Retirement plan to support my "habit"

[MXGratefulDiver]

I'm still many years away from retirement (unfortunately), but I'm also not young anymore. So, I'm thinking more and more about how I'm going to survive when I retire. I so regret not listening to the folks who said to start early. I admit, I've been unconcerned about this whole retirement planning thing until now. And I'm now starting too late, but at least it's a start.

Problem is...I picked up this relatively new habit and since I do not dive locally I have to travel to dive. Travel costs money, lots of it. Sure, I could keep costs low and go to Cozumel forever, but it's still several thousand per trip between my husband and myself. And when I'm retired, I'll want to dive lots. And see different parts of the world. And even stay at reasonably comfortable places. And sit in extended leg room seats on the plane (if not Premium Economy). And maybe buy new gear once in a while. And have nice dinners. Heck, I'll be old and I deserve it!

So I'm so sad right now because the thought of not being able to maintain this passion of mine during retirement due to financial constraints is KILLING ME! I'm so concerned that I'm actually thinking of doing a master's degree in what I do now, being more aggressive about my career (I admit I've kind of been in a rut about this) and hopefully, that will translate into more opportunities and more money for my retirement plan.

Maybe this passion is a good thing, motivating me to excel with the time I have left. I dunno. How do you guys do it? How did you plan for it?

I just want to add: Me and my first world problems.

I'm right on the cusp of retirement, and been spending a lot of time thinking some of the same thoughts. I've had a reasonably successful career, and will have a moderate retirement income. But I didn't start a personal retirement account until I was 40. And then at 49 I picked up scuba diving, and made a conscious decision to spend a fair amount of my income on scuba trips while I was still at the top of my earning curve. I've since travelled all over the world enjoying scuba adventures. Now, a few months away from retirement, I'm glad that I did, even though it meant saving less money for retirement.

But I won't be able to stay where I live once retired ... it's just too expensive to live here. I could opt to move to some less expensive part of the country. But I'm more likely to relocate to some other country ... the cost of health care is already out of reach for many Americans, and is only going to get more expensive as the boomer generation continues to tax the system. So on that aspect alone I'm thinking to move elsewhere. I should point out that I do have some experience with both the Mexican and Philippine medical systems, and am fairly impressed with what you get for what it costs.

I've given some serious thought and research into Bali ... I've been there several times and love the place. But there's a big difference between vacationing somewhere and living there ... and my last trip to Bali, a bit more than a year ago, was with an eye toward what it would be like to live there. I found a nice town on the north shore (Lovina) where I could retire in some degree of comfort ... but an honest assessment of the pros and cons of living in Indonesia drew me to conclude that it wouldn't be the right place for me. So I'm looking elsewhere. Some current options I'm investigating are in Central America ... Costa Rica, Mexico, and Panama are the top contenders. Each has pros and cons. Each offers reasonable living standards at affordable prices. Each offers the American expat a reasonable path to living there.

One thing I'll point out is that as you age your passions will change. I love being underwater ... even as a cold water diver I managed a LOT of diving over a 16 year period. But over the past couple years ... since I stopped teaching ... the passion's taken on a different dimension. I still love diving ... in a couple months I'll be spending a few weeks in the Baja, first for a diving trip to the Socorros, then driving around the peninsula seeing what else the place has to offer. But diving isn't the central part of my life that it used to be. So while it might be different for you, it's also something you might consider as a possibility that by the time you reach retirement age it'll become less of a priority for you too ... and that will factor into wherever you decide to retire.

I'm far less certain about what I'd like to do now than I was a few years ago ... when I was giving it less thought and knew a lot less about the realities of day-to-day living in retirement ... much less doing so in someone else's country. And the more time I spend researching it, the more questions I can think up to find answers for. Maybe, ultimately, it'll boil down to just trying a place for a few months and see what it feels like.

Best of luck on your quest for information and answers ... may the journey eventually lead you to a happy conclusion when you decide it's time to retire ...

... Bob (Grateful Diver)

 

[TMHeimer]

I have always saved and invested for retirement since age 23 when I started teaching. Of course, being single and childless until age 40 obviously helped. But, we have enjoyed 2 cruises and a whole lot of snow-birding over the last 22 years, and are now in the process of downsizing to a smaller and less costly house--a stone's throw from the ocean, but not the 1,000' of direct shore line and 6 acres we are leaving. You can't take it with you anyway. I'm looking to curtailing my winter diving here (well, hard when you're not right at the shore) and thinking of doing a second tropical dive trip or two. But, tomorrow sees me in the 40 degree water once more in my farmer john.

 

[Schwob]

Very interesting topic to me so I'll throw my .02 in.

Mrs flush and myself are 44 and 48 respectively. This is the second marriage for both she and I. We were both terribly stupid with money earlier in life with our first spouses. Some because of them, some because of us. If we had been practicing then what we practice now then we would probably both be very close to retiring, if not already. Even at that we think we can be looking seriously at retirement in 10 years if we remain in country.

We will have the kids out of high school at that point. We do not live like paupers but neither of us throw money around willey nilley either. We have one note a month and that is our house which we hope to have paid off in the next 4 years by making double payments. Everything else is paid for including cars and we pay cash for everything else (not exactly cash but if we do not have the money to buy it outright then we do not buy it)

In general terms we save/invest half of our income per month. Expenses and (current fun money) are the other half.

We think our plan is to sell the house and move somewhere with good diving. Some will depend on where the kids decide to go to college if they go that route. They are half Aussie so I am pushing that direction

I wish you, honestly, good luck with that push. My kids are half German... I lost with my push... Having been born in the US and gone to school there and being inundatet with everything being the greatest here (well, that and Germany actually being a somewhat foreign country (with a lsnguage they are less fluent in) to them) won. Lot's of what would already be early retirement and diving money goes and will continue to go to ridiculously exorbitant US college fees...
PITA!
Anyway still am trying to reture somewhat earlier... and less comfortably so...

As mentioned above open market healthcare cost is scary in the US, not only in terms of how expensive it is, but so because it could go up 30% or such from one year to the next and because (I think) you never can really figure out what is coming your way in terms of cost and in terms of coverage. Even with what you might think is decent coverage, one serious enough sickness that has enough uncovered or 50% covered cost can wipe you out. Often it is still cheaper to fo something abroad than do it here at 80% coverage...
How do you plan for absolute health care cost u certainty...?
...
To me that puts a lot of food for thought on the table about where to retire. Except my kids college plans delayed the urgency in that thought...

 

[Schwob]

look @Dog Bowl whos to say you cant work while retiring ? im in that phase I am a retired full time diving instructor I have had several offers to retire in the islands even had a friend offer his dive shop for free to me (as long as I kick back a percentage ) so its not all doom and gloom ...we will talk at the deep 6 clinic ..bet I can give you some great ideas how you can have your cake and eat it too with diving and retiring

I would be listening if you were talking a bit during the upcoming ice diving class... (and filter the specific Canadian perspective)...

 

[mi000ke]

@KathyV , interesting. I didn’t know that the magic number was 7 years. That is, of course, ok with me as my intention is not to be a Caymanian full-time. I’d lose my Canadian healthcare coverage by doing that. I would like to be what we Canadians call a “snowbird”, fly south in the winter, fly back home in the summer, so we can keep our healthcare. Free healthcare is a big deal, especially in old age!

So in actuality you are not looking to retire for a while (unless I'm missing something, working is not retirement and retirement means not working), so your income strategy over the next few years until you actually do retire needs to align with your projected expenses in retirement and the amount of funds you will need to support that level of expenses. It may be that you can find that job in the Caymans, or maybe given the cost of living here you are better off continuing to work in Canada and just take dive trips for now, and save until you do retire.

If you plan to be a snowbird in retirement (like we are), then the property purchase/investment decision can be made entirely separate from your retirement decision. If you were to purchase a property (and after a lot of investigation and analysis we concluded that a condo made a lot more sense in terms of property management and rental), you could put it up for rental most of the year and maybe use it just for your one or two trips per year to the island. This strategy, if you pick the right property, would not only pay for the condo, but could actually generate a profit - making your retirement either come sooner or be better funded.

As I've mentioned in other posts, we live in our condo on Seven Mile Beach for 3-4 months each winter, plus usually a two-week stay in summer and in fall - and our rental income net after management fees covers all of our annual costs of ownership. And we figure we save another few thousand dollars on utilities (water, electric, heat, house cleaning) while we are out of our new england house. Were we to rent during the high season instead of being here (as you would do if you continued to live and work in canada until retirement) we would double the net income and actually make a tidy profit. Which is why many of our neighbors own two units - one for them and one in full time rental.

And when you were ready to retire you would then use your property during whatever 6 months you like and rent it out the other 6 to help offset the costs.

But before investing, you need to put together some proforma financial analysis (Oh no! More spreadsheets!) for each property you are looking at, identifying the estimated annual rental revenue for when you would not be using the property yourself (we were able to get past rental data on every condo unit and building we looked at) net of all condo fees, rental management commissions, and other expenses. I analyzed about 20 condos and the most interesting relationship I found was the the more you spend on a condo the better investment it is, as generally rental rates rise faster than property costs. So even though you are paying more, you need to rent for less weeks to cover your costs. Plus the more you pay, the nicer the place (usually). We ended up paying 3x what we had expected based on the first (and cheapest) property we were initially interested in, but the cheap property would probably never have covered all our costs given the lower expected number of weeks rental and the lower rental rates, while the more expensive one does - even though we are using it ourselves way more than we initially planned. Plus we are in a better location.

So look at the retirement/work decision as one issue, and property investment as another.

 

[Schwob]

So in actuality you are not looking to retire for a while (unless I'm missing something, working is not retirement and retirement means not working), so your income strategy over the next few years until you actually do retire needs to align with your projected expenses in retirement and the amount of funds you will need to support that level of expenses. It may be that you can find that job in the Caymans, or maybe given the cost of living here you are better off continuing to work in Canada and just take dive trips for now, and save until you do retire.

If you plan to be a snowbird in retirement (like we are), then the property purchase/investment decision can be made entirely separate from your retirement decision. If you were to purchase a property (and after a lot of investigation and analysis we concluded that a condo made a lot more sense in terms of property management and rental), you could put it up for rental most of the year and maybe use it just for your one or two trips per year to the island. This strategy, if you pick the right property, would not only pay for the condo, but could actually generate a profit - making your retirement either come sooner or be better funded.

As I've mentioned in other posts, we live in our condo on Seven Mile Beach for 3-4 months each winter, plus usually a two-week stay in summer and in fall - and our rental income net after management fees covers all of our annual costs of ownership. And we figure we save another few thousand dollars on utilities (water, electric, heat, house cleaning) while we are out of our new england house. Were we to rent during the high season instead of being here (as you would do if you continued to live and work in canada until retirement) we would double the net income and actually make a tidy profit. Which is why many of our neighbors own two units - one for them and one in full time rental.

And when you were ready to retire you would then use your property during whatever 6 months you like and rent it out the other 6 to help offset the costs.

But before investing, you need to put together some proforma financial analysis (Oh no! More spreadsheets!) for each property you are looking at, identifying the estimated annual rental revenue for when you would not be using the property yourself (we were able to get past rental data on every condo unit and building we looked at) net of all condo fees, rental management commissions, and other expenses. I analyzed about 20 condos and the most interesting relationship I found was the the more you spend on a condo the better investment it is, as generally rental rates rise faster than property costs. So even though you are paying more, you need to rent for less weeks to cover your costs. Plus the more you pay, the nicer the place (usually). We ended up paying 3x what we had expected based on the first (and cheapest) property we were initially interested in, but the cheap property would probably never have covered all our costs given the lower expected number of weeks rental and the lower rental rates, while the more expensive one does - even though we are using it ourselves way more than we initially planned. Plus we are in a better location.

So look at the retirement/work decision as one issue, and property investment as another.

Wondering on the "snowbird condo over house" thought:
Do you move everything that you don't want accessible to the renters every time (all the way, or into local storage) - or do you manage with a decent sized, locked owner's closet ... or a whole locked room - or how is it being done to be practical? How about toys in the garage? (if any)

 

[Trailboss123]

I'm right on the cusp of retirement, and been spending a lot of time thinking some of the same thoughts. I've had a reasonably successful career, and will have a moderate retirement income. But I didn't start a personal retirement account until I was 40. And then at 49 I picked up scuba diving, and made a conscious decision to spend a fair amount of my income on scuba trips while I was still at the top of my earning curve. I've since travelled all over the world enjoying scuba adventures. Now, a few months away from retirement, I'm glad that I did, even though it meant saving less money for retirement.

But I won't be able to stay where I live once retired ... it's just too expensive to live here. I could opt to move to some less expensive part of the country. But I'm more likely to relocate to some other country ... the cost of health care is already out of reach for many Americans, and is only going to get more expensive as the boomer generation continues to tax the system. So on that aspect alone I'm thinking to move elsewhere. I should point out that I do have some experience with both the Mexican and Philippine medical systems, and am fairly impressed with what you get for what it costs.

I've given some serious thought and research into Bali ... I've been there several times and love the place. But there's a big difference between vacationing somewhere and living there ... and my last trip to Bali, a bit more than a year ago, was with an eye toward what it would be like to live there. I found a nice town on the north shore (Lovina) where I could retire in some degree of comfort ... but an honest assessment of the pros and cons of living in Indonesia drew me to conclude that it wouldn't be the right place for me. So I'm looking elsewhere. Some current options I'm investigating are in Central America ... Costa Rica, Mexico, and Panama are the top contenders. Each has pros and cons. Each offers reasonable living standards at affordable prices. Each offers the American expat a reasonable path to living there.

One thing I'll point out is that as you age your passions will change. I love being underwater ... even as a cold water diver I managed a LOT of diving over a 16 year period. But over the past couple years ... since I stopped teaching ... the passion's taken on a different dimension. I still love diving ... in a couple months I'll be spending a few weeks in the Baja, first for a diving trip to the Socorros, then driving around the peninsula seeing what else the place has to offer. But diving isn't the central part of my life that it used to be. So while it might be different for you, it's also something you might consider as a possibility that by the time you reach retirement age it'll become less of a priority for you too ... and that will factor into wherever you decide to retire.

I'm far less certain about what I'd like to do now than I was a few years ago ... when I was giving it less thought and knew a lot less about the realities of day-to-day living in retirement ... much less doing so in someone else's country. And the more time I spend researching it, the more questions I can think up to find answers for. Maybe, ultimately, it'll boil down to just trying a place for a few months and see what it feels like.

Best of luck on your quest for information and answers ... may the journey eventually lead you to a happy conclusion when you decide it's time to retire ...

... Bob (Grateful Diver)

Try and check out Loreto while in Baja, Bob. It is a gorgeous spot and there is some great diving from there.

 

[Trailboss123]

Have any of you US citizens ever looked into or considered American Samoa as a retirement destination? I have been thinking about it, but haven't done much research on it yet.

 

[JamesBon92007]

Have any of you US citizens ever looked into or considered American Samoa as a retirement destination? I have been thinking about it, but haven't done much research on it yet.

Not yet but I had an Australian friend who loved it there and insisted that I go diving there. She's not a diver but was impressed with how the ocean looked.

 

[RyanT]

@NWGratefulDiver, if you give some real consideration to Panama, let me know. I'd be happy to talk with you about living in Panama. Although, I haven't technically lived there, I do spend a couple of months working there every year, so I have a good sense of some of the pros and cons.