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Cost of living

While purchasing property may be your biggest buying decision and expense, the cost of every day living is an important consideration, especially if you are retired and living on a fixed budget.  The cost of common expenses such as groceries, utilities, entertainment, eating out and others will determine your standard of living.

Have you considered how much monthly income you are going to need to lead a comfortable retirement lifestyle?  Obviously most of us would like to either maintain or improve upon our current standard of living.  In order to do that how much savings does one need to support an enjoyable lifestyle?  The common wisdom goes something like this.

Let’s say, in your retirement, you think you will be comfortable by having $35,000 of income a year.  That would give you a monthly budget close to $3,000.  If you earn 7% interest (a reasonable rate of return) on your savings you would need $500,000.  If you have pension then you may need less then that.  Now, how many people out there can say that they have half a million sitting in their bank account?  How long would it take for you to save this kind of retirement nest egg?  If you are just planning your retirement now, how long would you have to work in order to save this much money?

If one is to subscribe to the conventional wisdom, most of us would have to give up our dream of owning a vacation home.  So how does one solve this dilemma?  The solution to this problem is to turn the problem on its head and look at it from a different perspective.  What if you only needed about $2,000 per month to maintain your comfortable lifestyle?  You would only need to have about $340,000 in savings then.  What if you can get away with a budget of $1,500 per month then you would only need about $250,000 in savings.

You are probably saying now, no way that $1,500 a month will be enough to even pay for basic expenses.  Even if one does not have a mortgage, condo maintenance fees and property taxes alone would be about $1,000 a month… and you would be absolutely right if you had a condo in Florida.  This is where the cost of living in Costa Rica makes a lot of sense.  In fact, you can lead a very comfortable lifestyle in this country for under $1,500 per month and enjoy additional benefits such as having a gardener and a maid for dollars a day.  Instead of paying $1,000 a month for maintenance and property taxes you can pay only $150 a month.  Just on these two items alone you have already saved $850.

North Americans and Europeans are usually surprised when they first go shopping in Costa Rica.  Prices at most supermarkets average about 60% below U.S. levels.  Produce is even cheaper at outdoor markets and most likely are organically grown.  Costa Rica has several excellent supermarket chains, including Mega Super and Auto Mercado, which are now competing with the likes of Wal-Mart, Target, and other American retailers.

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