Advisors typically seek to improve their clients’ financial well-being by increasing their wealth, but a less common approach that can potentially have as big an impact is to reduce their expenses.
In the college finance realm, for example, a few elite advisors are doing more than helping their clients fund 529 college savings accounts; they are also poring over financial aid differences among colleges that can cut tuition by $5,000 a year. That’s $20,000 over four years multiplied by the number of children the parent is supporting.
Now imagine saving your client not tens of thousands of dollars, but hundreds of thousands of dollars — not by choosing a lower-cost college but rather by helping them choose a more affordable country in which to retire.
That is now possible as the international retirement trend gathers steam, and indeed authors Suzan Haskins and Dan Prescher, in their newly released book "The International Living Guide to Retiring Overseas on a Budget," affirm it is possible to live quite comfortably on just $25,000 a year.
“If you can get better weather, great health care, enjoy a different culture and immediately cut your cost of living in half, that’s like an arbitrage play. Your standard of living more than doubles overnight,” says Prescher, who with Haskins, his wife, spoke with ThinkAdvisor from their home in Cotacachi, Ecuador.
The Omaha transplants don’t miss Nebraska’s freezing winters or brutally hot summers, which used to generate $500-a-month utility bills. Today their utilities run about $30 a month, including water.
Property taxes on their 1,100 square foot condo total just “52 and change” a year. Gasoline costs less than $1.50 a gallon, but because public transportation is “ridiculously cheap” and taxis and buses “ubiquitous,” the couple doesn’t own a car, saving further on insurance and maintenance.
“We actually walk everywhere [amid] cobblestone streets and Spanish colonial architecture,” Haskins says, but they shell out the $2 it costs to take a two-hour ride to the Ecuadorian capital, Quito, when they want to attend the symphony, view an art exhibit or visit a specialist doctor.
“We’ve never paid more than $10 for a taxi, and that was to go to the provincial capital,” a 30-minute ride away, Prescher says.
The couple work as writers for International Living magazine, and just interviewed a couple aged 68 paying just $350 a month for health care in Mexico. Their insurance policy, they say, has far better coverage than their policy in the U.S., where they were paying $1,200 a month 10 years ago — coverage they estimate might be $2,000 today.
But beyond professional experience interviewing expats and their current living situation, Prescher and Haskins draw on more than 12 years of experience living in two places in Ecuador (Quito as well as Cotacachi); three in Mexico (Lake Chapala, San Miguel de Allende; and Merida); and half a year each in Panama City, Panama, and San Juan del Sur, Nicaragua — and have therefore charted a path for others.
“It used to be a pretty exotic idea, but in the last five or 10 years, with the internet, it’s a mainstream idea now,” says Prescher. “Not everybody will do it; it’s for people with a sense of adventure, people with a tolerance for novelty … You have to be willing to leave your comfort zone.”
But going outside your comfort zone need not be quite so uncomfortable.
“Most people retiring are of a certain age and want things to be easier,” says Haskins. “There are places in Mexico or Costa Rica that are just a short flight back to home.” She adds that options even include English-language destinations (Belize) or places that use the U.S. dollar as currency (Panama, Ecuador).
“We suggest you ruthlessly profile yourselves,” Prescher says.
For those attracted to the benefits of international living — its lower cost and adventure — the self-profiling should include an awareness of potential difficulties.
“If you can’t tolerate waiting in line; if you don’t like noise; if you get nervous trying to communicate in another language and wonder why they don’t speak English, it might not be right for you,” Prescher says.
“Your neighbors might have chickens or cows; roosters sometimes crow at 2 or 3 a.m.; wedding parties with loud bands can last for three days. I don’t even hear it anymore,” Haskins adds. “None of these problems are insurmountable.”
Initially at least, it is the separation anxiety that presents the biggest hurdle. But modern technology can help. Skype, which allows the two authors to stay in regular contact with their new grandchild in the States, is one way to lessen the potential pain of separation.
Patience is also required. “Things just don’t happen as quickly or conveniently as in the States,” Prescher says. But there’s a positive flip side, says Haskins:
“The rest of world is more polite. We’re very informal. We forget to say: ‘how are you? how’s your family?’”
If a potential retiree has decided they are up for it, Haskins and Prescher endeavor to help readers determine where to live, and indeed their book’s middle section looks at countries and, more narrowly, communities that might make sense.
The focus in not exclusively Latin America, though they think our southern neighbors have the most advantages for Americans who still have close attachments, as well as “birthday parties and funerals” to attend.
For example, they cite Malaysia and Thailand as the top two destinations in Asia (with Cambodia up and coming), with Malaysia being especially attractive for those who seeking plentiful access to English speakers.
In Europe, they focus, as Haskins puts it, “on areas that are more suitable because of better weather, lower costs and health care” advantages, such as the Limousin region of France, Spain’s Costa del Sol and southern Italy.
“If money is no object you might as well settle in Paris or Rome,” says Prescher, but since their book is written for those for whom money is an object, they focus on “places that are convenient, have good infrastructure and an excellent quality of life,” he adds.
The final segment of their book involves what to do when you get to your selected community, based on the supposition that retirees no longer lie on hammocks.
One thing to expect is that expats tend to find each other:
“You tend to rely on each other,” Haskins says, noting expats tend to ask each other for advice, “but we like to try to meet our Ecuadorian neighbors as well — because that’s part of the experience, immersing yourself in the culture.”
Expats also like to share their ‘horror’ stories about things that Americans take for granted.
“You can’t get things done in Latin America in a phone call,” Prescher says. “You make an appointment. If you’re a Type-A American, you’re not going to be happy.”
But if you don’t fall into that category, Haskins notes the extremely pleasant aspects of daily life, for example the fresh produce, which costs just pennies. “You not only reduce your cost of living but you’ll be healthier, too,” she says.
The couple’s values have evolved as a result. Noting that U.S. “consumerism slaps you in the face” on visits home, they’ve grown to appreciate the simplicity of life abroad, and as “serial relocators” have come to acquire fewer and fewer possesions.
And with inevitable slip-ups like asking the bartender for “dos besos” (two kisses) instead of “dos vasos” (two glasses), the authors say having a sense of humor is one more requirement of retiring abroad.