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6 steps to size up your overseas retirement plan

Wednesday - 9/19/2012, 3:42pm  ET

By ALEX VEIGA
AP Business Writer

LOS ANGELES (AP) - Like many Gen-Xers, my present outlook on retirement falls somewhere between doom and gloom.

I fear a stock market collapse could decimate my investments as I near retirement _ a fate that befell many retirees following the 2008 financial crisis. I'm highly skeptical that Social Security will be much help, if any, and I fret that I won't have enough money set aside to keep up with rising costs for everything from food and gas to housing.

Recently, however, I've started to consider whether retiring overseas might be a good strategy.

Moving to countries like Mexico, Ecuador and Thailand, where the cost of living can be far lower than in the U.S., can turn a modest nest egg into something more substantial.

"It's really not for everybody, but there are many places where your dollar can go a lot further abroad than it can here," says Gabrielle Redford, editorial projects manager for AARP The Magazine.

Americans have been retiring abroad for many years, some seeking a more adventurous and culturally exotic experience, others looking to save money.

It's hard to gauge how many there are, as the Census doesn't track Americans living abroad. The State Department estimates 6.3 million Americans live outside the U.S., but that only accounts for those who voluntarily report their status to U.S. embassies.

Still, many countries have established enclaves of American retirees. And the fallout from the 2007-2009 recession appears to have fueled greater interest.

"We hear anecdotally from readers that many more people are looking into these options," Redford says.

Doug Hall is such a retiree. The 61-year-old Atlanta resident retired in February and is planning on moving to Mexico City once he figures out whether to sell his house or rent it out.

He visited Mexico City many times in the 1980s, when he split time between the Mexican capital and Washington D.C. while working as a reporter for a Spanish-language newspaper.

He calculates that, after housing costs, he would spend 40 percent less on entertainment and other expenses living in Mexico City.

"And at the same standard of living _ not reducing my standard of living one iota," he adds. "In Mexico City, if you want to go to the opera, it's there, and it's a third the price it would be in New York."

Spending one's golden years abroad is a non-starter for retirees who wish to remain close to family in the U.S. For it to be viable, retirees need a healthy sense of adventure and openness to another culture. But retiring abroad isn't just for those with a well-padded nest egg, either.

Someone with a modest retirement budget, even those living on Social Security alone, can do it, says Kathleen Peddicord, publisher of Liveandinvestoverseas.com, which caters primarily to American retirees living abroad. This group can benefit most significantly, Peddicord says.

Here are six steps to take before making a decision to retire overseas:

1. SIZE UP YOUR RETIREMENT INCOME

How much you will earn from investments, a pension, Social Security or other sources will determine where you can afford to live comfortably. Experts suggest calculating monthly income, so you can compare that to likely monthly expenses, including housing, utilities, transportation, health care and food.

If your monthly income is $3,000 or more, you can probably retire just about anywhere, says Peddicord.

Try Firecalc.com, an online calculator designed to work out monthly retirement income.

2. RESEARCH AND VISIT A FEW TIMES

You can get plenty of information online about a country's history, politics, crime rate, economy, rental and real estate listings, and quality of life. Also tap into online forums of expat retirees living in the country. They can best relay how prices are faring at the grocery store, gasoline pump and elsewhere.

Buy also plan on making a few trips to the country before you commit to moving there.

"Stay there for a month or so, try to see what day-to-day life would be like, not the life of a tourist," Redford says.

3. FOCUS ON COST OF LIVING, NOT EXCHANGE RATES

The price of real estate, meals or a taxi are better indicators of how affordable a country is than how its currency is faring versus the dollar. That's because exchange rates fluctuate.

Also, a nation's cost of living can increase sharply.

Take Argentina, which used to be a bargain. It has seen inflation balloon 98 percent in the last five years. Even with U.S. dollars being well ahead of the Argentinean peso, you end up paying more.

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