Ask Sid: Better Retirement Living South of the Border?

Q. My wife and I are about to retire and are considering moving to Latin America. Is that a smart move financially?

A. It could be. The Global Retirement Index, published by International Living magazine, ranks Mexico as the world’s most affordable country in which to retire. Living there comfortably costs about $2,135 a month—including a thrice-weekly housekeeper and gardener. Other places to make more of your nest egg include Panama (ranked No. 3), Costa Rica (9) and Belize (12). By comparison, the United States ranks No. 21. Some Latin American countries also offer foreign retirees discounts on medications and other products and services, as well as tax breaks on pensions and foreign-earned income.

However, U.S. citizens living abroad are subject to the same IRS tax filing requirements as those living here, and no matter where they live, their worldwide income is generally subject to U.S. income taxes. Also, if you’re collecting Social Security, find out how a move would affect your benefit payments. As for Medicare, you can enroll overseas at 65 if you’re eligible, but you won’t be able to use Part A, Part B or Part D medical benefits outside the United States.

Sid Kirchheimer writes about consumer and health issues.