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Beat Inflation by Retiring Overseas

Retirement Savings by Age

Inflation in the United States is the highest it has been in over 40 years.

The latest data from the Bureau of Labor Statistic’s Consumer Price Index (CPI) show an 8.6% increase before seasonal adjustment for the all items index. This is the biggest 12-month increase since December 1981, but it’s not the only concerning number in the report.

Prices for food at home have increased 10.8%, which is the biggest 12-month hike since November 1980. Meat, poultry, fish, and egg prices increased 14.3%, the biggest 12-month increase since May 1979. Perhaps most shocking is the fuel oil index, which went up 106.7%, representing the biggest increase since the series began in 1935.

Most affected by these price increases are those living on fixed incomes, including retirees. Financial planning for your non-working years is daunting enough. Add to that inflation’s ability to decay the value of your savings over time, and it becomes clear why many retirees are deferring retirement indefinitely, or even going back to work.

Inflation is a serious threat to retirees’ quality of life long-term, but there’s simple solution that can help mitigate that threat: retiring overseas. These 3 factors combine to make a powerful case for overseas retirement:

  1. Inflations rates are currently lower in many countries than they are in the United States;
  2. Cost of living can be so much lower overseas that inflation is not a concern; and
  3. The value of the U.S. dollar relative to certain local currencies is at an all-time high.

Low Inflation Rates in High-Value Retirement Destinations

In his June 10 White House briefing, President Joe Biden said, “Every country in the world is getting a big bite and piece of this inflation — worse than we are in the vast majority of countries around the world,” in response to the CPI.

While it’s true that inflation is a global reality right now, not everywhere is getting as big a piece of it as the United States. According to Trading Economics, inflation rates are lower in the following destinations – all of which are attractive overseas retirement options:

  • Belize: 5.8%
  • Ecuador: 3.4%
  • France: 5.2%
  • Indonesia: 3.6%
  • Italy: 6.8%
  • Malta: 5.8%
  • Panama: 4.2%
  • Vietnam: 2.9%

At current rates, you could enjoy enhanced purchasing power in any of these countries relative to the United States.

Retiring Overseas is Possible at these Amazing Locations

Another strategy for combatting inflation pressures is to seek out a destination with a lower cost of living than the United States.

In attractive retirement havens around the world, you can drastically reduce your expenses because the cost of goods and services is lower. Because you are starting off with a lower cost of living, the effects of inflation are proportionately lower. In some cases, they are negligible.

Moving to a lower-cost locale does not require compromising on quality of life. The goods and services available in countries around the world are not only lower cost but, in many cases, better quality than their American equivalents.

The 2020 Consumer Expenditure Surveys show that Americans 65 years and older spend a mean of US$47,579 per year, or US$3,965 per month. In the following destinations—a selection of my top recommendations for affordable overseas living—the cost of living is well below that amount.

  1. Chitré, Panama

Chitré is a beach town along Panama’s Pacific Coast, about a 3-and-a-half-hour drive west of capital Panama City. It’s a small town, with a population under 10,000 people, but because it’s a local hub of commerce and transport, it offers the conveniences of a much bigger city, including shopping, banks, health care, legal services, real estate agents, and more. This makes life convenient for retirees.

Chitré receives limited tourism attention and has a small expat community, so prices for everything remain low. The cost of living is highly customizable and depends on your lifestyle preferences. If you eat at local restaurants that serve traditional Panamanian fare, you’ll pay about US$5 to US$10 for a full meal, versus US$20 to US$25 at the international restaurants.

If you shop for local produce and seafood at the open-air market, you’ll spend about US$100 per month on groceries versus about US$425 shopping at supermarkets for imported goods, which cost a premium. You can further reduce expenses by living in a central part of town and getting around on foot rather than by car. One thing you can’t skimp out on here is air conditioning for your home, which will run up a monthly electricity bill of about US$125 depending on use and the size of the space you are cooling.

On a monthly basis, a couple can expect to spend about US$1,600 if they own their own home in Chitré or about US$2,000 if they rent. With a minimalist lifestyle, you could get by here on as little as US$600 per month.

About 500 expats call Chitré home. Aside from the low cost of living and diverse amenities, they are attracted here by friendly, small-town environment, warm weather, and excellent beaches, including the opportunity to own affordable beachfront property.

  1. Medellín, Colombia

Medellín is a cultural hub, a place where you can enjoy orchestra, theater, art galleries, museums, and a generally sophisticated cultural scene. It has strong infrastructure: reliable internet, dependable electricity, water, and phone service, with an upscale and modern city center and excellent public transport.

All of this combines to create an above-average standard of living, yet it doesn’t come at a premium in Medellín. A couple can live comfortably here on a monthly budget of about US$1,500 if they own their accommodation or about US$2,000 to US$2,500 if they rent.

This city allows you to cut down on the cost transportation, which was the second biggest expense for Americans 65 years and older in 2019. Medellín has the only metro rapid transit system in Colombia. It’s not only clean, efficient, and easy to use, it’s also inexpensive. The standard fare costs 2,580 Colombian pesos—about 64 U.S. cents. A monthly transportation budget of about US$100 would be plenty for a couple to get around in Medellín.

Medellín is known for having agreeable weather year-round, never too hot or cold with daily highs averaging around 82°F and lows in the 60s. You won’t need air conditioning or cooling in your home, meaning utility bills will be low cost. Expats report spending about US$55 a month on utilities here.

In Medellín, you can receive better-quality health care at a lower cost than you can in the United States. Colombia ranked 22nd for performance in the 2000 World Health Report, while the United States ranked 37th. Medellín is a top global medical tourism destination, home to 9 of the best 58 clinics and hospitals in Latin America.

  1. Chiang Mai, Thailand

Southeast Asia is one of the world’s most inexpensive places to live, but quality of life is not equally distributed across the region. A top choice for balancing a low cost of living with a high standard of life is Chiang Mai, a city in northern Thailand.

It’s known for its relaxed pace of life and high-quality infrastructure, including top-quality hospitals, restaurants, and shopping. A big expat community made up of people from all over the world bases itself here, including many digital nomads who take advantage of the opportunity to earn a strong currency while spending relatively weak Thai baht.

In the United States, the average social security payment is US$1,658 in 2022, but in Chiang Mai, about US$1,200 per month is enough for a nice lifestyle for 2. This includes rent, which is very affordable in this city. A 2-bedroom bungalow with a garden can be rented for about US$285 per month. For about US$710 per month, you can rent a 3-bed villa with a pool.

In Chiang Mai, you can save greatly on transportation if using local options for getting around, like tuk tuks, baht buses, and taxis. Your monthly transport bill could be about US$10 per person. Compare that to US$624 per month, which is the mean amount Americans 65 and older spent on transportation in 2019. The same is true for food. Eating out may be more cost-effective than cooking your own food, with the average meal costing about US$3.

  1. Kyrenia, Northern Cyprus

Northern Cyprus offers the best of Mediterranean living for a fraction of the price of better-known destinations, like the south of France or coast of Spain. While still an off-the-radar choice for most Americans, it has a strong expat community mostly made up of Brits and other Europeans.

Here locals live to great ages because of the stress-free existence and healthy diet. There are great beaches to go along with near-perfect weather, with 340 days of sunshine per year. With great hospitals and high-quality care, medical tourism is a burgeoning industry.

Found where the Five Finger Mountains meet in the sea in northern Cyprus is Kyrenia, a quickly developing coastal city of about 46,000 people. It boasts seaside hotels, restaurants and cafés, and a charming old harbor and castle.

Here, a 2-bedroom apartment with a communal pool can be rented for about US$590 per month. Cypriot food, a blend of Greek, Turkish, and Middle Eastern influences, is fantastically low cost as well, with the cost of restaurant meals ranging between US$3 to US$10.

Real estate is remarkably affordable in northern Cyprus as well. It can be as little as 1/3 the cost of similar property just over the border in the Republic of Cyprus. Condos in beach resorts with quality shared amenities start at well under US$100,000, which, if you’ve done any shopping for real estate in the United States lately, you’ll recognize as a world-class bargain.

  1. Cuenca, Ecuador

Cuenca is one of the most affordable places to retire well in the Americas. It’s also one of the region’s premier Spanish-colonial cities and a UNESCO World Heritage Site. Hundreds of years old, the cobblestoned and adobe historic center is the main attraction.

Cuenca has a population of about 430,000 but it rivals much-bigger cities for the most vibrant cultural scene. Diverse cultural events, from theater and festivals to concerts and art openings, are available year-round and often for free. The colorful indigenous presence, contributing to its Andean feel, is another cultural plus.

Located in southern Ecuador in the highlands of the Andes, Cuenca sits at an elevation of 8,400 feet above sea level. The altitude mollifies the climate, keeping it mild year-round. The average daily temperature is about 58.5°F.

This is another destination where you won’t need heat or air conditioning in your home, which saves a lot on the monthly budget. About US$40 per month is enough to cover electricity.

Cuenca has a huge expat community of about 5,000 people. With the surge in expat numbers, nice cafés, restaurants, bookstores, and other expat-owned services have been installed. Part of this city’s popularity is the very low cost of living…

Cuenca expats quote US$1,145 per month is enough for a couple to live comfortably. This includes about US$550 for rent, US$250 for groceries, and US$180 for entertainment per month. If you invest in a home of your own, you could bring your monthly expenses down to about US$700.

  1. Da Lat, Vietnam

Da Lat is a charming city of 230,000 people found in the Central Highlands of southern Vietnam. As a former hill station for French colonists, it was endowed with villas, boulevards, golf courses, health complexes, and more.

Architectural and cultural remnants from the era remain today, casting a historic and otherworldly charm over the place. This European feel is accentuated by the natural scenery, including tranquil lakes, misty peaks, and pine forest. Perched at 4,900 feet, the scenery is oddly reminiscent of an Alpine ski resort.

The unique ambiance has made Da Lat a domestic tourism destination. In fact, it’s Vietnam’s honeymoon capital. Mainstream tourism hasn’t discovered Da Lat yet, and prices remain accordingly low.

A couple needs only about US$1,000 a month to live well in Da Lat. Rent can be as low as US$200 a month for a studio apartment on the edge of town. For a more central or bigger apartment, expect to pay between US$350 to US$450 monthly.

Lam Dong Province, which Da Lat is the capital of, is the garden bed of Vietnam. Because of the cool weather and fertile soil, produce not available in other parts of the country can be grown here: coffee, strawberries, cabbage, cauliflower. Da Lat even has a wine industry, another effect of France’s influence.

You can enjoy a meal for 2 at a local restaurant for about US$4.50. Even at an international expat-run restaurant, your bill will still only come to about US$17. A grocery trip to a local market is about US$22.

A small expat, diverse group of expats call Da Lat home, attracted here by the peaceful lifestyle, agreeable climate, natural beauty, and affordable living.

  1. Cayo, Belize

The Cayo District is a quirky corner of the world. Located on the mainland in western Belize, Cayo is a frontier land of rivers and rain forest. Here, the burdens and concerns of the rest of the world feel far away and unimportant. It’s a nature lover’s paradise, with some of the country’s best opportunities for exploring rivers, caves, mountains, tropical forests, and wide-open spaces.

Cayo is made up of small villages and neighborhoods, each with their own unique characteristics. San Ignacio, with a town square with a park and a pedestrianized thoroughfare lined with boutiques, souvenir shops, tour companies, and real estate agencies, is the nucleus.

This can be a place to reduce your cost of living, although this depends on your preferences and spending habits. The key to keeping costs low is getting to know the local vendors, farmers, and suppliers. Purchase locally grown foods rather than imported goods, which are taxed at a premium in Belize. Or better yet, grow your own food. Living like a local means your monthly budget could be about US$1,600. This includes rent—about US$500 for a simple but comfortable home, US$220 per month on groceries for a couple, and going out for meals and drinks regularly, spending about US$420 per month on entertainment.

Belize is particularly convenient for American retirees, at only a 2-and-a-half-hour flight to Miami (or an overland journey across Mexico). It’s the only English-speaking country in Central America, meaning you won’t have to grapple with a language barrier when you get here.

Exchange Rate Impact and Currency Advantages

Managing the movement of money in foreign currencies is a key factor when living or investing overseas. Unless you’re moving to a place that uses the U.S. dollar as its currency, exchange rates will affect your cost of living. Panama and Ecuador use the U.S. dollar, which eliminates the variable of exchange rate fluctuations. Choosing one of these countries for retirement means an expat with U.S. dollar-based income isn’t hurt if the dollar falls against the local currency.

If you’re investing in real estate, exchange rates will affect your purchase price, ongoing expenses, and your profits upon exit. Using the Mexican peso as an example, it has been trading between 19 and 21 pesos per US$1 in recent years. Even within this narrow band, the exchange-rate impact can be significant. For a property valued at 7 million pesos, that 2-peso spread can cost or save you move than US$35,000.

Exchange rates can also work in your favor, especially when the U.S. dollar is strong, which, despite raging inflation, right now it is. In mid-May, it reached 104.92—the highest level it has seen since December 2002. Currently, U.S. dollar-holders have a lot of buying power. This strength makes an already low cost of living in certain destinations even more affordable.

Since 2015 and June 5, 2022, buying power for U.S. dollar-spenders has increased 77% in the case of Brazil and 59.6% in the case of Colombia. The Turkish lira has lost half its value compared to the U.S. dollar in the past year alone, making an already low cost of living in northern Cyprus even lower.

Exchange rates fluctuate, and there’s no way to predict which direction the trends will go. Consider these tips for managing expenses across currencies:

  • Move money abroad to a dollar-denominated account abroad, and exchange it when the time is right.
  • Keep track of exchange rates in your destinations of interest.
  • Move large sums when the rate is good rather than waiting until you need the money, which puts you at the mercy of the exchange rate.
  • Open high-interest local currency accounts where you can.
  • Save your pension, Social Security, or other routine checks in your home country rather than direct depositing them into in a foreign-currency account, and exchange them when favorable. The fees will be less.

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