Ventanas Mexico

Resources for full- or part-time life in Mexico

Provides a blog promoting living in Mexico and promotes books on learning Spanish and how to rent in Mexico.

The Retirement Crisis and Living in Mexico

 
 
middle class neighborhood in Mexico

Middle class neighborhood in Mexico

Updated 2018

A few years ago, a friend sent me the cover story from Atlantic magazine, an article called “The Secret Shame of Middle Class Americans.” The underlying premise of this excellent article is that most people in the U.S., even if a person considers themself a middle-class wage earner, most could not come up with $400 immediately if an emergency struck. 

My friend guessed accurately that the story would resonate with me and what I write about as an American who has chosen to live in Mexico, partly for financial reasons.

Rather than go in the red every month supporting the middle-class American lifestyle on wages that likely will never recover from the Great Recession, I have chosen to reduce spending in a more unconventional way.

As the U.S. moves increasingly toward a “gig economy” of remote and contract work, the option of working from Mexico or Latin America is bound to get traction, even if only to be able save enough to retire back in the U.S. some day. The amount of content you will find related to the lifestyle of "digital nomads" indicates a growing segment of people who are at least aspiring to it.  Working In a cheaper country, a young adult from the United States might be able to actually save 50% of their salary while learning a second language and having the adventure of a lifetime.

For writers, I.T professionals, photographers, web designers and others who can finnagle it, Mexico is a place to work, save money and live an adventure.  Moving to Mexico has enabled hundreds of thousands of Americans and Canadians to retire at the normal age, 55 or so, when people used to be able to retire.

If, as the article states, 47% of people cannot save $400 for emergencies, what chance do they have of saving the outrageous sums predicted they’ll need for retirement?

According to the Trinity Study, at age 25 you could save enough for retirement if you saved 20% of your salary for 37 years at a salary of $70,000.  Who wouldn’t give up before they began knowing they going to need $1,750,000 to retire based on a salary of $70,000 year to be  certain of never having to work again?   By the time they took out that 20% for retirement savings, another 20% for taxes, they'd have to live on $41,300 for 37 years. And how long does it take for some to get to $70,000 a year?

Past benchmarks used to define “middle class"  as stated in the Atlantic article included having enough to buy a home, a car, health care, provide a college education for your children and take an annual vacation. Based on those benchmarks, you you are not middle class at a salary of $70,000 a year because you would not be able to do all those things on that salary (Don’t forget you’re also paying taxes and saving for retirement). To achieve those benchmarks today would require an estimated $120,000 a year.

Paradoxically, Mexico's middle class can achieve all the criteria; the home, car, healthcare and education for their children. Those things may look different in Mexico, but all the benchmarks can be met.  

Now let's say you don't believe you will really need $1,750,000 to retire. These high savings calculations are usually based on your living on interest income and never spending down your capital.  Financial planners like you to position yourself for living basically forever and assume that you want leave all that principal to heirs. We all know people with less than $1,750,000 who seem to be doing fine in retirement, between social security, pensions and perhaps a house that is paid for.

If you read up on the anticipated rising cost of healthcare however, you will learn that a 65 year-old couple will need the estimated $317,000 savings beyond the income they live on to pay for health care costs not covered by Medicare. That is a development no one was expecting when they began planning for retirement decades ago. Social security was to provide income, not supplement Medicare.

In light of those statistics, expats in Mexico shake their head in wonder that so many people still think that the idea of cutting bait and moving to Mexico is crazy.  The cost of a very good health insurance policy here, if you get on the plan while you're still healthy and under 64 is less than $1,800 a year.

From a budgeting standpoint, moving to Mexico at its heart a matter of moving to a far less expensive place. But unlike that trailer in West Virginia, in Mexico, on your social security and pension you will still have a truly middle-class lifestyle; with nice restaurants, a stimulating culture and a wildly more interesting life.  

Admittedly, you will have cultural adjustments and language difficulties (Arguably not unlike adjusting in West Virginia, but with better food and dentistry). You will grow personally and be enriched culturally in Mexico in a way you could not living in American's small cities and town (Sorry.) If you learn the language you will probably even be mentally sharper than if you stayed at home.

Yet in spite of these truths, when I suggest to the average retired person or couple in their late 50’s that they might be able retire to Mexico comfortably now, most would still rather clutch the steering wheel than even consider the option.

As further proof of that, whenever I pitch stories to retirement planning magazines or blogs about all the benefits of living in Mexico, my ideas are usually dismissed as and idean only considered by the lunatic fringe. Not enough of their readers are crazy enough to warrant a nice factual article about retiring to Mexico. Likely the most you’ll see will be an annual, worthless template article by International Living, or a “Ten Best” list.

These articles are nothing like the in-depth articles on how to secure a really shitty job when you’re 60, how to avoid telephone scams and desicated book lists. They should be covering the expat option with the same seriousness they employ when covering cleaning tools for older teeth.

What a disservice this omission is. Becoming an expat might save a reader from aging in destitution. I know several single women in Mazatlán living very pleasant lives on their pensions alone. They could never do that in the U.S. Those women had to dig that information out. They never found it on any financial planning or retirement site.

housing in Mexico

Gated community in Mazatlán

I’ve heard people say they would not consider moving because of their relationships, often citing their grandchildren.

Most of those living in Mexico are enterprising enough to figure out ingenious ways of spending months in the U.S. if they want to stay close to family and friends.

Between long visits and Skype,  they keep those relationships alive and well - and their options open.

People living with retirement anxiety need to know that the expat option is real, practical, and that living abroad gets easier every year through technology.

Understandably, our lives and relationships are important to us. To that my argument would be how much more difficult relationships are to maintain when you are poor. 

Information should be presented in a way to be taken seriously, because the retirement crisis for middle-class, middle-aged Americans is serious.

Middle-class people who are worried about their money lasting should be encouraged by these “experts” to seek truthful information on retiring to Mexico from those who are doing it, and not fall prey to heresay from someone who-knows-someone who went there once and didn’t have good time.

Setting it all up to live in any less expensive country can take several years. The time to chart it all out (and learn some Spanish) is earlier than you think.  Plan an extended trip to any of the top expat areas. Talk to the people doing it. You’ve got nothing to lose. Perhaps your whole dream of retirement when your young enough to enjoy it can be saved.

Financial planning and retirement planning publications should encourage their readers to learn the facts about Mexico, even as the hope of mnay for a secure, worry-free future in the U.S grows ever dimmer.   

Don't take my word for it.  Over a million Americans and 500,000 Canadians can't be wrong.

Related Links:

“America’s Looming Retirement Savings Crisis” - CNBC
"“The Retirement Crisis is Getting Truly Scary - Slate magazine
"The American Retirement Crisis in Five Charts  -  Fiscal Times
"The Retirement Crisis is Real" - Huffington Post, along with a slate of similar articles.

"The American Retirement Crisis is Real" by The Week
 

"What you don't know about America's Healthcare system now could bankrupt you later" -  Ventanas Mexico

Next up:  Once you have ducked out of the American economy, you see it from an entirely different perspective 

Most recent:   An examination of the world's most dangerous cities and our skewed concept of danger itself

Take a fun quiz on where to live in Mexico by Mexican Guru - I took it and it gave me Mazatlán

Hola, I'm Kerry Baker and a partner with Ventanas Mexico which provides insight and resources to those considering expat life in Mexico, most recently "If Only I Had a Place" on renting in Mexico (very different from renting in the U.S.) with all its advantages and disadvantages. 

My first book, and love, was writing the "Interactive Guide to Learning Spanish Free Online," a curation of the best Spanish language tools on the web.  Create unique plans every day or use the plans in the book. The book is completely interactive, enabling you to go via interactive links to the best features.  Use it with your laptop (I love my Acer Aspire!) , e-reader or tablet.