How Moving Overseas Cuts Retirement Costs

Many people reduce their spending by eliminating or cutting back on minor discretionary expenses. For example, you could eat out less, buy fewer new clothes and start making your daily coffee at home. However, I'd argue that by cutting back relatively small out-of-pocket spending like this, you're just tinkering around the edges. Rather than cutting tiny outlays, we can cut big things that can have a much greater impact.

I encourage this approach when considering a move overseas. When calculating how much it will cost you to retire in a new country, don't be distracted by the little expenditures. Focus on the big two: housing and transportation.

Here's the good news: When retiring overseas, the first of these can be seriously controlled and the second can be practically eliminated.

In the following top choices for retirement overseas, you could rent a comfortable, convenient and pleasant place to live for $500 per month or less:

--Cayo, Belize

--Cebu, Philippines

--Chiang Mai, Thailand

--Cuenca, Ecuador

--Granada, Nicaragua

--Hoi An, Vietnam

--Medellin, Colombia

--Pedasi, Panama

When you're spending $500 a month or less on rent, you've got lots of flexibility with other, smaller expenses like nights out, new clothes and cable TV packages.

In Chiang Mai, Cuenca, Granada, Hoi An and Medellin, you could not only control your housing expense, but you could practically eliminate your transportation costs. These are all places where you could live a full and fun life without owning a car.

Living overseas makes it easier to live in smaller spaces, with less stuff. And retiring abroad also makes it easier to live without a car. Living in the United States, everyone you know has a car. Los Angeles was designed and built for cars. But in Chiang Mai and Medellin, for example, you'll meet large numbers of expats without cars. They get around using buses and taxis, instead. And both of these forms of transportation are typically cheaper overseas.

How much could a move overseas save you? The IRS calculated that the costs of running a car were 56.5 cents per mile in 2013. If you and your spouse each own a car (as many retirees do in the U.S.) and drove a total of 40,000 miles per year, you'd spend about $22,000 on transportation. That's $1,833 per month. And even if you and your spouse downsize to one vehicle in retirement, that's $916 per month. In any of the eight appealing, affordable and walkable cities on my list, you could almost live on that $916 per month.

Instead of cutting minor costs and small daily pleasures, you'll see a much bigger impact if you reduce major expenses by choosing a low-cost locale overseas.

Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group. With more than 28 years experience covering this beat, Kathleen reports daily on current opportunities for living, retiring and investing overseas in her free e-letter. Her newest book, "How To Buy Real Estate Overseas", published by Wiley & Sons, is the culmination of decades of personal experience living and investing around the world.

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