Money: Running Away to Retire
Ex-pats: The Bergs retired to Costa Rica in 2002
Wesley Bocxe for Newsweek
Ex-pats: The Bergs retired to Costa Rica in 2002
By Linda Stern
Newsweek
March 14 issue - After a lifetime in Minnesota, Randy
and Rhonda Berg turned their backs on frigid winters,
work and the high cost of living in the United States.
They sold everything and retired to Costa Rica in
2002, enticed by reports of cheap real estate and a
laid-back lifestyle. "The first week was an
eye-opener," says Randy, 58, describing balky
real-estate agents, an Internet-touted house that was
"an absolute disaster" and the urge to head back home.
They stuck it out, and now he and Rhonda, 48, have the
retirement lifestyle of their dreams, complete with a
sprawling mountaintop property, a custom-built home
and household help, all for less than $2,000 a month.
"There isn't anything that would entice me to move
back," says Randy.
The Bergs are part of a trend that demographers say
will only increase as baby boomers start cashing their
Social Security checks: Americans retiring to other
countries where the prices are low and the living is
easy. Hot spots like Costa Rica, Panama and Belize
look like Florida circa 1970: new developments,
proximity to water, no snow and lots of hype. Numbers
are hard to come by, but some estimates put 11,000
American retirees in Costa Rica, 2,500 in Panama and
more than 100,000 in Mexico, which got an early start.
But not all of them are as deliriously happy as the
Bergs. Folks who pack up too precipitously can get
stuck in a bad situation without the means to get back
home. Here's how to do it right:Grab retirement deals
while they last. Most of these countries offer special
visas and tax breaks for Americans who can prove
they'll live on retirement benefits or imported
income. In Belize you can bring in a car, your
household goods and your bank account tax-free. Panama
hands new American retirees a property-tax exemption
and steep discounts on everything from movies to
surgery. But nothing lasts forever: Costa Rica curbed
its special breaks for retirees when it became too
popular a destination.
Get real about real estate. You can live in a nice
place by the water, and you can live dirt-cheap. But
not at the same time. Panama boasts homes in the
$150,000 to $200,000 range, but if you want to be on
the ocean, expect to start at $300,000. And remember
that you're buying property in a foreign country,
where the procedures and laws are different. Most
popular destinations have real-estate consultants who
can walk you through the process. To get started,
search online for Web sites that are populated by
expat retirees already living in certain areas, like
localgringos.com in Belize, and costarica-online.com.
Ask the locals for recommendations.
Build surprises into your budget. Margaret Briggs, a
Houstonian living in Belize, saw her property taxes
rise from $80 to $800 overnight when the rules
changed. Folks who retired to Spain in 2002, when 90
cents bought a euro, are not living quite so large now
at $1.30 per euro. And there are some expenses you
might not have had in the United States. You'll have
to buy health insurance (say, $100 a month for a
retired couple in Costa Rica), because Medicare
doesn't pay in foreign countries. Some expats spend
$300 or more a year for emergency-medical-transport
insurance (see aaro. org), to fly them back to a U.S.
hospital if they have big trouble.
Don't forget the tax man. Unless you're renouncing
your U.S. citizenship (a move that few make), you'll
still have to pay federal income tax. Some countries
will even tax your Social Security benefits, notes
Donald Walter, a Seattle CPA who earns his living
preparing tax returns for expats.
Visit early and often. Even after you pick a country,
you'll have to decide whether you want city or country
life, an American-dominated gated community or an
authentic small town. To help you choose, a host of
companies, like panamaatyourservice.com or
liveincostarica.com, have sprouted, offering
pre-retirement tours. It's sort of like a vacation�but
you may end up staying forever
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