Forget Florida; Central America the New Hot Spot for Retirees

If you travel regularly, it happens eventually. You'll be in another country, lying on a white, sandy beach or strolling through some charming village, when you turn to your significant other and say, "I could stay here for the rest of my life."

The idea seems tantalizingly exotic, an elaborate scheme to be hatched over dinner while on vacation -- only to be discarded and forgotten upon return to the workday world.

However, the dream may not be unrealistic at all. In fact, many Central American countries are betting U.S. baby boomers will be the generation that globalizes retirement.

They're gearing up by offering financial incentives that could make retiring internationally a smart financial move for some individuals.

The same advances that allow companies to do business across borders are making it possible for people to live out their golden years in another country. "Technology and travel developments have put us in the position to do more with our lives while still staying in touch," says Susan Black, director of financial planning for eMoney Advisor.

If you retire in Panama, for instance, you can talk to your children and grandchildren via phone or email every day if you want to, fly home a few times each year, and probably even get a satellite dish to keep up with your favorite TV programs.

Still, that doesn't mean things are the same as they were at home.

Making Adjustments

Jim and Donna Hawley found this out the hard way three years ago when they moved from Minneapolis to an apartment they bought in Panama City.

When they arrived, they discovered that not only were appliances not included, but there were no lights, air conditioner, water, or even a bathtub!

"It never crossed our minds to ask about that," Jim says.

Paul McBride, an American expatriate who offers free advice on relocating to Panama though his company Prima Panama, says many retirees don't ask enough questions or fail to use common sense when relocating to a new country.

Recently, he met a businessman from New York who was ready to buy property from the cab driver who picked him up at the airport. "Don't leave your brains at the border," McBride cautions. "You have to be very careful."

That said, he believes Panama is on the verge of something big, and expects as many as 30,000 Americans to move there in the next 15 years -- a major development in a country of around 3 million people.

They'll be drawn by Panama's pleasant climate, lower cost of living and stable dollar-based economy.

Many will also appreciate the generous incentive package the Panamanian government has put together: Retirees on pensionado visas get import exemptions on their household goods and cars, may not have to pay property taxes for up to 15 years and even receive special discounts such as 10% off prescription drugs, 25% off domestic airfares and 50% off movie tickets.

The Hawleys say it was the low cost of health care that motivated them to move. They pay $130 apiece for what they call a "Cadillac" insurance policy. As for the quality of Panamanian health care, "a lot of the doctors in Panama are U.S.-trained," Jim says.

Southern Comforts

Anticipation of the boomers' arrival is fueling wild speculation on real estate in and around Panama City.

It is also spurring the development of retirement communities all over the country such as Valle Escondido, a gated development in the mountains with its own sewage and water systems, paved roads, 24/7 security, a golf course and Internet access. Home construction costs typically run about $55 to $60 per square foot.

Throughout Central America, countries are jockeying for position, trying to attract flocks of North American retirees they believe will be willing to settle a bit farther south than Florida or Arizona for the right price.

Countries such as Costa Rica, Belize, Nicaragua and Honduras all offer retirement incentive packages similar to Panama's. Generally, the rule of thumb is the less developed the country, the lower the cost of living and the better the enticements.

And this is not to say that your retirement experience in these areas will be an unpleasant one. Ray Auxillou says he and his wife are living much better in mainland Belize than they would have if they had stayed in Florida. "In the U.S., we would currently be homeless or upper poverty class," Auxillou says.

Instead, they own their own hostel catering to backpackers and enjoy luxuries such as two pickup trucks, cable television, a nursery and maid service. The price tag? Around $700 a month.

Concerns about crime and political unrest are part of what keeps costs down for retirees in countries such as Belize and Nicaragua. However, Auxillou feels those fears are overblown. "Nothing happens here that hasn't happened in Miami," he says, "and usually there's much less of it."

Still, retiring to another country is definitely not for everyone, and Central America will never turn into Florida Lite.

In many areas, you need at least a bit of Spanish to get by. Routine chores that can be handled online in the U.S., such as paying the electric bill, may require you to stand in line for hours. And of course you'll have to give up some comforts of home if you want to live frugally somewhere else.

"If you have to have your Kraft macaroni and cheese in Nicaragua, it's going to cost you more than in the U.S.," says Lief Simon, who covers the Central American real estate market for International Living.

Black says the best candidates for retiring abroad have flexible personalities. Many in the expatriate community are people who traveled heavily in their former careers or who immigrated to the U.S. from another country in the first place.

"You have to ask yourself," Black says, "do you feel comfortable treated as a foreigner every day for the rest of your life?" If so, then it may be time to start looking toward Central America for your golden years.