Discover the best cheap places to retire, where you can live comfortably and even enjoy some luxuries without straining your retirement budget. Instead of sweating over the burning question "Can I afford to retire?", you will answer it with a smile and a confident "Yes".
What's cheap to you and me won't be cheap to a person living in the poorest parts of Africa or Asia, which makes defining "cheap" a tricky issue. To narrow down the range of budgets to consider, we are going to assume that most of our readers will be from the United States, Canada, Europe or Australia.
AARP, the American Association of Retired People, states that nearly two out of three current retirees rely on Social Security for most of their retirement income. However, the average American needs to replace about 70 percent of the amount they earned while working. Currently, Social Security replaces only an average of about 40 percent of that pre-retirement income. Sounds like a dilemma to me.
This scenario leaves you basically with two choices: either supplement your retirement income from additional sources (personal savings, 401(k), part time job, etc.) and smart money management, or move to a country where your Social Security paycheck covers ALL your expenses easily.
Speaking in absolute numbers, how high is this paycheck? In 2015, the average monthly benefit for retired workers in the United States is $1,328 (up from $1,261 in 2013; source U.S. Government Social Security website).
How is the situation for retirees in Europe? I am going to take Ireland, where I lived from 2007 to 2010, as an example. The "Non Contributory State Pension" is similar to Social Security in the US. Weekly rates in 2015 are €219, which translates into €876 per month (source welfare.ie). This is actually a decrease compared to 2013, where the weekly rate was €230. On top of that, the US$ is stronger now compared to 2013, so the income from this non contributory state pension has dropped from about US$1,325 to US$979.
Let's use the average of the two amounts as our bench line for cheap places to retire. Where can you live comfortably for less than $1,200 a month?
Start your research with the various "Cost of Living," "Quality of Life," or retirement indices published for example by International Living, Numbeo, or Mercer.
Numbeo.com is a website where thousands of users across the globe enter prices for household goods, rent, gas, etc. Based on those entries, Numbeo keeps a constantly updated cost of living index, not only by country, but by city. At the time of writing (March 2015), Hamilton, Bermuda, tops the list if you sort by consumer price index, closely followed by Caracas, Venezuela and Geneva, Switzerland. Towards the bottom of the list are many cities in India, indicating that India is right now the country with the lowest cost-of-living - but not necessarily with the best retirement locations.
Here are my favorite cheap places to retire, where a paycheck
of $1,200 not only covers all the 'normal' expenses, but even allows
you to have a maid coming 5 days a week. This list is by no means exhaustive and can change over time:
We'll cover each country one by one, including typical monthly expenses. And you know what? Since I started looking into these most affordable places to retire, I feel much more at ease with the question "When can I retire?" Hopefully you'll feel some of this relief too.