I'm 42 and would like to retire at 55 in Costa Rica

[retireat55]

Hi everyone! I'm excited to have found this site. I have written quite a bit of detail below, in hopes of seeking some help and guidance. I want to know if I'm headed in the right direction to meet my goal.


I'm 42 and my husband is 41 and we would like to retire at the age of 55 in Costa Rica. I am saving $30k a year in a deferred compensation program. I am currently set up to take 15 equal installment distributions from my deferred comp account starting at the age of 55. I currently have $30k in this account. My husband and I also each have a 401k account but we are limited to 5% contributions. We currently have $25k and $46k in these accounts. Our annual contributions are roughly $5500 and $6500 in these accounts. I also have a regular savings account that I save $6000 a year into. I have $20k in this account. We each have a health savings account, and we collectively save about $10k a year into the HSA, and spend about $4k a year. We just started the HSA this year, so at the end of this year we will have $6k in the account. I have two homes, both of which will be paid off in 2023, the year before I retire. I plan to sell these homes when I move to Costa Rica, and use some of the $$ to purchase a home there. We will likely have about $200k left over. We would like to have $50,000 a year after taxes. We plan to start withdrawing social security at the age of 62, and I calculate each of our payments to be about $1500 each. (I logged into SSA and created a scenario of stopping work at 55) I am trying to plan for 25-30 years of retirement. We will not have a house payment once we retire, and we will not have a car payment but of course, at some point, we will have to purchase a couple of vehicles over the course of our retirement.

I also have some property that I would like to keep to pass on to my kids, but can sell it if I need to. About 50 acres at $5k an acre.

A couple of questions - do I need to save more to meet my goal? Does anything change regarding taxes when I withdraw from my accounts when I live in a foreign country? Do I need to be saving in a different way? Can I use my HSA to pay for medical expenses in a foreign country?

 

[Sandhog]

Hi,

Costa Rica has a very high volatile country depending on who in power. Anything and everything can change with which way political power swings. I would suggest when you are about two to three years away from your FIRE to visit Costa Rica to see if you can live on what you and your husband saved. Even then, there is no guaranty that it won't change after FIRE. Best you can do for now is to plan and save for FIRE.

 

[W2R]

Have you tried entering your information and assumptions into our free retirement calculator, FIRECalc? (link at the bottom of each page). It might give you a rough idea of how you are doing.

Why Costa Rica? Do you have family there? Have you spent your vacations there? Moving to another country is a pretty big decision. The cost of living there may be higher than that in some parts of Mississippi (your location, shown on your profile).

 

[retireat55]

I have not tried the FIREcalc - I will do that today. I have visited Costa Rica and it is a beautiful, stable country. They do not even have an army. It's inexpensive to live there, and has beaches, mountains and beautiful weather. It has a dry and rainy season, but the temperature is always nice. Violent crime in minimal, although there is non-violent theft as a problem. The crime statistics in Costa Rica are better than the US!!

My husband and I plan to visit every other year between now and retirement. We have read that 40% of retirees who decide to retire out of the country move back within a year. We are going to rent for a year when we move there, before we buy - just in case!!

 

[W2R]

I have not tried the FIREcalc - I will do that today. I have visited Costa Rica and it is a beautiful, stable country. They do not even have an army. It's inexpensive to live there, and has beaches, mountains and beautiful weather. It has a dry and rainy season, but the temperature is always nice. Violent crime in minimal, although there is non-violent theft as a problem. The crime statistics in Costa Rica are better than the US!!

My husband and I plan to visit every other year between now and retirement. We have read that 40% of retirees who decide to retire out of the country move back within a year. We are going to rent for a year when we move there, before we buy - just in case!!

That sounds like a great plan! Vacation there as much as you possibly can, and you will become familiar with it and know more about what location and even what neighborhoods you may want to live in. Renting for a year is a good idea too.

 

[kcowan]

Do you both speak Spanish? If so then you have a lot of choices.

Do you want to stay connected to the US. If so then Mexico or the Caribbean would be better choices.

Otherwise, it sounds ike a good plan and not that many people even have a plan so you are in relatively good shape.

 

[martyb]

I'm wondering why you're limited to only 5% contributions to your 401k's? I understand your employer might only match 5% of your contributions, but I haven't heard of any employer trying to restrict how much you can contribute. Normally, I believe, you have the option to contribute up to the IRS annual limit for tax deferral, which currently at your age(s) would be $16,500 for each of you.

If I misunderstood and you meant you aren't able financially to contribute more than 5%, then please disregard!

 

[retireat55]

If you are a highly compensated employee, the company limits contributions to 5 %. It doesn't seem fair because those who make less can save more.

 

[Dranoel]

We're in Costa Rica and retired early. Rent before you buy anything... plenty of horror stories on that front. Weather is great. Cost of living is not that much lower than many areas of the U.S. unless you mostly eat beans and rice. Primary savings will be health care and taxes. Government is very stable. But, plenty of adjustments for gringos. You'll want to be sure you can make 'em

 

[chinaco]

Welcome.


All of the advice I have read about buying a home away from home... (even if one intends for it to be their new permanent home)... is to rent first.


I have had a number of "Dream [take your pick]" scenarios where reality did not quite stack up to the Dream! Thankfully so far they have been things like boats and other toys that I was able to sell (and get most of my money back). I did enjoy them... but as time passes...

I have also read that reselling a house in many of those latin american countries can be hard on the wallet... I have read many instances where the (foreign) sellers took a big loss.


But you are on the right track. You are saving (lbym) and investing. Make sure your investments are appropriate for your goals and time till FIRE. Most people grow to FIRE slowly over a number of years following and executing a plan.

 

[retireat55]

We are definitely planning to rent a year before we buy anything. I have read too many of the stories of others like myself who intended a wonderful retirement in a foreign country, but could not adapt.

I am interested to know from others on here who are living in Costa Rica, what part did you move to and why?

 

[Ed_The_Gypsy]

Why not rent forever? If you must own real estate, keep some (managed) property or an REIT back home. Do not be an absentee landlord. (Voice of experience.)

 

[retireat55]

I really hadn't thought of that... I was assuming there were tax advantages to owning, but I don't know if there are or aren't.... Anyone know??

I guess the advantage to renting is that I could live in several different areas and not have to settle down in just one location.

 

[packrat44]

My husband and I plan to visit every other year between now and retirement. We have read that 40% of retirees who decide to retire out of the country move back within a year. We are going to rent for a year when we move there, before we buy - just in case!!

Good plan.

 

[martyb]

If you are a highly compensated employee, the company limits contributions to 5 %. It doesn't seem fair because those who make less can save more.

Well...I guess that's why I never had to worry about that rule, then!
I've never been a highly-compensated employee...but I'd sure like to try it out to see if I like it!

I contribute $22k to my TSP/401k. Is your 5% less than that amount?

 

[retireat55]

Well...I guess that's why I never had to worry about that rule, then!
I've never been a highly-compensated employee...but I'd sure like to try it out to see if I like it!

I contribute $22k to my TSP/401k. Is your 5% less than that amount?

Yes, much less.

 

[playaman]

If you are going to retire in Costa Rica, be very careful about what part of the country you choose to settle in. The best medical care (and it is quite good) is in the major cities, but the cost-of-living to maintain an American-standard level is not all that much lower than the States when you consider costs to get there, huge import duties on cars, relatively high costs for utilities, dining out at American-style restaurants, gasoline, etc. Most educated Costa Ricans speak decent English but in the countryside you'll really need to know basic Spanish at least. Overall though, many Americans are retiring there because it really is a nice country -- clean by Latin American standards, relatively safe, drop-dead gorgeous in many areas, and full of very friendly people.

 

[mexico]

I moved to a city in Mexico 2 yrs ago and pretty sure I would never move back to the states. I can't speak for Costa Rica but the point is that there are a lot of options to live very well in other parts of the world at a low cost. The rent before you buy is common sense but I dove right in and bought a house for 265k that in the states would be considered a mansion ( pool, etc.) There was substantial renovation ( aprox 150k) but work and finished product was outstanding. Property taxes here are very low, about $100 per 100k in value and in my case, $240/yr. Also no heat or cooling costs. Learning Spanish is important but I know plenty of americans down here that don't know how to say "hola" and they get by.
You have a long way to go before you retire and you might find another location that suits you better, including the states, but I like your idea. To me, cost of living was pretty important component as well as a non humid but warm climate.

 

[mh]

I moved to a city in Mexico 2 yrs ago and pretty sure I would never move back to the states. I can't speak for Costa Rica but the point is that there are a lot of options to live very well in other parts of the world at a low cost. The rent before you buy is common sense but I dove right in and bought a house for 265k that in the states would be considered a mansion ( pool, etc.) There was substantial renovation ( aprox 150k) but work and finished product was outstanding. Property taxes here are very low, about $100 per 100k in value and in my case, $240/yr. Also no heat or cooling costs. Learning Spanish is important but I know plenty of americans down here that don't know how to say "hola" and they get by.
You have a long way to go before you retire and you might find another location that suits you better, including the states, but I like your idea. To me, cost of living was pretty important component as well as a non humid but warm climate.

If you don't want to mention the location you picked in MX maybe you could
mention some of the criteria you used in selecting your location (if you feel like it). I would guess a few people besides me would find it interesting.

 

[mexico]

If you don't want to mention the location you picked in MX maybe you could
mention some of the criteria you used in selecting your location (if you feel like it). I would guess a few people besides me would find it interesting.

Hi, the city is Guadalajara, 2nd largest city in Mexico, and centrally located. I live downtown and not in Chapala or Ajijic which are very popular for ex pats and about 60 min from downtown. It is elevated, so the climate is dry and mostly "spring like" year around. It does get hot at times- mostly April and May- but never humid which was important factor.


Cost of living here is very low because it's not a tourist town and also no need for AC or heat. A fine dinner with a bottle of red is about $40/$50 pp. The food is very good but not great. There is culture such as an opera house, decent music ( blues, jazz..) and art. It's also a University town with lot of energy and things to do including proximity to beaches, magic pueblas, etc.. The people in Mexico are extremely friendly & it is safe.

Negatives would be traffic, graffiti, a lot of people, food ( very good but not world class), somewhat dirty in places ( so is Boston btw), and you really need to know Spanish, at least in city itself.

 

[Sam]

Why not rent forever? If you must own real estate, keep some (managed) property or an REIT back home. Do not be an absentee landlord. (Voice of experience.)

Or a even a landlord.

 

[mh]

Hi, the city is Guadalajara, 2nd largest city in Mexico, and centrally located. I live downtown and not in Chapala or Ajijic which are very popular for ex pats and about 60 min from downtown. It is elevated, so the climate is dry and mostly "spring like" year around. It does get hot at times- mostly April and May- but never humid which was important factor.


Cost of living here is very low because it's not a tourist town and also no need for AC or heat. A fine dinner with a bottle of red is about $40/$50 pp. The food is very good but not great. There is culture such as an opera house, decent music ( blues, jazz..) and art. It's also a University town with lot of energy and things to do including proximity to beaches, magic pueblas, etc.. The people in Mexico are extremely friendly & it is safe.

Negatives would be traffic, graffiti, a lot of people, food ( very good but not world class), somewhat dirty in places ( so is Boston btw), and you really need to know Spanish, at least in city itself.

thanks for the reply to my query.

 

[Sandhog]

A fine dinner with a bottle of red is about $40/$50 pp. The food is very good but not great.

Yeah, but that's for eating out American, gringo style. I personally enjoy eating where locals hangout including bars.

Rule of thumb is that if you are not in a place with lots of gringos, you are much better off. I personally preferred not to be around gringos in Mexico except if I chooses to. It's much easier on the pocket book.

 

[kcowan]

Yeah, but that's for eating out American, gringo style. I personally enjoy eating where locals hangout including bars.
...
It's much easier on the pocket book.

Actually, the restaurants make much of their money from Mexican tourists as well. Mostly Guadalajara and the city.

There are not many truly cheap restaurants. There are restaurants that serve cheap food but that is different than serving bargains. A shrimp dinner may cost 225 pesos in a top tier restaurant and 160 pesos in a bargain restaurant.

You might also buy a cheaper wine for 180 pesos that costs 60 pesos in Costco. In the high end restaurant, you will pay 280 pesos for a wine that sells in the store for 95 pesos.

 

[Sandhog]

Actually, the restaurants make much of their money from Mexican tourists as well. Mostly Guadalajara and the city.

I eat from street vendors like the locals.

Anywhere there are tourists, both domestic and foreign prices going to be higher. That's the reason tourists cities like NY, Boston, SF, DC... cost more for the resident. Unless, you go deep into the city shielded from those damn tourists.