(Smart Money) For Robyn and John Cole , having one retiree in the family was workable. As long as Robyn, 56, kept her job as a golf course marketing director, they could live comfortably in their native Orange County, Calif.; enjoy company health coverage; and wait out the underperforming investment properties they bought into—oops!—a month before the ’08 crash. The challenge came when Robyn got itchy to retire and join John, a 67-year-old former teacher, in the slow lane. No matter which retirement haven they looked at—Asheville, N.C.; Austin; Phoenix—they found that between the wobbly economy and the “atrocious” cost of private health insurance (John’s a cancer survivor), they simply couldn’t afford for Robyn to quit. “We’ve done the numbers,” says John. “It would not be pretty.”
Recently, though, the Coles found their retirement spot—a little further south than they originally imagined it would be. In fact, it’s a few degrees from the equator. Media accounts the couple pored over certainly made their chosen destination—the mountain hamlet of Boquete, Panama—sound enticing. (Spring-like climate! Lush natural beauty! Low-cost living!) And once he signed up at a few “retire overseas” websites, John says, it didn’t take long for the real estate pitches to start hitting his in-box. But as the couple packed up their lives, they did so with a tinge of hesitation, opting to rent instead of buy, for now. “We’re looking at it as an adventure,” says Robyn. “We may end up there, and we may not.”
Turns out, they’re following the bread crumbs left by a growing legion of intrepid, often cost-conscious retirees who’ve found themselves offshore—way offshore. A decade ago anyone who announced plans to spend their golden years beyond U.S. borders was often looked at askance as a bohemian adventurer—or worse, someone with something to hide. But the crash of 2008 is still having a transformative effect on the largest demographic group in America, and the fallout includes a little-noticed but mounting migration to cheaper (if uncertain) horizons.
No one knows how many American retirees now reside overseas. They aren’t counted by the U.S. census, and many operate under the radar on renewable tourist visas. But according to the Social Security Administration, the number of retired Americans receiving benefits overseas has soared 32 percent since 2002, a figure experts say is gaining steam. Some are ex-snowbirds, flying straight past Florida to a Caribbean paradise; others are holing up in quaint French villages. Still others are moving into newly minted gated communities as far afield as Malaysia and Thailand, navigating lifestyles as foreign to them as the locales. “The actual numbers are tough to quantify,” says Demetrios Papademetriou, CEO of the nonprofit think tank Migration Policy Institute. “But it’s a phenomenon that can only grow larger.”
To some degree, these refugees are getting a renewed push from a burgeoning industry that’s honed its ability to sell the good life overseas. No longer just a sleepy niche, the retire-abroad business now includes growing ranks of real estate developers, foreign governments, offshore investment advisers and “transition specialists,” all trying to lure the great silver wave of boomers to their shores. Mexico, for one, is stepping up its medical tourism industry and lobbying the U.S. government to extend Medicare benefits to Americans living there. In Panama, the Boquete area alone saw the number of new gated communities jump from zero to more than 40 in the past decade (although many are suffering since the speculative bubble burst). Companies like International Living and Escape Artist publish magazines and websites, promote “hot” real estate opportunities, and host informational conferences-cum-salesfests; the former reports that attendance at its events has doubled in the past five years alone.
But experts say that, even without a whole industry behind it, life outside the land of $4 coffee has an obvious appeal to anyone on a budget, especially retirees. Even in an improving economy, older Americans face higher unemployment rates than other groups, and for many, crash-battered nest eggs have never fully recovered. According to a recent study by Generation Mortgage Co., nearly 80 percent of U.S. boomers are afraid they won’t be able to retire comfortably. Indeed, it’s the kind of fear that has them contemplating lifestyle compromises. So what if, say, Nicaragua is in the hurricane zone, it just last year proclaimed itself “land-mine free,” and the only use for a Nordstrom card will be as a coaster under your rum punch? The price per square foot for an ocean-view condo is cheapest in Central America, and the government, like many, offers generous financial incentives for American retirees to come crack open their piggy banks. Are the trade-offs worth it? We test-drove a semiretirement of our own (six days—gee, thanks, boss!) in one of the fastest-growing expat destinations, Panama, for an up-close view of the golden years gone global.
It’s 5 p.m. on a sultry Friday in Panama City, and while the sounds of salsa in the streets below signal that the capital is starting its weekend, Bernice Starrett, a Northern California retiree, is sitting in a nondescript hotel meeting room, attending the “Emergency Offshore Summit.” Sponsored by a publishing company called Live and Invest Overseas, the two-day conference, which has attracted 60-some casually dressed, mostly older North Americans, has lived up to its anxious-sounding name. A few doomsayers predict economic Armageddon; that’s followed by presentations on how to slash estate taxes (irrevocable insurance trusts), diversify assets (teak plantations) and safeguard wealth (gold bars stashed in private Swiss vaults). There’s a lively discussion about second citizenships and plenty of talk about Latin American real estate opportunities.
Seattle transplants Val and Jake Hrobsky say they’ve met plenty of new golf partners since relocating to the expat enclave of Coronado.
Last year, Starrett says, she put a $51,000 deposit on a small ocean-view plot of land in Los Islotes, a yet-to-be-built gated community on Panama’s ruggedly beautiful Azuero Peninsula. “I’ve always wanted to live on the beach,” says the 64-year-old, who adds that she’s comfortable investing sight-unseen in Panama’s frontier, in part, because her deposit is refundable. At the conference, Los Islotes developer Lief Simon talks up the amazing sunsets and planned amenities, including an equestrian center and a Spanish colonial–style town. Still, he admits, Los Islotes’ first phase is only 35 percent sold—not exactly like in the precrash days, when speculators pumped endless money into Panama. The remote location doesn’t help: It’s more than four hours from the international airport and major hospitals of Panama City—when the access road is passable. (The weekend of the conference, it was washed out by recent downpours, nixing a planned site visit for attendees.) Asked if the area’s six-month rainy season might dampen her future beach bliss, Starrett wrinkles her nose. “A little,” she says.
For those who daydream about their own offshore retirement, Starrett’s path is pretty common. It starts with some “what if?” Web research and maybe a subscription to popular publications like International Living or the Live and Invest Overseas Retirement Letter, which offer information on topics ranging from visas and taxes to health care and expat dating and feature widely quoted top-10 lists of retirement hot spots. The armchair-adventurer phase is usually followed by a scouting visit, which may include a publication-sponsored conference, complete with a real estate tour. But critics say getting objective information from retire-abroad firms can be tough. “They purport to be information companies,” says T. Rob Brown, founder of retirement website The Retirement Detectives. “But in reality they’re heavily involved in real estate marketing.”
Living in a remote area of Panama doesn’t mean doing without. Boquete’s expats have organized a weekly marketplace, offering everything from alfresco manicures to freshly baked artisan breads.
For years, developers and brokers say, International Living made a commission on sales it promoted through its publications, website or conferences. Developer Sam Taliaferro, who built Valle Escondido, Panama’s first gated community (home values: $250,000 to $5 million), says that for a 10 percent cut of sales, International Living brought couples to the secluded mountain site. Dan Prescher, special projects editor for International Living, says the publication received a percentage of sales from developers like Taliaferro in the past. He says that in a move to give the magazine more editorial independence, starting in 2007 those deals were sent to a newly created company, Pathfinder International. But the companies still do business with each other: Pathfinder says it vets developers who advertise in International Living and speak at its conferences—and that it pays promotional fees to International Living.
Back at the “Emergency Offshore Summit,” presentations are informative but rarely cover the risk side of things, whether it’s investing in Uruguayan farmland or an Internet marketing company. Live and Invest Overseas’s publisher, Kathleen Peddicord, says the key reason her company markets real estate is that overseas home-buying is “the ultimate step” for many readers, and her team has decades of expertise in discerning the good guys from fly-by-nighters. “It’s a disservice to send readers off to this Wild West,” she says, “where these emerging markets are unregulated.” Still, most speakers have something to sell, and Peddicord acknowledges that they pay to appear at the conference—a fact that’s not always apparent to conference-goers. Peddicord says her company scrutinizes the speakers carefully and that her firm’s endorsement comes “after a lengthy investment of due diligence.”
Indeed, say experts , those looking to move abroad should be practicing due diligence of their own. Buyers who take for granted North American niceties like a multiple-listing service don’t always fully fathom the murkiness of these markets, says Claudia Gonella, cofounder of RevealRealEstate.com, an independent market-research firm specializing in Central American property. Price transparency is virtually nonexistent, she says, with the same property often marketed by different brokers for vastly different prices. Establishing ownership can be a nightmare in countries like Panama, where, according to the U.S. embassy, some two-thirds of properties lack titles. And while scammers can come from both inside and outside the country, it can be difficult to find legal recourse south of the border, insiders say, given the region’s reputation for governmental corruption. In a recent ranking of global “judicial independence,” the World Economic Forum ranks Panama at 103 of 133 nations. Ecuador ranks 130.
Sometimes, disputes end up in U.S. courts. A lawsuit filed in the 17th Judicial Circuit Court in Florida alleges that a Florida-based company, Paragon Properties, operated a “Ponzi-like” real estate scheme in Costa Rica, failing to provide hundreds of retirement-age investors with deeds for land it claimed to be developing. Matthew Sarelson, the Miami-based lawyer for some 250 plaintiffs, estimates total depositor losses at $50 million to $60 million. (A lawyer for Paragon declined to comment.)
Building a house in Panama was trickier than Mark and Martine Heyer expected, but the couple ended up with a sprawling deck and impressive views.
While rip-offs are always a risk, experts say, the more common hazard these days is the cash-strapped developer who fails to finish the project—think luxury high-rise towers without working elevators or gated communities with a half-built clubhouse. Reveal Real Estate calculates the current completion rate of Central American developments at between 38 and 46 percent, depending on the country. Indeed, says Michael Cobb, a veteran developer in the region, the bubble years spawned a rash of speculative projects that, even finished, were thin on the amenities that differentiate lasting communities from barely populated ghost towns. Few have reached the critical mass of Boquete or the long-established beach spot Coronado, where Val and Jake Hrobsky, recent transplants from Seattle, say they never lack for golf partners and estimate they made 100 new friends in the first few months alone. “The Robinson Crusoe experience is good for about a week,” says Cobb. “You want to go have a beer at your neighbor’s, have a clubhouse and shops.”
That’s especially true in isolated coastal areas, where gated communities are the primary option. In Boquete, a well-established town that’s attracted a few thousand English-speaking émigrés, new arrivals can choose from modest in-town rentals for a few hundred dollars a month to million-dollar hillside mansions. Real estate war stories are always a prime expat conversation starter. For Martine and Mark Heyer, the odyssey began in 2008, when they arrived from Palo Alto, Calif., and found a half-acre lot (price: just over $100,000) complete with a burbling creek and a reach-out-and-touch-it view of Barú, the region’s 11,000-foot volcano. Mark, an affable former technology entrepreneur who now nurtures photography and woodworking hobbies, took charge of designing their three-bedroom home and guest casita using off-the-shelf software, while Martine, a former real estate agent, oversaw construction.
She says she knew there would be challenges, but she wasn’t prepared for how many. It soon became clear that the Panamanian workers she hired only had experience building with cinderblock and stucco, not two-by-fours. Exact measurements—and right angles—were frequently less than exact. And skylights? In this land of tin roofs, they were a decidedly foreign concept. “When I got here, very few houses met North American standards,” says Martine. Still, the finished home (cost: $300,000), with its huge wall of windows and generous deck, has a homey, tree house feel that showcases the lush landscape that drew them to Boquete. And the bumpy building process? It’s another reminder that, like Dorothy arriving in Oz, they’re definitely not in Kansas anymore.
Expatriates say a crucial part of adjusting in a new land is learning to realign expectations and go with the flow. After all, says former Tucson tech consultant Lee Zeltzer, who writes a popular blog BoqueteGuide.com (complete with posts on the region’s crime and mud slides), most retirees have come—in theory, at least—to experience another culture, not impose their own. Sure, gringos like to grump about the pervasive ” mañana ” factor: You can sprout a few extra gray hairs waiting for the phone or utility company. And don’t expect 911 emergency responders to come in a New York minute, they warn. (You might even have to pay for the policeman’s gas, says Martine.) But most extranjeros say their Panamanian hosts have a lot to teach them about slowing down, the importance of family and the benefits of a good party.
One recent Monday morning, a steady stream of expats is looking to close the culture gap at the bustling Habla Ya Spanish school, where classroom capacity has tripled since 2005. One class features four recent transplants—none of whom spoke much Spanish before arriving. “Just cerveza and baño ,” says “Betty from Boquete,” the class cutup who high-fives her classmates when she gets something right and prods them when she sneezes, “Where are my saluds, girls?” Between laughing and gossiping, they practice conversational skills (today’s lesson: reflexive verbs) and talk about how learning the language, even a little, has made life in a foreign land easier. Kathy Donelson from Salem, Ore., who moved to Panama with her husband after taking a cruise here, says she can now talk to her household help without pantomime. And she no longer has to rely on the 14-year-old boy next door when she needs to call the gas company. Quips Betty: “Charades don’t work over the phone.”
Though Boquete may be 3,500 miles from Oregon, relocated retirees like Donelson don’t lack for reminders of home. They drive on the right side of the road, even if those roads tend to flood during rainy season. Electrical outlets run on the same currents (power outages may be more frequent), and Panama’s legal tender is the U.S. dollar. And for those who prefer American-style shopping, there’s a host of new big-box stores cropping up down the road, like Do-It Center, a blindingly bright equatorial version of Home Depot, and El Rey, a grocery store that caters to the region’s burgeoning boomer set with a huge farmacia and an impressively stocked alcohol section.
Whether it’s groceries, housewares or real estate, how much you pay depends on how much of a taste of home you want. Prefer the four-burner Whirlpool gas stove at Do-It Center? That’ll run $679. A similar Mexican brand costs $400. But whatever their budgets, expats proudly trumpet the financial benefits of their newly adopted land: No property taxes for 20 years if you build a house. Generous government discounts on everything from airline tickets to prescriptions. And cheap, high-quality health care. The Heyers say they can live “like royalty” for $2,000 a month, compared with $7,000 back in Palo Alto. Their health insurance dropped from $1,000 a month to—Martine pauses for emphasis—$1,000 a year. Lunch for two at a typical Panamanian restaurant runs about $6; dinner for four with wine at a more upscale place might cost $50. And for breakfast, the “patio chickens” strutting around their yard provide free fresh eggs.
Of course, if it’s just a cheap lifestyle they’re after, expats could choose Belize or Ecuador, where dollars stretch even further. But arguably, the biggest draw of Boquete isn’t the balmy weather or cheap cervezas ; it’s the large, tight-knit cadre of English-speaking émigrés. On a recent weekend, several hundred have come out for one of the year’s biggest events: Bid4Boquete, a charity wine-tasting and auction. The community center, home to two English-speaking theater troupes and the expats’ bustling weekly marketplace, is swathed in twinkly lights. Attendees are dressed in their Boquete best, with the women’s fashion running toward “elegant former hippie” and most of the guys having actually ironed a shirt. In one room, boomers are boogying hard to a band belting out oldies like “Takin’ Care of Business.” The auction, conducted with great brio, raises $55,000, more than the past three years combined. And over in the wine-tasting room, residents sip, mingle and gossip—about shady local bureaucrats, which road got blocked by recent mud slides and other aspects of small-town life in the tropics. It’s an intimacy that new transplants John and Robyn Cole noticed right away. After all, a few thousand idle English speakers could quickly become a kind of Panamanian Peyton Place, with everyone knowing everyone else’s business. “You’re not talking nirvana here,” says John.