Addressing Your Retirement Crisis by Living in Mexico
Middle class neighborhood in Mexico
Updated April 2021
Saving your American middle-class life…in Mexico
A few years ago, a friend sent me the cover story from Atlantic magazine, an article by Neal Gabler called “The Secret Shame of Middle Class Americans.” a key point in his widely referenced article is that most people in the US, even those who consider themselves a middle-class wage earner, couldn’t come up with $400 immediately if an emergency struck.
By most social scientists’ definition, the middle-class has been decimated at home. Past benchmarks used by sociologists to define middle class historically included having enough to buy a home, a car, health care, provide a college education for your children and take an annual vacation. To achieve those benchmarks today would require an estimated $120,000 a year according Gabler and other studies.
A level of economic cognitive dissonance has infected workers today. Anyone who makes half that amount will stubbornly tell you they are middle-class. Do you make $120,000 a year? In 2020, only 32% of Americans make $100,000 a year. Will you continue to have that level of income in retirement? Are you truly middle class?
The one factor no one anticipated in planning their retirement 20 years ago
Perhaps you don’t believe you will need the amount financial planners estimate you’ll need to retire. After all, our parents seemed to do fine with social security, a pension and perhaps a house that is paid for. Why won’t that be enough for you?
The big difference between us and our parents is that a 65 year-old couple will need the estimated $285,000 savings beyond the income they live on to pay for health care costs not covered by Medicare. That’s a development no one was expecting when they began planning for retirement decades ago. Social security was to provide income for living expenses, not healthcare.
In light of those statistics, one has to wonder why so many people think that the idea of moving to Mexico is fringe. Living as an expat today is nothing like 25 years ago. Uber, Amazon.mx, increased global trade, entertainment streaming, and online banking has drastically cut the inconvenience of living in a cheaper country. The cost of a very good private health insurance policy here if you get on the plan while you're still healthy and under 64 is less than $2,400 a year. If you become a resident and get government healthcare, the cost is a fraction of that.
What’s stopping you?
From a budgeting standpoint, moving to Mexico is the same as from moving to any far expensive city. Almost all the costs are cut substantially. But unlike most cheap places to live in the US, in Mexico, your social security and pension will provide you great restaurants, good weather, a stimulating culture and a wildly more interesting life than cheap towns in the US.
Understandably, our friendships and relationships back home are important, as usually cited as the chief reason people decide to stay where they are. My argument has always been how much more awkward friendships are to maintain when you’re broke (unless everyone around you is broke too. A sorry situation.). Perversely, a key reason I can keep up financially with friends at home, being able to go out and do things, is owed to the money I save the months I live in Mexico!
Several years ago, the L.A. Times interviewed me and four other career victims of the Great Recession about how they had dealt with the crisis and thrived. I described my move to Mazatlán and the logic behind it. Reaction to my story were comments such as, “Let’s get real. Who’s going to move to Mexico?” as if my solution wasn’t a realistic option. But moving to Mexico is a move millions make. I socialize with them in English language book clubs, pickleball courts, and live music venues. Many of them are single. Many are women.
In addition to greater conveniences and active expat communities traveling to Mexico’s top expat cities has become almost as easy as flying across country for family members and grandchildren. Some expats say they even see them more because grandchildren would much rather visit them in Puerto Vallarta or San Miguel de Allende than Topeka.
Overlooked by financial planners
Regardless of how much sense it might make, financial planners and traditional advisors give little thought to living in a cheaper country as an option for clients. Fluffy magazine articles and online resources give nothing to create a practical game plan out of.
Books overwhelm those who might be interested with detailed aspects of issues one doesn’t need to think about for at least a year. That’s why I wrote “The Mexico Solution: Saving your money, sanity and quality of life by living in Mexico part-time.” It breaks down a plan for your first year.
Visit Mexico first.
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 in Mexico (or any foreign country you’re considering, See how it feels.
Talk to the people doing it in context of being there with them. The worst that can happen is an interesting vacation and satisfied your curiosity. The best might be exhuming your dream of retiring while you’re still young enough to enjoy it.
Related Links:
“There’s a retirement 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.
Most recent:
An examination of the world's most dangerous cities and our skewed concept of danger itself.
Related:
Take a fun quiz on where to live in Mexico by Mexican Guru - (I took it and it gave me Mazatlán, where I live).
About the author:
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 for the expat
My third book is “The Mexico Solution: Saving your money, sanity, and quality of life through part-time life in Mexico". Most recently I co-authored a cookbook for expats, travelers and snowbirds, “The Lazy Expat: Healthy Recipes That Translate in Mexico.