Retirement arbitrage: Boomers head south to enjoy retirementArticle added by Jason Lampa on August 12, 2009
Jason Lampa MBA

Jason Lampa


Joined: January 31, 2008

Most U.S. baby boomers are not prepared for their retirement. During the past 18 months, they have seen their retirement accounts and homes -- which they were counting on to fund their retirement years -- lose significant value. In addition, rising health care costs and college tuition are eating away at their current income and have caused American boomers to look for alterative options for retirement.

The generation responsible for adventure travel is now looking to spend their retirement years abroad. The number of Americans older than 65 years old is expected to double by 2030, according to the U.S. Census Bureau, and many of those Americans will reside outside the U.S. financial advisors need to be aware of this trend and how it may affect their business going forward. It is possible that those clients will tap into their resources for solutions on retiring abroad, and as their advisor, it will help build your credibility if you can assist them in their effort.

Central America and Mexico are becoming the most popular destinations for American retirees. For example, the number of U.S. senior citizens living in Panama doubled between 1990 and 2000, according to a Panama Census.

Benefits to retiring oversees
  • Lower cost of living
  • Tax deferrals
  • Tax exemptions
  • Senior citizen discounts
Central America and Mexico are a short distance from the U.S. by plane, allowing boomers to make the transition to living abroad without losing touch with friends and family. The areas also offer beautiful weather, miles of beaches and friendly people. Individual countries gaining popularity with American baby boomers include:
  • Brazil
  • Panama
  • Nicaragua
  • Mexico
  • Costa Rica

A strong economy, affordable housing and a highly developed infrastructure make Brazil an ideal place for boomers in retirement. Whether in the Hamptons, Florida or Mexico, beachfront property usually is a valuable investment. Brazil falls into this category, as well. Boomers may be shocked and excited to know that a house on the water in Brazil is approximately 1/10 to 1/20 the price of buying a beach house in Ft. Lauderdale. To go along with affordable property, Americans retiring in Brazil will be happy to know that the lower standard of living will allow them to hire live-in cleaning staff. Examples of staff include:
  • Gourmet chefs
  • Cleaning staff
  • Groundskeeper
  • Chauffeur
  • Event planner
In total, the full staff listed above costs between $1000-$2000 per month (depending on a number of factors).

Another consideration is safety. In Brazil, the major crime centers are located in poor sections of Rio de Janeiro and Sao Paolo. Within the past couple of years, the Brazilian government has made civilian safety a key initiative as they look to secure the 2016 Olympics.


Known for years for its volatile political environment, Panama is now a safe retirement haven for American boomers with a cost-of-living equivalent to that of the United States in the 1960s. Looking to attract foreign retirees, Panama has one of the most generous incentive programs in the world. Typical discounts include:
  • Fifty percent off of movies and sporting events
  • Fifty percent off of hotels Monday through Thursday
  • Twenty-five percent to 30 percent off of transportation
  • Twenty-five percent off at restaurants
  • Property tax remains frozen until a person sells their home. This would mean that your taxes would not go up as the area develops. Moreover, on new homes, you can get a 20-year deferral from taxes.
Panama offers excellent medical benefits and state-of-the-art hospital facilities in its major cities. Many of the doctors in Panama are trained in the U.S., and the standards at the top facilities are equivalent to those seen in hospitals in the U.S. According to, prices for prescription drugs are low as well, because manufacturers price them for the market. Moreover, many drugs that require a prescription in the States are available over-the-counter in Panama.

Costa Rica

Despite having one of the highest standards of living in Latin America, purchasing power is greater in Costa Rica than it is in the United States and Canada. According to, most areas offer housing costs less than those seen in the U.S., and hired help, as in Brazil, is incredibly inexpensive. A recent study by the Miami Herald rated Costa Rica the 27th safest country for investment of 140 countries surveyed. That may not seem all that impressive, until you consider the U.S. was ranked No. 22. In addition, Fortune magazine ranked San Jose Latin America's fifth best city to do business in, and placed it within the 25 best cities in the world. According to the report, Fortune considered the city's ability to create opportunity for its residents, its business climate and how well it can satisfy the business needs of companies that invest there.

Costa Rica has had a stable democracy since 1949. According to, it has not been subject to the kind of political civil unrest that has tragically set back progress in neighboring countries, nor was its progress impeded by these nearby conflicts.

The bottom line is that American baby boomers are finding that there are options outside the United States where they can enjoy their retirement years. The generation that changed everything is now utilizing their creativity to change the way we view retirement. As mentioned earlier, with the rising costs and diminishing values in both their retirement accounts and homes, be on the lookout for more American retirees heading south to live the retirement of their dreams.

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