Passive Income Flow

The “average” American Social Security payment today is only about $1000 after a lifetime of work. At death, usually 50-60% or this payment is available for the surviving spouse. On the demise of the surviving spouse, there is very little left “for the kids”.

In contrast, our rental income and its underlying assets continue forever for whomever .... 

Our Original House with Pool at Rear

Our House with a new Front Addition (2007)

 A $100,000 Property Investment with a $10,000,000 Value

There may be an even more interesting way of analyzing the value of our Coronado property for retirement purposes.

This approach may be of particular interest to any Eisenberg fans out there who might be a bit worried about achieving their “Number” in this lifetime ... or the next. Apparently this includes about 60% of rich Americans!

If you were to deposit $1,000,000 into a Jumbo Certificate of Deposit with a friendly banker in North America, you might earn as much as$15,000 per annum at a top rate of 1.5%. Not very good you might say considering that fewer than 5% of all Americans could even hope to acquire such an investment.

After paying average taxes of say 25% on these "earnings", you might have $12,000 left if you are lucky.

After making "provision for inflation", at say 1% or $10,000 of the original million, you would have about  $2000 left over as "net spendable" cash.

If you spend more than this amount, the you will erode your capital base at a time when you may live much longer than you expected.

Your million bucks has to last and last. Of course you could take more risk and seek higher returns after taxes and inflation while hoping to avoid a repeat of the 2007-2009 crash just as you turn 80 ... about 20 years before your untimely death at age 100!

In contrast, our total $100,000 property investment including 2010 improvements (excluding our main residence) created three guest house rental income streams which should total $25,000 in 2011 (the first full season following renovations and an expected recovery of the global economy). Our rents can be fully adjusted for inflation.

Two of our Guest Houses... virtually finished at a first stage.

Our new "income stream”, based on our $100,000 investment (plus "sweat equity" for management only), will produce “net spendable income” equal to about 10 times that of a $1,000,000 Certificate of Deposit.... or actually $10,000,000 ... not bad at today's rates!

New Budget and Lifestyle

Our expected annual living expenses, in Panama in our new greatly enhanced home by the pool, is now $24,000 per annum without any debts.

This budget is basically one third of our New Jersey budget where our standard of living was considerably lower. In NJ, we could NOT eat out whenever we wished, we did not have a "beach house" with an in-ground pool, we could not have afforded a membership in a private country club (although we still have not joined here).

In NJ we did much less entertaining with far fewer friends. We also lived on a much smaller 3500 square foot "average sized" lot on a busy street corner rather than on a quiet half acre only 200 paces from a sandy Pacific beach.

At our new home we have a gardener for about $40 a week to clean our pool and manicure the lawn and plants.  A maid comes in 2-3 times a week and that costs $25.

We live 2 miles from a clean, modern super market (open 24x7) where huge juicy pineapples cost $1.00.  Top quality rib-eye steak is priced at $2.45 per pound; delicious sea bass costs $1.50 per pound. Three large avocadoes will set you back $1.00. Bananas are 8 cents each.

I hesitate to tell you about the low cost of the excellent imported wines and hard alcohol ... it is truly a hazard ...  but there are 4 excellent Chilean "CLOS" table wines for about $2 a liter

Our health insurance costs $85 per month.

In summary, one dollar spent in our new tropical paradise buys at least 3 times as much "stuff" as it would in the USA considering an average basket of goods and services.

Without any real financial planning, we created a “triple financial cushion” on our required "number".  

Incidentally, the official currency used in Panama is the Balboa which is essentially the American dollar. This makes keeping track of costs a lot easier.

 New "Millionaire Lifestyle"

In New Jersey or Florida, this “offshore lifestyle” would clearly be considered that of a “millionaire”. In California, this is a slam dunk “multi-millionaire lifestyle”.

Just buying a lot with a fixer upper house within one or two blocks of the ocean along the “Jersey Shores”, in Southern Florida or anywhere along the Pacific Coastal Highway in California might set you back $2,000,000 - $5,000,000 or much more. An ocean frontage home in Santa Barbara will start in $10,000,000 range. Just the municipal taxes would be several times our annual cost of living.

Such properties in the US are often adjacent to busy highways with awkward beach access to water that is too cold for swimming 5-8 months a year (and sometimes all year) unless you are under 20 years of age and wear a wet suit. 

In mid-2006, a modest 650 square foot condo in downtown Carlsbad CA, one block to the beach at Lincoln and Pine had an asking price of $800 per square foot or about $8800 per square meter (about $550,000 for the unit). This unit did NOT have ocean views, there was NO swimming pool (but a hot tub), and, in my opinion, it was modestly designed with "floating" floors that  easily transmitted sound to a separate unit below.

The top luxury condo high rise units in Panama City at that time (in Punta Pacifico) were selling for $1000 per square meter.

I took note that the Pacific Ocean temperature in Carlbad. As of May 1, it was 60 degrees and rising and as of August 15 it was 70 degrees and falling. In April and May I had to wear a long sleeve shirt, sweater and light jacket in the evenings. Inland, it is much warmer ... but I like the ocean.

Inevitable Tax “Bite”

One thing I forgot to mention ... the tax regime!

Income that you earn outside of Panama is potentially “tax free” although it is “reportable” to the tax authorities. Consult your account because these laws are always changing.

§    If you are Canadian or European this may mean "tax free” for unlimited offshore earnings from any source although there are restrictions for "active" income.  

§   If you are an American, and you have lived outside the USA for 330 days in any “calendar year” then you and your spouse may quality for an IRS annual exemption of more than $80,000 each on income earned through regular salaries. This exemption does not apply to "passive" or investment incomes.

 Residency Rules

Our low cost tropical country has some of the most generous residency conditions in the world for pensioners although there are many other countries with easy residency conditions as well. 

To obtain “Pensionado Status” you only have to be 18 years of age or older with proof of an “after tax” pension income of USD$1000 per month.

Different rules apply for various investor visas and other visa types but they are all very generous. With a $50,000 investment you may be able to set yourself up in the "tourist business" and have a tax exemption for up to 20 years. 

A clean criminal and health record are needed.

Your legal and application costs for residency will be in the $1500 range for a couple.

You also have the option of purchasing a 5 year Certificate of Deposit at the Central Bank sufficient to generate $750 per month and obtain residency for your family in this manner.

“Pensionado” Benefits

• You can reside permanently in the country.

• On moving, you will receive an Import Tax exemption for personal household goods up to $10,000.

• You have an Import Tax exemption for a new car, for personal use, every two years

• You can purchase tickets for the cinema, sport events and entertainment at a 50% discount

• You can enjoy public transportation for 30% less on buses, trains and boats and less 25% for internal travel on airlines.

• You can stay at hotels for 50% less from Monday through Thursday and less 30% from Friday to Sunday

• Your restaurant meals will be discounted by up to 25%

• Fast food restaurant meals are discounted by 15-25%

• Visits and services received at hospitals and clinics are discounted 15%

• Medical prescriptions and most medical services and special consultations are discounted from 10% to 20%.

• The mortgage rate on your personal residence is reduced by 1 percentage point.

• Your monthly electric bill, up to 600 kwh, enjoys a 25% discount.

• Your water bill is reduced by 25%.  

Although very attractive, these discounts should NOT become the main reason you choose to move but they certainly make life more enjoyable and serve to significantly stretch the purchasing power of your "fixed income".

Other Visa Options

$200,000 invested in a home, registered in your own name, can also provide you with a permanent resident visa as a “person of means”.

My book explains many other visa options for residency.

 Is this some Mythical Country?

Absolutely not!

Many tropical developing countries have overall lower costs of living and real estate than Panama. In fact, you could probably live very well on 5-15% of your current North American retirement budget in Ecuador, Uruguay, Belize, Argentina, Thailand, or even Nicaragua where you could purchase or build a comfortable home for as little as $20,000 to $50,000. Every country is a compromise but you can take some comfort that Escape Artist, AARP, Fortune Magazine, and many prestigious publications have written very favorably about Panama.

But Panama, on balance, has a significant edge ... in my opinion.  

Panama is was chosen as the “best country in the world” to live by International Living … in fact six times in a row. The Editor of International Living has in fact decided that she and her husband will move to Panama by early 2007. 

If “offshore living” is potentially an option for your retirement contingency planning, then this book will give you the "big picture".

 What Could I Learn from this Book?

•  “Retirement Planning for Offshore Living” provides you with a solid “framework” and “reference” to compare one tropical country with another as well as developed countries with developing countries.

• It will show you how to dramatically enhance your present lifestyle on one third of your current budget if that is of interest.

• It allows you to compare the many retirement advantages and disadvantages of living in developed countries such as the USA, Canada, the UK, France, Singapore etc with specific low cost tropical developing countries such as Thailand and Panama. Mexico is also compared in-depth but is not considered a low cost developing country.

• It provides you with a “road map” or “plan of action” to analyze your retirement options and alternatives to an expensive and high risk retirement in a developed country (e.g. the USA, Canada or Europe). 

• You will learn important details about purchasing real estate, day-to-day living, investing, working, and retirement opportunities.

• There is also a significant section outlining a wide range of small businesses that you could easily start in such a country with much less capital and fewer risks than in North America or Europe.

 Should I Purchase this Book?

• My book will help you to make a sound judgment concerning the advantages of offshore living and retirement.

• It reviews the full range of retirement issues using a long term perspective with a focus on important financial and medical risks that could cause a “lifestyle relapse”.

• It directly addresses the long-term risk of “assisted living” in a developed country and provides a sensible alternative.

• It will save you time and money by avoiding common “mistakes” that the author (and others) has already made.

• It provides you with a valuable “standard of measure” and a “checklist” so that you can quickly determine and compare the most optimal retirement locations for your particular needs and interests.

• It will permit you to better understand the risks and advantages of retiring or downsizing in a developed country. 

• It will introduce you to some of the best small business opportunities for a developing country and the advantages of a starting a second career.

Why Purchase this Book Today?