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Having experienced living in several different countries, the reality of different salary ranges and different costs of living has struck me.

You can work at a high salary country and make huge amounts of money compared to what you would make in a third world country with the same skill set and same job description.

Then you can retire at a country with a low cost of living, and get 2-4x your money's worth vs if you'd spent it back in a country with a high cost of living.

What disadvantages am I missing?

Of course, family, relationships, or property comes to mind. And I do think those reasons are enough for you to stay in a country with a high cost of living.

I was just wondering if, aside from that, am I missing anything else?

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Visas? Governmental permission to stay in another country for X years (whether while earning mucho big bucks or while spending even more mucho big pesos)? –  Dilip Sarwate Aug 22 at 4:02
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Are you sure that taxes, health care and basic other living conditions would be comparable? –  JB King Aug 22 at 6:26
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Kids and grandchildren. –  superluminary Aug 22 at 9:50
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To expand on your "family, relationships" theme - where you build your life often turns into where you want to spend the end of your life. You end up getting married, having kids, and by the grandkids are visiting, this place is "home." –  Jared Aug 22 at 14:19
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one large missing reason - pension/healthcare - when you work and make lots of $$, you pay lots of taxes, and a significant part of that comes back to you when you retire - you would lose out on these benefits and need to pay for them elsewhere. –  user2813274 Aug 22 at 14:26

9 Answers 9

up vote 34 down vote accepted

There are two parts to the hack you describe. One is moving to a high-cost, high-pay country to work, and the other is moving to a low-cost, low-pay country to retire.

As Dilip mentioned in a comment, the first part is not so easy in many cases. You can't just take a plane to the USA and start making big bucks immediately. In the first place, it's illegal to work without special visa permissions. Even if you manage to secure that permission (or take the risk of trying to work illegally), there's no guarantee you'll get a job, let alone a high-paying one. The same is true in most other high-paying countries.

As for the second part, that takes considerable willpower as well. After spending X years getting used to a country, investing time and money, you must then have the resolve to uproot your life a second time and move to another country. For the most part, countries are expensive for a reason. Even if you in principle reject the cost-benefit tradeoffs of a particular country, it can be difficult to give up some of those benefits when the time comes (e.g., trains running on time, reliable electricity, donut shops, or whatever). You might "get soft" or become co-opted by the rich-country rat race and find it difficult to extricate yourself.

All of these problems are compounded if, as in many cases, you happened to start a family while in the expensive country. At the least, moving would require uprooting not just you but your family. Also, quality of education is often one of the main reasons people immigrate permanently to expensive countries. Even a person who personally would prefer to retire to a cheaper country may be unwilling to transplant their children into that country's education system. (Of course, they could wait until the children are self-supporting, but that makes the wait longer, and may result in them living far away from their children, which they may not want.)

As JoeTaxpayer notes, the same reasons may work on smaller levels, even within a country. In theory it's perfectly possible to power through a brief, lucrative career in Silicon Valley and then retire to Idaho, but it doesn't seem to happen as often as the plain numbers might suggest. A simple way to put it might be that the kind of person who would be happy living in a cheap environment often cannot or will not endure a lengthy "tour of duty" in an expensive environment. Either you like the expensive environment and stay, or you leave, not as a planned lifehack, but because you realize you don't like it.

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Also, consider that, by moving to a low salary country, you're essentially setting yourself up as a rich target. Example, Johnny Cash and his family moved to Jamaica for some time, and nearly lost their lives in a home invasion spurred on by the lavish house he was living in. –  Sean Duggan Aug 22 at 12:13
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@SeanDuggan That is the main reason I wouldn't. It is very cheap to live in Honduras, but it is very very dangerous to do so, especially if you have (or look like you have) lots of money. –  BinaryTox1n Aug 22 at 14:48
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There are countries where you can get high salaries without much visa difficulty, but they are usually not very nice places to live. –  DJClayworth Aug 22 at 15:10
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+1 for the concept of making the big buck in an expensive area, then moving to midwest. –  JoeTaxpayer Aug 22 at 17:56
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I don't think this answer is very good. Firstly, many of the things it claims are barriers to the strategy are largely irrelevant to a determined person. Second, it falls into the "few people are doing it therefore it must be hard or a bad idea". A lot of people spend their whole paycheck every month and rack up credit card debt in excess of 5x their monthly earnings. So what? It doesn't mean saving money is impossible. –  Superbest Aug 23 at 4:25

I was at a restaurant in NYC, 1st Avenue and 63rd street. I don't recall how the conversation started, but the woman at the next table remarked how none of her friends from the West side, 9th avenue or thereabout, would visit her. Less than 2 miles away, yet in their minds, too far. Your question isn't likely to be answered with facts, but opinion. In this case an anecdote. Human nature is such that a good number of people have a small geographic circle of comfort. Of course some do exactly as you suggest. But not the majority.

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I like this answer :-). The Los Angeles Times often has relationship columns where people talk about how they had to break up with their boyfriends/girlfriends because they lived on the other side of one freeway or another and it was just too much of a hassle. –  BrenBarn Aug 22 at 4:34
    
Tell me about it. I hate going over to the east side. –  Kris Harper Aug 22 at 16:13
    
I live in NYC myself. Going crosstown is a PITA, and the nearest subway to 1st Ave. is around a 10 minute walk away. It's a bit out of the way for someone to visit often. –  Bigbio2002 Aug 22 at 17:24
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@Bigbio2002 I don't know if you realize how silly that sounds to someone who isn't from the city... –  Michael Aug 22 at 19:38
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If your friends won't take a 7-minute cab ride to see you, they're not your friends. –  Joe Aug 23 at 20:06

Different priorities

At retirement age, your life priorities are somewhat different, and two key items come to mind.

1. Social circle

Your social circle, community and extended family contacts are highly related with your lifespan at retirement age. Loneliness kills, literally. Long distance relocation would weaken those ties exactly at the time when you most need and want them. You are also likely to need at least occasional physical assistance at random times, so living in a spot where none your friends&family can visit at a day's notice is hard.

2. Healthcare

Cheaper living locations tend to have worse healthcare. Again, this doesn't matter much for a 25 year old expat, but at an age where you likely have one or multiple chronic diseases, general frailty and a very frequent need for healthcare this is a priority.

Move as a family

This might work if you can do it as a family. I met a retired British couple in southern India, and they had a nice system where they were living in UK during the (UK) summer, and in India for the rest of the year. However, the above concerns don't disappear - when at a later time their health deterioates and one of them dies, then it would probably be better for the widow[er] to stay in UK permanently closer to their extended family and with the local healthcare system.

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"Cheaper living locations tend to have worse healthcare." - in fact, some cheaper places have very good healthcare catering for medical tourists. You can have better healthcare there than in your own country, considering how much money you can spend. –  user626528 Aug 26 at 6:56

I'm currently working as an expat, and my grandparents used to work overseas but retired to Canada so you could say my family has done things completely the opposite of what you suggest. However there are a number of very good reasons that my grandparents have done things the way we have, and I think it's worth sharing the rationale there.

Low-cost moving to high-cost is a no-brainer: it's not easy to do, but many people are trying nonetheless. However, even they will be likely to stay in the high-cost countries, mostly because of health care, also safety is a factor, but social factors also matter.

Firstly, I think two key factors that have been overlooked are language and health care-- most low-cost countries speak different languages than high-cost countries.

Language & Culture

This isn't a problem if you're young, but it becomes prohibitive if you are older. Even if you can manage, it's inconvenient in most countries. You can't just walk down the street and do whatever you like. You either have to keep a translator handy, or restrict your activities to places where you can communicate in your native language. Your favorite sports channels (rugby, american football etc.) might not be available, because nobody there cares. Your favorite news channel, or food (even in grocery stores) might not be so readily available. All these reasons made living abroad undesirable for my grandparents, but the big deal for them was healthcare.

Healthcare

Outside of the US, every single developed economy has socialized healthcare to a large extent. When you're young it doesn't really matter, but when you are older, it's a constant concern! There are two aspects to healthcare-- firstly, if you are a citizen in a developed country there are significant financial benefits (In the US there is also medicare/medicaid but I don't know how those work so I'm not going to talk about that) to staying in-country when you retire, even if the health care would be more expensive- it's the government that's paying! Secondly, health care in low-cost countries tends to either be cheap and poor quality (and by poor quality I mean really, really scary!) or expensive and almost as good as a developed country. Again, high-quality hospitals in low-cost countries may still save you money, but the nurses may not speak good English and the doctors may not have a great bed-side manner.

Crime

In many low-cost countries, nobody calls the police because they know the cops don't care, or will never solve the problem (i.e. they will arrive hours or days after it's too late), or the cops may even be 'in on it'. So basically you try to protect yourself from the inevitable robbery,swindle,extortion,hold-up,you-name-it but sooner or later something bad will happen. With security guards and being younger, it's less of an issue, but when you're elderly, especially if you look foreign and rich, it's definitely more dangerous. Many of my friends from low-income countries try to emigrate for this reason (and/or in combination with the political climate, which is largely corrupt and full of problems). So, if you're old, why risk it? Stay somewhere safe.

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"Even if you can manage, it's inconvenient in most countries. (...) You either have to keep a translator handy, or restrict your activities to places where you can communicate in your native language." - or ... do the most straightforward thing one could think of when moving to a different-language-place for more than a few weeks: learn the language spoken there? (I'm not saying everyone could quickly do so or would want to, but I'm amazed at how this most obvious option is ignored in that paragraph.) –  O. R. Mapper Aug 23 at 13:24
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Like I said, not a problem if you're young, but it's not so easy if you're in your 60s or 70s. –  serakfalcon Aug 23 at 13:50

I should think the primary reason is due why those countries have a higher standard of salary - its not what you get, but what it buys you.

In a high-salary, low-exchange-rate country like Sweden, you get a lot of services that your taxes buy you. Healthcare and quality of life in a stable country is something you want when you get old (note that your viewpoint might be very different when you're a kid).

Moving to a country that has less impact on your finances is often because that country has significantly fewer services to offer. So a Swedish citizen might think about moving to a 3rd world country and find that their retirement income isn't sufficient to pay for the kind of lifestyle they actually want, such countries tend to be pleasant to live in only if you are exceptionally wealthy.

Now this kind of thing does happen, but only "within reason", there are a number of old people who retire to the coast (in the UK at least) and many people who used to work in London who retire to the south west. For them, the idea of moving doesn't seem so bad as they are moving to areas where many other people in their situation have also moved. See Florida for an example for US citizens too.

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One thing not mentioned is that in so called third world countries, a lot of "stuff" isn't actually less expensive.

Food is almost always less expensive, housing is often less expensive, but cars, fuel, computers, smartphones, electronics, brand name clothing, shoes, cosmetics, tools, art supplies, internet service, bicycles, sporting goods and many other consumer items are typically more expensive.

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+1 Not sure why this was downvoted, it seems like a valuable and relevant factor. Is it inaccurate? –  Relaxed Aug 26 at 10:16
    
@Relaxed probably to a point; most major companies don't want somebody buying a truck load of whatever in country A at 50% of country B's retail cost and shipping it to country B to sell at 80% of their retail cost. –  coburne Aug 26 at 15:14

A lot of good answers, but there’s one more factor: ignorance. The majority haven’t considered it, or considered it and assumed it’s not an option without investigating. PLUS, the widespread myth that every other country is primitive, unhealthy, and dangerous.

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I know folks who considered retiring to another country. Their conclusion was that while base cost of living was lower, the cost of the things that they enjoy doing -- not to mention the cost of spending time with friends they didn't want to give up -- would be sufficiently higher to erase most of the advantages.

Those of us who grew up in or close to cities feel much the same way about moving out to less-populated and less-expensive parts of our own country.

Basically, when cost of living is high it tends to be because there are more people who want to live there and are competing for resources (and driving prices up). Low cost of living is generally tied to less-desired locations, for the same reasons.

IF you can find a location that appeals to you, and if you can get the resources there which your preferred lifestyle requires, this may make sense. For a while there were a number of professional writers moving from the US to Ireland, in part because the Irish tax structure heavily favored writers and other creative artists. (Katherine Kurtz spent several years living in a renovated Irish castle.) I'm not sure how many have stayed there after the novelty wore off.

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Political instability and general inability of the government to control crime, economomy, or even remain in existence, would be my greatest worry. I wouldn't want my bank account to randomly disappear, criminals to come take my stuff and/or life by force because nobody is going to stop them, or a hoarde of revolutionaries appearing at my door telling me "get lost, the times they are a-changin".

On a whim, I tried to compare instability to cost of living. I used lowest monthly disposable income as my correlation to cost of living and the Fragile State index to measure instability. I picked the 55 lowest to get the countries with $500.00 (usd) and lower in monthly income.

Those countries average out to 83.42 on the Fragile State index, which would be in the "Very High Warning" range and includes 18 countries in the "Alert", "High Alert", or "Very High Alert" status.

Obviously, there is some subjectivity in an attempt to measure something in as broad a term as "fragile state", but it illustrates it's point well enough.

Sources: http://en.wikipedia.org/wiki/List_of_countries_by_Fragile_States_Index http://www.nationmaster.com/country-info/stats/Cost-of-living/Average-monthly-disposable-salary/After-tax

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