Every time I go to Antigua Guatemala, a lovely colonial town in the South of the country, I am amazed by the number of retirees who decided to come spend their golden years in Guatemala. I saw a question on Mr Money Mustache about where the best place would be to retire early, so let’s look at the costs.
Typical costs of retiring in Guatemala
Here is a more detailed post about the cost of living in Guatemala.
Rent: You can find a lovely small place for $500, or a luxury house for $1,000, both fully furnished, with all bills but electricity included. Yes, even wifi.
Food: We eat well, have meat once a day at least, and buy quite a bit of alcohol for $200 per month. A lunch at a small comedor will cost you $2, and a nicer restaurant dinner costs $20 or more per person but can rival with international cuisine.
Healthcare: Most retirees don’t have health insurance, but healthcare is cheap. A visit to a US trained doctor costs $20 to $50 and you can visit a local doctor for much less that this.
Transportation: Having your own car is not really a must if you live in Antigua Guatemala or around Lake Atitlan, where tuk tuks and taxi boats will take you anywhere for $2. You can rent a car for $20 a day when you want to visit the country.
Staff: A full time maid costs about $200 per month, or $12 a day if you want her to come once a week.
Taxes: We get taxed at 6% of gross income, as we operate as an LLC. We pay 0.9% a year in property taxes over the thankfully undervalued price of our properties. VAT is 12% and that is about it. We could claim company expenses to get the VAT back but would pay 31% of our benefit in taxes, so the 6% works better since our expenses are low.
A couple can live well on $1,000 per month, in a small home. Make it $2,000 and you can have a larger place, some fun money to travel and go out, be it to restaurants or to climb a volcano, what is the point of living in Guatemala if you aren’t going to enjoy all it has to offer?
Since we have no mortgage, we live on about $1,000 per month with a full time staff, two cars, a motor boat and a couple of trips abroad during the year.
Extreme early retirement cost of living in Guatemala
If you want to do it the extreme way, you can live on $400 a month or less. A small house in my village recently sold for $6,000 on a 900 sqm plot. It is a basic thatched hut, and unless you would rather live in Detroit, you will find few houses in the US in that price range.
Those houses rent for under $100 a month, add $50 for utilities, $50 for food (a rice and bean diet mostly), and an occasional $2 feast at the fried chicken joint. You can dress at the local thrift store for $0.5 a shirt and take bus rides for $1 an hour. Since you can’t afford Baygon, better find a malaria-free zone, and always have the price of a ticket back home saved up for sanitary repatriation.
A $300 a month budget is lean, but not impossible to live on, $200 if you bought a house.
Considerations when living abroad
For people like me, living abroad is not a sacrifice, on the contrary. I love the mild weather, my lakefront paid for house, and can afford to go back to France whenever I want. I just went for a full month and did all the family and friends visits I wanted.
But you should add up the costs of flying back and forth if you plan on traveling often. The fact that you will be away from your family and friends. The language barrier if you arrive without speaking it. The difference in diet, you won’t find all the products you are used to in the supermarket. The added cost of some imported products you may not be able to live without. From cereals to computers to used cars, we pay a premium to buy stuff from abroad.
There is also the visa cost, in Guatemala a 2 year residency can be obtained via a lawyer for $1,000 (or you can go queue up for hours in hot and humid offices, or make a visa run to Mexico every 3 months). Then you can renew for another 2 years before applying for permanent residency.
Cost of retiring in the US
Housing: That will be your main cost, and it can vary greatly depending on where you retire. If you are going the early retirement route on an average salary, you won’t be able to afford housing in a high cost of living area.
You can rent a small place in the Midwest for $400, limit your food budget to $200 by clipping coupons, have a high deductible health insurance cover like MMM for $250, cycle around, grow a garden and lower your heating costs by wearing extra layers. A $2,000 budget, like the comfortable Guatemalan retirement budget, is perfectly achievable with some dedicated fun money for holidays or whatever you fancy.
If you have already paid off your house, in order to make an apple to apple comparison, you should treat the equity as idle money, since you would get a cheaper house abroad and that money is not bringing you interest or anything.
Extreme early retirement in the US can be achieved for even less, there is a sample $1,000 budget on Tight Fisted Miser that shows how you can live on $12,000 a year.
The main thing you sacrifice by living in the US instead of in a cheaper country is your comfort. Living in a small studio or a 1 bed apartment instead of a bigger house with staff. You may not have a garden for a $400 rent, or if you do, it would be in a remote place with little social activities where a car will be a must. You may not even find those rates unless you live with roommates. Your meals will evolve around coupon food, not what you really feel like eating. Your holiday options will be a camping trip, Couchsurfing or no holidays at all.
Your lifestyle will either be more frugal for the same price, or twice as expensive as maintaining it abroad. Meaning you will need twice the money before you can retire. At a 4% withdrawal rate, you can retire with $300,000 on $1,000 a month. But if you need $2,000 to live, you will have to work until your nest egg reaches $600,000. If you are desperate to retire early, go do the $300/month early retirement thing in Guatemala as soon as you have saved $100K, because you won’t be able to live on that in the US. I know I wouldn’t like that kind of extreme lean living, and it it a pretty bad idea to choose a country only because it’s cheap, but I have met people who spend months here on a few hundred dollars a month.
So is retiring abroad worth it?
Yes. If you want to enjoy a higher standard of living for the same cost. In your 30s, having a staff is a luxury, but in your 60s, having someone carry the groceries and mop the floor when your back hurts is pretty awesome.
If you want to visit a new destination and are curious about other cultures, living there for a few weeks or a few years is a unique experience.
No. If you can’t live away from your family, will get homesick and want to come back four times a year. Crashing on your brother’s couch is ok for a few days, after a while it is abusive, people do not have to cover your living expenses because you are too cheap to pay for your own place.
If you are just there for the cheap cost of living and will never get out of the house because activities cost money, bad idea too. A life of clipping coupons and free concerts at the community college will be more fulfilling.
A good option for many people retiring in Guatemala is to come spend the winter months under the sun. They fly back to a paid home in the US for summer, enjoy their grandkids and the longer days, and rent a house when they are here. With flight tickets and the rental, they enjoy the country for the price of staying at home. Some rent their home and manage to live well here for under the price of the rent. Popular retirement destinations include Mexico, Belize, Costa Rica, Panama, Ecuador, Argentina and Chili. Being on the same time zone as the US is convenient if you need to call home, and you have no jetlag on holiday. Eastern Europe and South East Asia are also popular but flights are much more expensive, retirees tend to fly back once a year or every other year.
Before you think about relocating somewhere just because it is cheap, check out Jason Hull’s post on the subject.