirees, at least compared to proximity to family, climate, and housing costs. That’s because income and sales taxes are relatively insignificant unless income and spending are high. Property taxes, which are a bit harder to identify, have their greatest impact on people who continue to live in expensive homes. Bottom line about taxes: Consider including towns in higher tax burden states to broaden your search when using the Retirement Ranger.
5. Prices in active adult and 55+ communities are not quite as impacted by the housing meltdown as for homes in general communities. So if you move to a 55+ community your new home might not be quite as affordable as for the general homes in that community.

For further reference:
Most Tax-Friendly Places to Retire
25 Best Places to Retire

Who Puts Out the Wackiest Best Places to Retire List?

Readers love best places to retire (or live) lists. Publishers are crazy about them because… (read first sentence again). But good grief, is there is no end to zany lists?

Consider three such lists put out recently. First one from U.S. News, another in a long string of “best places to live” from this magazine. Their “Best Affordable Places to Retire” list has some very odd choices, at least in our opinion. Consider the list:
– Ann Arbor, Michigan
— Asheville, North Carolina
— Aurora, Colorado
— Columbia, South Carolina
— Columbus, Ohio
— Eugene, Oregon
— Fort Worth, Texas
— Jacksonville, Florida
— Kansas City, Missouri
— Tucson, Arizona

Some of these cities (and that’s interesting in and of itself, almost all of these choices are fairly large cities) are great places to retire, no doubt. Asheville is everyone’s favorite retirement town. Ann Arbor, Eugene and Tucson are top places to retire. But some of these cities are not particularly affordable places to live. The average sale price of a home in Asheville this summer was close to $250,000, well above the national median of $174,000. Likewise at $202,000, Eugene’s median home sales price is higher than the national median. Prices in Tucson are at the national median, while the the other cities on this list are well below it. The biggest bargains, at least as far as home prices go, are Columbia ($137k, Columbus ($133k), and Kansas City ($144k). For Colorado prices, Aurora ($170k) is a relative bargain. (Most of these prices are from the National Association of Realtors 2nd quarter 2009 report).

As far as being low tax states, Florida and Texas do not have income taxes. Most of the other towns listed are in states that are somewhere in the middle of the pack when it comes to tax burden. So we don’t especially get why these towns are so “affordable”. Since the average home price is now below $100,000 in many towns across the country, we think there are better choices out there. Here is the link to the Topretirements list of “Affordable (and More) Best Places to Retire”.

Bottom line: A curious list of places. No smaller towns, a few cities that are on the expensive side, and many choices that are middle of the pack in terms of being interesting places to live.

List #2 is from the Today Show and real estate expert Barbara Corcoran. To be fair, it’s not really a retirement oriented list; instead it is her picks on which real estate markets represent the biggest upside potential for a general audience. Her list:
1. Sarasota, Florida
2. San Francisco, California
3. Lansing, Michigan
4. Marietta, Georgia
5. Grand Rapids, Michigan
6. St. Petersburg, Florida
7. Naperville, Illinois
8. Trenton, New Jersey
9. St. Louis, Missouri
10. Saginaw, Michigan

If you listen to the broadcast you will better understand why Ms. Corcoran selected these cities - there is a good reason for each. We love Sarasota and St. Petersburg from a retirement standpoint - they are 2 of the most interesting towns in Florida and real bargains right now. Most of the other cities selected might be good investments for working folks, but we can think of a lot more places we would rather retire. The 3 choices for Michigan are all interesting towns, but that seems like a lot of picks for one state that has had its share of troubles. We hope these markets do appreciate because Michigan could use all the help it could get, but don’t think we would move there to retire. Naperville, San Francisco, and Trenton are all in high tax states, something not in their favor. San Francisco is lovely but one of the most expensive places to live in the USA.

Bottom Line: Interesting list for real estate investors or speculators, not particularly relevant to retirees.

Finally, “America’s Recession Proof Cities for Retirement” from Forbes.

Their list includes many of the same cities on the first 2 lists including St. Louis, Tampa, Atlanta, Dallas/Ft.Worth, and Kansas City. The thing that strikes us as the oddest about this list is the subject - do/should retirees really care about recession as a selection criterion? Seems like a lot of other factors ought to be more important - like climate, taxes, quality of life, recreation, culture, etc.

Bottom line: A really odd selection criterion, and therefore some strange choices.

For further reference:
Topretirements has a page which lists the mainstream best places to retire lists, including our own. On that note, look for our new 2010 best places to retire list coming out in the next few weeks. Preview: there are a lot of new towns making the list!

Jennie Phipps also poked fun at the U.S. News “Best Affordable” list in her “Best Places to Retire, at Least for a Computer” article.

What do you think?
Have you uncovered any other strange best places to retire lists? Or do you disagree with our conclusions? Let us know in the Comments section below.

No 2010 COLA Increase in Social Security - Is “Stimulus” Payment an End Run on the System

October 15, 2009. It’s official, there will be no social security COLA (Cost of Living Allowance) increase in 2010, the first time this has happened since 1975. The reason is simple, this year there was no increase in the Consumer Price Index (CPI-W) from the third quarter of 2008 to the third quarter of 2009, hence no need for a payment.

A press release from the Social Security Administration is advocating passage of a special 2nd round stimulus package for seniors, veterans, and the disabled (the same people who would have received a COLA). The amount of the payment in the Economic Recovery Act
Payment for 2010 would be $250, about a 2% increase to the average social security recipient. The press release has one of the great non-sequiturs of the season as its reason for recommending passage of the proposal: “Last year when consumer prices spiked, largely as a result of higher gas prices, beneficiaries received a 5.8 percent COLA, the largest increase since 1982. This year, in light of the human need, we need to support President Obama’s call for us to make another $250 recovery payment for 57 million Americans.”

So let’s see, prices went up in 2008 so we needed an increase, but in 2009 prices went down but the “human need” went up. Conservative critics are citing the special stimulus package as an end-run on social security system’s rules, building a slippery slope where annual increases come no matter what happens to prices. In our mind the criticism seems valid, particularly since the only recipients of this stimulus program would be social security recipients. If we really need another round of stimulus, let’s give it to everyone and preserve the integrity of the social security system rules.

What do you think?
Sound off in our Comments section below.

For further reference:
When to Start Taking Social Security
No Social Security increase planned for 2010

Baby Boomer Self-Appraisal: Where Should I Live in Retirement

Note: This is the 3rd in a 3 article series about baby boomers and their retirement real estate plans. Part 1 featured the differences (and similarities) of boomers’ retirement housing preferences and the homes builders are building. Part 2 explored the conflict between baby boomer desire to retire in suburbia vs. reality.

What kind of retirement lifestyle is best for you?
Some visitors will recognize a few similarities to these questions and those in our free “Baby Boomers Guide to Selecting a Retirement Community“. Our goal with this article is to provide thought-provoking questions any self-respecting boomer should ask herself before deciding where and how to live in retirement.

1. Are you willing to move far away in retirement? Recognize that might mean starting over again with friends, and not seeing children and grandchildren as often as you do now. This issue is one of the most frequent causes of unfortunate retirement location decisions.
2. Can you afford to retire where you live now? Are your property taxes, insurance payments, and maintenance expenses going to be affordable on your retirement budget? Should you consider downsizing to save money and work?
3. Is warm weather important to you in the wintertime? Just how warm - would it be OK to have an occasional cold day in the 30’s or 40’s, or do you want at least 60’s every day? If the former is OK, there are lots of places in the Carolinas, west, and south. If it’s the latter, better head to South Florida.

4. Are you passionate about some activity, sport, or culture? If golf, tennis, or boating are extremely important you should probably consider an active adult community that has those activities. If culture is critical to you, better head for a college town or at least a medium sized city.
5. Do you like meeting people, but aren’t necessarily good at it? If that describes you, you should consider an active adult or 55+ community. In these communities it is so easy to meet people you almost have to try not to have a full social life.
6. Are you willing to try living in a new culture? If not, forget about moving to the south if you are from the northeast. Ditto moving to Mexico, or South America. No matter how cheap the lifestyle might be, you will not be happy.
7. Have you really thought through the idea of retiring in the suburbs where you live in now? It might be tempting to say you don’t want to move, but think about these factors: maintenance; taxes; driving miles to get to a store, doctor, or pharmacist. Imagine yourself in your 80’s living in your current house - who is going to maintain it, and what will happen when your doctor tells you to stop driving? The experts predict that residential density is the wave of the future - critical for transportation, energy efficiency, and an improved social life.
8. What is your plan for the long term? If we are lucky enough, youwill live into old age. If you live long enough, you won’t be able to take care of yourself. Long term care insurance is one way to plan for that eventuality, and you can either buy it or self-insure. But when the day comes that you need it, you better be ready. Many forward thinking people have a plan that includes living in a CCRC - Continuing Care Retirement Community- by a certain age. That way when they might need assisted living or nursing care, they can get in, and it’s paid for.
9. Have you thought about a 2 part retirement? Most people in their 50’s or 60’s probably wouldn’t like living in a CCRC - now. That being the case, you might be smart to consider a 2 part retirement (young retirehood in a 55+ or conventional community, then moving to a CCRC or independent living). You could make that a lot easier by making your first move to an active adult community that has these options as part of its campus, or has those type of facilities in the vicinity. That way your 2nd move, when you won’t be that young, will be a lot less traumatic.
10. Have you listed your priorities for the features that must be in your baby boomer retirement home? Here is what is on our list: universal design, door handles (not knobs), accessible counters, wide hallways, minimal steps, 1st floor master bedroom, no/low maintenance, public transportation nearby, walk/bike/golf cart to stores and doctors. List your must-haves, and don’t settle for less.
11. Before you buy, how about renting? We hear this time and again - I wish I would have rented first - then I would have known (fill in problem).

Bottom Line
Take a moment with your significant other to discuss these questions (and feel free to add others in the Comments section below). Are you both in agreement on these issues, and have you come up with a plan? In our opinion, the mere act of discussing these issues could help lead you to a more interesting and enjoyable retirement.

A Rough Week for Active Adult Communities

It’s been a rough couple of days in the retirement real estate market. Fortunately, not all the news was bad, depending on your perspective. Here are few news stories crossing our desk:

- Prices are falling in many active adult communities, which is stimulating sales to at least some degree. According to a report in the Press-Enterprise, Hanley Wood Market Intelligence, a real estate research firm, prices in Del Webb’s Solera Diamond Valley recently ranged from $170,000 to $291,000. Back in January 2008, similar houses were priced from $246,000 to well over $300,000.

- Hanley Wood also points out that active adult developments are selling about two and one-half times the rate than in more mainstream developments. The conclusion that some draw is that reduced prices are attracting buyers who want to strike - while the market is cold.
- Most forecasters believe that nationwide, prices may now be at the “pre-bubble” levels after a spectacular growth and a similarly drastic correction. The important housing price/median income ratio is at its lowest level since the mid-1990’s, while median prices are at about 2003 levels.
- Sunrise Senior Living announced last week it is selling 21 assisted-living facilities. Sunrise is selling because it needs funds to pay down debt.
- KB Home, according to a Reuters report, is being investigated by the U.S. Securities and Exchange Commission over possible accounting and disclosure issues. The home builder has other legal woes as well - homeowners have filed a lawsuit against KB and other parties, saying they falsely inflated selling prices in Nevada and Arizona.
- More people 55+ are moving into active adult communities but still continue to work. For instance, Del Webb reports that 50 percent of residents at its Sun City community near Las Vegas still work full- or part-time. According the company, that’s an 8 percent increase from 10 years prior. The explanation some have for this phenomenon is that baby boomers don’t want to/ are afraid to retire totally, but they do want to improve their lifestyles. Many builders of active adult communities are responding by including flexible layouts that can include home offices.
- Some top active adult communities owned by companies experiencing financial difficulties are being snapped up by stronger outfits. Province, a 2006 Best Active Adult Community in 2006 located near Phoenix, was just acquired by Meritage.

Bottom line:
Here is the Topretirements take on these developments.
- Prices are falling - it’s a better time to buy than it was a few years ago
- Some companies are having big troubles. Be careful about who you buy from
- Maybe, just maybe, better times are ahead of us

Baby Boomers Delaying Retirement

Remember the great fear of a few years ago: baby boomers will be retiring in droves, creating a severe shortage of skilled workers and driving up costs for employers. Whew - there’s one less thing to worry about. A recent survey on the impact on retirement of the recession by the Society of Human Resource Managers (SHRM) found that more than two-thirds of human resource professionals surveyed report that the number of employees planning to delay retirement has increased.

Topretirements is frequently asked this question and the SHRM survey confirms our theories on the matter. Millions of working Americans are nervous about their retirements because of a combination of ingredients: their investment portfolios are way down and they are fearful about their jobs.
According to The State, The unfortunate reality is that more and more people 55+ are out of work who would rather be working. The Bureau of Labor Statistics says more people in this age group are or out of work since they began keeping records. Experience Works, a nonprofit employment training organization for older Americans, figures that the expected retirement age for Americans is now 72.

What do you think?
Have you delayed your retirement for one reason or another? Please respond in the Comments section below.

Missing in Florida: Retirement Mojo

The Sunshine State just had its first population loss since 1946, according to research from the University of Florida. The State lost 58,000 residents in the year ending March, 2009, the first such loss since military personnel left the State when WWII ended.

This decline is sobering to Florida, a state used to nothing but unending growth. The experts are quick to provide a multitude of reasons for this change, leading the casual observer to think Florida might have lost its (retirement) mojo. The current recession and attendant housing crisis is the most important reason for the decline. Construction is hugely important in this state, yet there is so little of that work that people are leaving the state to find jobs. Meanwhile the free fall in housing prices brought on by foreclosures, bankruptcies, and short sales has brought panic into the market; people are losing their homes and others are afraid to buy and see prices go down further. The state has prided itself on being a low-tax state, which is now producing its own problems. State and local budgets are being cut drastically, helping to fuel the recession and discourage families from moving here. Lastly, the hurricanes of a few years ago have led to dramatic increases in homeowner insurance rates, adding greatly to the cost of living here.

According to Stan Smith, Director of UF’s Bureau of Economic and Business Research, the decline is spread across Florida. Counties in South Florida like Broward, Lee, and Palm Beach Counties all had population losses. In central Florida some counties increased their populations. Those include Alachua County (home to Gainesville and the University of Florida) and Lake County (home to The Villages). According to Smith the population decline “… reflects a very abrupt change from three or four years ago, when Florida was experiencing some of its largest population increases ever”. Since the 1970’s the State experienced net population growth of 10 million per decade; Smith thinks those days are over.

Florida as a retirement destination
To some extent Florida’s population decline is confined more to the working population rather than the retired folks. Although the “halfback” phenomenon is at work (where people retire to Florida only to later move halfway back to the Carolinas), that is probably confined to a small number of people. The question is whether people will stop moving to Florida for their retirement in the years to come. Here are some pros and cons as to what will happen:

Pros for Florida as retirement destination
- Only an Ice Age could take Florida’s winter warmth away from it, and hopefully that’s a few thousand years from now. The Sunshine State is the warmest place in the Continental U.S., so anyone looking for warm winters will still choose Florida over just about anywhere else
- The housing crisis has so distorted the market that Florida real estate is a relative bargain again, after a few years of being overpriced. The Florida Association of Realtors reports that the median price of a FL condo in August was $107,500, down 46 percent from its 2007 level
- Florida is a tax friendly state. Full time residents can Homestead their homes if they are used as a primary residence, which means their taxes can’t go up more than the cost of living. Florida has no income tax or taxes on intangibles
- No state can match the number of active adult and 55+ communities that are already built and looking for residents

Cons against Florida’s retirement importance
- Florida’s negative publicity about population losses, housing crisis, recession, and tax revenue woes are not helping. Some people will think twice about moving into that negative environment
- Many baby boomers have a negative image of Florida (congestion, population age, conservative makeup, untrammeled growth unraveling)
- The housing market is so bad in parts of the State that people are nervous about moving there
- The State’s budget cuts will make people fearful that vital services will not be available
- Most importantly, retirees have so many more choices than they did 20 or even 10 years ago. The Carolinas, Georgia, Virginia, Tennessee, Alabama, etc. have marketing budgets to attract retirees. Some of their tax structures are friendly for baby boomer retirees. There are plenty of brand new 55+ communities to choose from with great amenities available at attractive prices.

Bottom Line
Florida used to own the retirement market. Today it is losing share and doing nothing against a host of eager competitors.

For Reference:
Newsweek article about Florida population losses
Sunshine Harder to Find in Florida