8 Tips for an Affordable Retirement Abroad

Living on $18,000 to $25,000 a year? It's possible.

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Most Americans don’t have a big enough nest egg to permanently become expatriates in Paris or kick back with a daily glass of Chianti in Tuscany. But surprisingly, your current 401(k) balance could be more than enough to retire in a low-cost country with a favorable exchange rate.

Many foreign cities boast consistently beautiful weather and allow you to stretch your dollars further than would ever be possible in the United States. “In Nicaragua or Ecuador, you can live on somewhere between $18,000 and $25,000 a year,” says Barry Golson, author of Retirement Without Borders: How to Retire Abroad—in Mexico, France, Italy, Spain, Costa Rica, Panama, and Other Sunny, Foreign Places (And the Secret to Making It Happen Without Stress). But lifestyle is a key factor, he says: “That’s probably [on] tacos, not steak.” On the other hand, some countries that seem affordable require at least a little more than Social Security payments to get by. “If you’re going to go to Costa Rica or Panama, you’re not going to be happy with much less than $30,000 a year,” says Golson. Still, it's essential to look beyond cost when it comes to choosing a retirement destination. Here’s how to decide if retirement in a low-cost country is right for you:

Take a test drive. Spending a week or two at a resort and driving through town is a much different experience than taking up permanent residence in a low-cost locale. Before making any major purchases, rent and spend a few months in the country. Rosanne Knorr, author of The Grown-up's Guide to Running Away From Home: Making a New Life Abroad, worked as a dog sitter for a month at a 5,500 square-foot house filled with antiques in Ajijic, Mexico, in exchange for living accommodations. “Go to the local markets and shop and get involved with the local people,” she says. “You can imagine yourself living there, and I think it increases you comfort level if you actually move.” An extended stay also allows you to get the inside scoop on housing options, medical care, and social atmosphere. Before you buy property, make sure you get all documents translated to English and have a lawyer look them over.

Practice your foreign accent. It's no surprise that some retirees gravitate to foreign countries with large English-speaking communities. “I recommend that anyone who wants to go to a foreign county makes sure they go to place where there's a big English-speaking enclave, so [there is] a support group,” says John Howells, author of Choose Costa Rica for Retirement and other retirement books. “You will be so lonely if you go to a place with only natives around with a different world view.” Still, your experience will likely be more enriching if you at least attempt to speak the same language as the locals. Clyde Dietz, 59, of Ocean Shores, Wash., purchased land in Panama and plans to retire there in 2010 with his wife, Dana. “I think this challenge of moving to Panama and learning a new language and a new culture will keep us young," he says.

Streamline your standard of living. Some Americans will find that they can afford luxuries in other countries that they couldn't in the United States. Says Howells, who lives in California and has a vacation home in Costa Rica: “People who couldn’t afford housekeepers or gardeners here can do it there,” she says. "We have a gardener and a housekeeper in Costa Rica and we pay them about $2 an hour apiece. Here in California, we have someone who works on the house and she charges $15 to $25 dollars an hour.” But if your objective is to make your nest egg last longer, don’t go overboard with luxuries. Billy and Akaisha Kaderli, authors of The Adventurer's Guide to Early Retirement: A Common Sense Approach, have retired 19 years ago and spend 70 percent of their time outside the United States traveling through low-cost paradises like Mexico, Thailand, and Vietnam. “We’ve spent under $30,000 a year the whole time we have been retired,” says Billy, 56. “When we go to Asia or Mexico, we can easily eat for $1 a meal and when we splurge, it's $5 a person.”