Reason 5: Retirement
This is sort of a blend of #1 (Frustration) & #3 (Seeking Improved Life). Retirees are both frustrated by healthcare costs and the cost of living on their incomes AND seeking an improved life with the means they have the (world’s) disposal.
But there’s definitely something special about this idea….of a person born, educated & employed their whole life in one country – only to retire and say “I’m done, and I’m moving to greener pastures.”
Now, if you’re a retiree and are reading this, you might be pissed off at me labeling retirement as “done.” Maybe you’re right to be mad. Because being retired should be a new beginning, not the finish line. But unfortunately for some people, retirement means waiting to die. Yes, a lot of you retire so you can just die. I hope if you’re reading this blog, you’re not one of those people.
Problem: Living off a Fixed Income
If you’re a retiree, or to-be retiree, you’re likely looking forward to a fixed income. Maybe it’ll be your pension, Social Security or you’ll be drawing from one or more retirement funds. Any of these are based on contributions over your working years. Calculated from how much you contributed, not how well your income provided for you.
for some people, retirement can mean waiting to die. …if you’re reading this blog, you’re not one of those people.
Unfortunately, your income will not provide as much as it would say, back when you were younger and learned how much your pension will be. To answer why, you already know: inflation. Inflation makes the purchasing power much smaller than it was in the many past years you contributed.
In short, your fixed income isn’t adjusted for inflation. (And I know I don’t have to tell you how much inflation has changed prices over the years!)
To better understand purchasing power, recall all the times you heard an old person say “Boy, a dollar sure doesn’t buy what it used to!” It sure doesn’t. A dollar bill is still labelled a dollar, but its value is what declines. Over time a person needs more and more dollar bills to equal the value of the purchase, be it a loaf of bread, a pair of pants or a house. Yes, we’re talking about inflation. It’s real and it’s different per country. If you don’t like your country’s path of inflation, then ….move.
For retirees, this is an especially painful topic. Retirees remember how much “penny” candy they could buy for 25 cents. Now, one candy bar costs a whole %&#*-ing dollar. Now, go back to all those retirees living on an income that’s been built up by salary or wages of an era long gone, and you have many retirees struggling to scrape by. Never mind the candy bar, retirees first need affordable medication, housing and canned catfood.
Big Risk: Living off a Fixed Income
Yes, I used the same phrase from “Problem to Fix.” A fixed income from one country is a risk. It’s a risk of currency exchange. By living off of the money from one country in a second country (& currency), you gamble on how that money changes exchange rates. Say your pension currency exchanges for 10% less against your host country…well, you just lost 10%+ of your income. For most of the developed world, currency exchange isn’t any more violent than inflation.
Mitigating the Risk
Currency exchange fluctuations are a daily, constant change and there’s little in the short-term you can do about it. Long term, you can lessen this risk by having assets in both countries. Let’s say you move savings to purchase property in your new host country. You rent that home out for a little added income. Now you have savings, equity and added income in your host currency, ad you totally bypass any currency exchange risk. Nice, huh?
One more thing – there is a risk to mitigating this risk 🙂 You may leave and be left with a new choice – hold the property or move your savings (again). Look at us- we purchased property while living in Prague (and
still own it sold it summer of 2016). Meanwhile we no longer live there. So for us, fortunately, both our rental income and mortgage are in the same currency. So no currency exchange risk when both “in-coming” & “out-going” are the same — a big plus.
Lastly, if your retirement funds or a pension are in US dollars, then it’s fairly easy to retire in a country where your $US will buy much more in your new home country. In some of the most stable, developed Central American countries, your $US has much buying power than back in the States. This saves you money for flying home to see the grand-kids.