Algarve, Portugal, is the index's top-rated place for retirement.

For the first time in years, Europe tops South and Central America as the continent with the best destinations for retiring abroad. Three of the five leading retirement destinations included in the annual Retire Overseas Index published by Live and Invest Overseas are located in Europe: Algarve, on the coast in southern Portugal, Languedoc in the south of France and Abruzzo in eastern Italy, bordering on the Adriatic Sea.

“Normally Ecuador or Panama would be in the top five,” says publisher Kathleen Peddicord. “This year it’s three European destinations because of the dollar’s strength against the euro and property markets that are very depressed.”

At the current exchange rate, average real estate costs in Algarve, Portugal, and Abruzzo, Italy, are lower than in City Beaches, Panama, or San Miguel de Allende, Mexico.

(Related on ThinkAdvisor: 15 Best Foreign Countries for Retirement: 2015)

Americans can retire in Algarve for $1500 a month for rent, utilities, groceries and allowance for some entertainment, says Peddicord. She usually recommends that retirees rent before they buy to make sure they’re comfortable living in a particular place but says “right now it really makes sense to think about buying.” The relatively low costs available now may not last, says Peddicord. In the meantime, those not ready to make the big move now can buy and rent out the property, says Peddicord.

‘You have to take the long-term view,” says Peddicord. “And you have to be flexible. Things can change, costs can change.”

Peddicord, who lives in Panama, says she just bought a small two-bedroom apartment in Lagos, a medieval town on the coast in the Algarve region, for 101,000 euros, or about $114,000.

She says there are comparable bargains in Languedoc and Abruzzo, and for $250,000 Americans can buy a big, comfortable, renovated apartment in either of these three European regions.

But bargain-priced properties are not the only attraction for European retirement destinations, says Peddicord. There’s also the availability of quality health care, reliable electricity and generally lower humidity and temperatures during the warm summer months. Public transportation is also available to travel around these regions, though she recommends a car.

On the flip side, retiring in Europe rather than in South or Central America puts more distance between retirees and their families back in the U.S. and increases the costs to visit them. There’s also the issue of language. Peddicord suggests retirees moving overseas learn the local language, especially in Languedoc and Abruzzo. Algarve has a long tradition of British retirees, so most of the locals speak English, says Peddicord.

That’s one of the reasons Algarve was rated No. 1 — with the only A+ rating – in the latest Retire Overseas Index.  Languedoc and Abruzzo were ranked 4 and 5, both rated A.

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