Journal of 25 y/o American retiring to 3rd world country

Where are you and where are you going?
JeanPaul
Posts: 66
Joined: Tue Jan 01, 2013 5:15 am

Post by JeanPaul »

I am moving to Lima, Peru in less than two weeks with the goal of permanent retirement. This journal will cover the normal budgeting issues, flavored by the surprises and complexities of living in a strange and exotic new place.
I have about 193K saved in total, so a safe withdrawal rate of 4% is $7720/year or $643/month. While obviously some of you guys are managing it, that seemed a bit lean for me in the US, so I figured I'd get a discount overseas, as this article so eloquently explains (Lima is quite cheap, among other virtues: http://voices.yahoo.com/why-retire-lima ... html?cat=3.)
Fortunately, I'll be living with my girlfriend, so that will help housing costs quite a bit, and should help a bit with costs generally. But then again, it might hurt - I've never lived with her before. She's quite frugal, but she definitely doesn't have a long-term saving mentality, and she likes us to go out. She will still be working, and I suppose that could also cause difficulty and tension if I'm relaxing when she's had a tough day.
We don't have an apartment yet, but will be living out of a hotel while we search. It's $25/night, including breakfast, so $375/month each, more than I want to spend for an apartment, but not too urgent for the short term (especially since it has a common kitchen and wifi/utilities are covered). Ideally, I'm hoping to pay $250 to 300/month for the apartment, which should leave me a nice cushion for food and miscellany. On my own, I would have opted for the sunny, safe, suburban, and cheap district of La Molina, but it's too remote for my girlfriend - we'll be looking for something in or around the (relatively) expensive and happening Miraflores area.
But I'm really going into all this quite blind – unlike many of you, I'm not starting out with any previous "necessary expenses" as a reference – I won't know the real price of a good-enough apartment/utilities, a monthly food budget etc. in Lima until I've actually hit the ground and lived there for at least a month or two.
I've never been one for big spending, though. My savings rate while working was always over 60% and in graduate school, I lived solo on about $900/month without any conscious attempt to budget. I also might be able to pick up a very little extra play cash each month doing things I enjoy.
If anyone has any advice about, for example, moving to a South American country, it would be very welcome, of course! Right now I'm basically just taking clothing, my laptop, and my tennis racket.
My finances at the moment:
98.5K invested in taxable accounts

77.5K invested in retirement accounts

3K in an HSA (in cash)

14K in a bank account
My investment asset allocation is 85% stocks/15% bonds. 40% US/60% foreign, with some tilt to small-cap and emerging.
I should be able to lower my cash buffer a bit once I get the lay of the land (and since my income will be low enough in 2013 that capital gains won't be a worry)


Christopherjart
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Post by Christopherjart »

I can't say if that would be doable for Peru, but that would be very liveable here. I know people who make less than that from their regular jobs. Sorry I don't know about the cost of living in south american countries.


dot_com_vet
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Post by dot_com_vet »

I'm looking forward to reading your journal.
The article quotes $500/month for an apartment. I'm in the midwest USA, and ok/decent apartments go for this. I'd be interested in reading about the differences you see there in standard of living.


Lorraine
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Post by Lorraine »

Check out the neighborhhod of Barranco. It's on the ocean, within walking distance of Miraflores, but a little cheaper. There is a lot o lovely old architecture there and a more laid-back vibe than the rest of the city. I stayed at a backpacker hostel there a few years back. Not sure about rent though. How did you choose Peru as a place to live? What will your gf be doing for work? I'm looking forward to reading your journal, as I hope to one day spend time living in Argentina or Chile. I lived for a year in Bolivia and it was one of the best things I ever did.


mds
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Post by mds »

Looking forward to reading your journal! This is something I've dreamed about for a while, so it'll be great to see how it goes for you.
Do you speak Spanish fluently? How did you choose Lima?
From a practical standpoint, what do you plan to do with your retirement account? Are you going to try to live off of the non-retirement investments? Or will you start early withdrawals?
Good luck!


JeanPaul
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Joined: Tue Jan 01, 2013 5:15 am

Post by JeanPaul »

Well, hopefully I can be a good guinea pig for you guys, without ending up the way most guinea pigs do in Peru :)
We choose Peru because it has a lot of virtues like cost, cuisine, temperature, booming economy etc. as described in the article. Also, I speak decent Spanish, and it's a much easier language than, say, Thai. Admittedly, though, a lot of it was because my GF's sister studied abroad there and loved it, and will move there at the same time as us (we won't be living together, though). Otherwise, we might have considered places like Mexico, Argentina and Chile more. My GF and her sister are from Madrid, so overall our Spanish is covered.
I did just get a scare seeing that pollution levels in Lima are higher than in any Latin American city, even Mexico City. Whoops... already bought my ticket :)
I should say that Peru is not necessarily permanent - we both want to travel and see new horizons, and quite likely would want to move on to other cheap countries after a couple of years.
Both sisters have degrees from the top university in Spain (and my GF a master's also), yet they still can't get good jobs in Spain (51% unemployed, 24% discouraged, 25% employed), part of why they don't wanna be there. My GF has a degree in English and French translation, so she can work remotely and earn dollars while spending nuevo soles, not a bad deal. She already has a contract-type job for a US company, and they say they can give her $1300-2600/month of work in Peru. However, she doesn't want to work remotely, at least primarily - she wants to be more integrated into the daily life of Peru, interacting with people etc. She also would prefer working for an NGO.
Yeah, people do really like Barranco, a lot of nighlife, art etc - it's definitely in consideration. I'm shying away from it, because of the little "study" I did of rent vs. safety by district. Basically it's in the first tier of expense, but the third tier of crime/safety. It seems like you pay a sort of hipster premium for gentrifying the place. But my data was on a district level, and people say there are better parts. And now that I know about the pollution, living on the ocean is more crucial!
My plan is to spend down all non-retirement money first, of course. Firecalc says that'11 have an 84% chance of lasting 15 years by itself, and it will last at least 11 years. By that point, all my retirement savings will be in Roths (half is already), so I can withdraw all the contributions. Finally, my last step would be to take distributions as equal payments. Given that they'll be Roth payments and I don't have other income, the tax consequences would be minimal.


m741
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Post by m741 »

I'm excited to read this journal. I'm looking forward to reading about a really different experience.


secretwealth
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Post by secretwealth »

I'm looking forward to updates. I'm on holiday in Guatemala right now and have got a good sense of prices. I think if Peru doesn't work out, living in a town on Lake Atitlan could also work.
Pros: Nice people, constant tropical climate (no need for heating/cooling costs), less polluted than most parts of Central America (but still the air quality is very poor by American standards)
Cons: Banking system is rudimentary at best, low hygiene standards make meat difficult to find and not very good quality, bureaucracy is pretty bad, and the lake's level is rising.
I think $643/mo. for one person would be plenty here. The market has very cheap fruit and vegetables but I've been warned about buying meat there. Restaurants serve filling meals for $3-$6 per person. If you're happy to stay in the small town, the only real costs are rent and food--and I think you could easily rent a 1br apartment for $300/mo. if you're happy to be a bit away from the lake.


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C40
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Post by C40 »

Mark me down as another that will be reading your journal closely. Thanks for sharing so far. I'm looking forward to reading much more on your experiences. :-)


akratic
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Post by akratic »

I'm definitely looking forward to this journal!
I spent a month in Peru three years ago, so here's some advice about Lima: you will get sick, probably very sick. You can only avoid the local water for so long before you slip up and buy a snow cone, or a seafood dish where all the bacteria in the water haven't been killed, etc. The locals are immune to the water, but you won't be initially.
The important thing is when you get sick, you have to take the antibiotics. My strategy in the US was always to let my body fight through any sicknesses it got. Peru was the first time that strategy failed. You can get the antibiotics at the Walgreens/CVS equivalent for cheap, like $20 cash, with no doctors appointment.
I think your budget will be very doable in Peru.


My_Brain_Gets_Itchy
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Post by My_Brain_Gets_Itchy »

Looking forward to your journal as well JeanPaul.
It's definitely part of my near future plan, so it's inspiring for me to read you are doing it now.


tylerrr
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Post by tylerrr »

I'm very familiar with Lima. I have family there and have been several times over the years The people are great. Food is delicious. It is affordable, but it's not dirt cheap like some think....
Women are beautiful....Oh, whoops...You already have a girlfriend..:)
It is dry there...Not a lot of rain at all. And it's cloudy a lot of days there....Yes, the pollution is quite bad in the city for sure....:(
Beaches are nice to North especially. Absolutely awesome place to surf if you want to start surfing.
There is great live music and dancing too. I love latin jazz.
The country is very diverse in geography. You can travel to the jungle Eastward, which I highly recommend to see the rain forest. Lima's climate is totally different than that...
Good luck....


JeanPaul
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Joined: Tue Jan 01, 2013 5:15 am

Post by JeanPaul »

I've arrived! Right now I'm sitting on the roof of my hotel. It's 79 and sunny (the latter being somewhat of a rarity apparently), with a nice breeze. It cools off a bit at night, but is still balmy. Weather-wise, even better than I was expecting (albeit after two days in mid-summer).
I haven't gotten moving too quickly, as we came in the evening, then spent the first day walking around the city, especially along the beach in Barranco and Miraflores. I even got a sun-burn (though they have helpful traffic light things which show the current UV level). It's definitely a little less PC than in the US - at least 4 or 5 times the girls got wolf-whistles and/or shouts from passing drivers - or maybe I was just looking particularly good that day!
We stopped to eat lunch at a little place in Barranco - 7.50 NS for the menu ($2.95), which was two courses (choosing from a list) and a pitcher of juice. The ceviche first course was quite good, but I found the pork in my second course a little fatty. Definitely filling even for an American, though. Our free hotel breakfasts are a little disappointing, just toast and butter and jam with tea, apparently traditional - the best part is the fresh-squeezed juice - papaya the first day and pineapple the second. And my sub-4-hour economy leg from Panama to Lima served a free meal with wine and beer (and no carding)! Obviously some private equity firm needs to come in and get rid of these extravagances...
The big accomplishment was getting cell phones today, which means we can do other stuff, like apartment hunt. It was $28 to buy a crappy pre-paid phone, but now just 4c for outgoing texts, free for incoming calls and texts... and I'm too young yo make outgoing calls - so it should be no more than $2/month). Electronics are definitely more expensive here - I saw my exact computer for twice the price I paid in the US.
My girlfriend is at a job interview as we speak, so that would definitely narrow down our apartment search
Even in Miraflores, the tourist district, I've only heard a language other than Spanish once - very different than European cities, which are filled with tourists speaking a variety of languages, including English. There are some tourists, like in my hostel, but most are from other Latin American countries. I know there is an expat community here, but it's not the visible on the street type.
The city is uglier than I expected in the rich districts - malls and fast food restaurants are mixed in everywhere, and the buildings all look a bit dirty from the air pollution. Even Lisbon or Porto, some of Western Europe's poorest cities (and with quite a Latin American flair, especially in Lisbon), look far more beautiful and affluent. Barranco actually looked a bit nicer, with a colorful, unassuming aesthetic. Even the Starbucks there was a sort of yellowish adobe.
One of the excitements is driving. Perhaps due to my sheltered American sensibilities, I felt like I was close to death a few times. Not that I was driving, but being driven by a local friend, and then especially in the public buses (only cost 30c, and they can be hailed like a taxi, and they try to drum up business with a sort of carnival barker style advertisement at every stoplight). Definitely don't stick your head out of the window - it will be torn off.
Money is just exchanged in the street by people holding big wads of cash! I exchanged a small amount for 2.53, with a going exchange rate of 2.55. Supposedly it's possible to get better rates leaving the tourist districts and bargaining with larger amounts. Grocery stores also list prices in dollars and you can pay directly with a decent exchange rate.
We've done a little of shopping, and prices aren't consistently amazing - some things are actually more expensive. Got enough food for about 5 individual meals for 15.5 NS ($6). Cheese is cheaper than in the US, but more than in Europe. Shampoo was more expensive than in the US (hard to beat 99c at CVS). Pasta and rice was quite cheap, though. Since we're living out of a hotel, though, there was no shopping around or buying in bulk. Haven't looked too closely (at things like meat, milk, produce), and admittedly I'm not actually that familiar with US prices.
Right now, though, I think I could meet my budget without too much trouble, even living out of a hotel. My daily expenses for food, lodging and transport have totaled to about $20 (right under my $23 or so target), and the cell phone will be insignificant long term. And I will definitely reduce lodging expenses from the current $12.50/day.
Update: My GF came home before I finished the post, and she got the job! Basically she's gotten paid by the project (although she's there from 9-5 M-F), then after three months if they're happy they'll make her permanent and get her a work visa. The Peruvian sense of time was fully on display. The interview was for 4, but they said 'un ratito," and she started at 4:30. Then she had an interview with the second person and they said "un ratito," and it was another 45 minute wait. But at least they didn't dilly-dally on the hiring decision.
She also got scammed on the way there! She took a taxi to the interview and he said it was 10 NS (about $4). She gave him a bill, but then he looked at at and said it was torn and he couldn't take it. She gave him another bill and took the ride. But then coming home, she tried to use the other bill and the guy refused it because it was fake. The first taxi-driver had substituted a counterfeit bill when returning the first bill! A cheap lesson in the scheme of things.


Christopherjart
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Post by Christopherjart »

being late and not thinking about time is pretty normal anywhere in Latin America at least for social situations and business.
I live in Mexico City so I've gotten very used to it, but I do remind people to call me if they'll be late since I don't like waiting a half hour or longer for someone to show up for a coffee date or whatever and after 10-15 minutes I'll usually just go home or do something else if they don't call.

The smog here really is not bad. There are a lot of pollution controls cars are checked for pollution levels, a great public transportation system, etc. :-) so considering the huge population we're doing pretty good.
If things are similar meat and dairy and factory produced goods will be more expensive as well as name brands. Vegetables and fruit would be cheaper. It'll be interesting to read more how you enjoy your time there.


JeanPaul
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Post by JeanPaul »

I guess the last post was a bit TLDR, so I'll be a little more to the point, and start with finances. For any additional color, read on afterwards.
Finances:

I now have a full months of data living in an apartment, so I can give a pretty confident summary of expenses, and it definitely looks like it's on track.
Remember my target is $667

Total monthly expenses: $581 (some one-time expenses are amortized).
Apartment: $288

Internet: $16

Water: $9

Electricity: $8

Groceries: $108

Restaurants: $50 (11 meals)

Laundry: $8

Vacation: $31

Entertainment: $23

Misc: $25 (phone minutes, kitchen supplies, toiletries etc)

Amortized one-time: $7 (handset, water filter etc.)
We've also built up some inventory (like buying cereal in bulk). On the other hand, longer trips which we have planned will create bigger expenses.
Housing:

We found an apartment, in Miraflores, the most expensive, downtown district. It's not ideal, since it doesn't have laundry or an oven, but we were getting tired of living out of hostels, and it's just a 3-month contract, so we can look for a different place in a more leisurely way. We looked at some really cheap places, like a big apartment for $275 in a pretty beat-up area (the upper-class locals who were driving us around wouldn't even let us get out of the car), but at out level of experience, we went with a pretty safe option. I do love the location though -within walking distance of the beach, the central park, a library with a free movie theater, the best nightlife, the Metropolitano (best public transit) etc.
Work:

My girlfriend's job is quite chill - she comes and goes when she wants (rarely getting in before 11 AM) and didn't go at all last week. Since she gets paid by piecework (page translated), that's fine for everybody. However, she also saw the downside of not being a salary slave. She made about 500 soles each of the first two weeks that she was settled in (about $200), which would be more than enough (and more than my spending), but last week was completely dead, with no work, so she just didn't make any money.
Cool things:
All in all, I've always felt the day is too short, contrary to some people's worries that retirement would be boring, between learning Spanish and German (and conversation exchanges), poker, chess, basketball, exploring the city, the beach, trips, meeting people, going out, reading, movies/TV, my housewifely duties etc.
We've made two weekend trips which were a lot of fun.
One was to Supe, an extremely poor village without running water 4 hours north of Lima. We stayed with a local family that is good friends with my girlfriend. They have a farm with watermelon, passion fruit, bananas, mango etc, as well as hogs, chickens, dogs, children everywhere. This was a huge family with 31 grandchildren, living in a terrible slum, but they were amazingly cheerful, welcoming and friendly, showing us everything, taking us to the beach, and to some great deviche, then overloading the three of us with some 50+ pound of fruit when we returned home (that lasted us for weeks). It was a weird contrast though, as even without running water, and living in a stone block in the midst of crumbling empty lots, they had cell phones, and the TV was on 24 hours a day, with things like Power Rangers.
Then the other was quite the opposite, to a ritzy gated beach resort in the south of Lima called Las Lagunas (there are beach houses for basically 72 miles straight south of Lima on the Panamerican Highway), where a friend of ours owns a beach house. We hung out in the pool and jacuzzi, swam in the lagoon in the back yeard (which heats up all day 'til it's near jacuzzi temperature at the surface), and walked the two blocks to the beach, past Mercedes' and sports complexes with manicured red clay courts.
Another fun thing for me is the chess tables near the central park where you can always get a game, with some pretty strong players.
There's also a cool nightclub called Help in Barranco on Thursdays, which is always entertaining, especially when they had a Carnaval night, with paint being sprayed everywhere over everyone and their clothes.
Negatives:

We've already had a few criminal experiences. First of all, we've gotten two counterfeit bills, one from a taxi, and one from a Chinese restaurant (neither caught at the time). In additional, my girlfriend's wallet was stolen on the Metro - it only had about $40, but she also had various IDs and annoying things to lose.
Also the restaurants are a bit of a negative. Sure, there are a lot of places you can get a solid filling meal for $3, but there is a definite lack of variety for a Californian. Even the Chinese and Japanese restaurants are very Peruvian. And it's weird - fast food is actually more expensive than normal restaurants here, not just American chains, but like an Asian fast food place we went to.
The most annoying thing I've discovered is that it's hard to play sports (besides soccer) in Lima. Tennis and basketball courts are rare, and you have to pay for them. But now I have a regular Wednesday basketball game with some friends, and I just found a tennis partner, and we're going to try to find the least painful way to rent a court.


secretwealth
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Post by secretwealth »

Can you explain more about the counterfeit bills? I don't quite understand.
Another thing--I would love to see pictures of your apartment, if you don't mind sharing. Your budget sounds pretty similar to what people can do in Guatemala as well, and it seems like you've got a good balance between saving money and enjoying life.


JeanPaul
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Joined: Tue Jan 01, 2013 5:15 am

Post by JeanPaul »

Peru is the world capital of counterfeit money: http://www.time.com/time/world/article/ ... 52,00.html
The nuevo soles they make are of varying quality, but some quite good. There are various tests to see if they are fake - sometimes they don't get the texture right, sometimes the watermark is off, sometimes the lettering isn't raised right. Basically, except for banks and major supermarkets, anyone might give you a counterfeit bill, even if it's just trying to pawn off one they were duped into taking. As gringos, we are target #1 for counterfeit bills any establishment has accumulated over time. So basically, we've had to get into the habit of examining every bill carefully, looking at it in the light, rubbing it etc. And in fact, whenever we spend money, the cashier will do the same thing - sometimes for up to a minute for, say, a 100 sole bill. Fortunately most of our spending is at Metro (the major supermarket) and we've never had any problem there.
The taxi driver was a bit more devious in duping my girlfriend, since he wasn't giving change. She gave him a bill, and he examined it, then said - "this bill is torn," can you give me another. Then while she was looking down to get another, he switched the counterfeit bill in and gave it back to her. That was only 10 soles though ($4). My counterfeit at the Chinese restaurant was 20 soles ($8).
I'll see if I can get some pictures together.


JeanPaul
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Post by JeanPaul »

OK, here's some pictures:

http://imgur.com/a/GUyfr
The first four are of my apartment and the entrance, with its comically small door (locked after 8, when the doorman leaves). It's cozy, but that's less to clean! The one in the dodgier district was half the price, 50% bigger, and included utilities.
The next four are of Supe, the small, poor town four hours north of Lima.

1) The front of the house (the blue one on the left), next to a vacant lot and attached to a partially built house and a pile of dirt

2) The kitchen, bare stone floors and a lot of tarp

3) The farmhouse where many of them live for most of the time, with the farmer talking on a modern cell phone next to his straw walls

4) A small fraction of the big family, which is just teeming with children, with motherhood starting at 18 or so.
The next four are of the contrasting beach house of our friend that we spent a weekend at. Beach houses have become a marker of the Limeño middle class with the economic surge, and some go for $1 million+ in a country where the average wage in even the richest district of Lima is no more than $400/month: http://www.nytimes.com/2012/03/02/great ... .html?_r=0

To get to San Bartolo, a beach resort town 51 km south of Lima, costs only 1 sol (39 cents) by bus.
The last two are just an illustration of how one's idea of basic staples changes. Instead of bananas and apples, the basic fruits are mangoes ($0.17/pound) and passion fruit ($0.34/pound) (don't get me wrong, bananas are cheap too). Pictured are two of my inventions - 1) crepes with passion fruit, lime and sugar, and 2) a smoothie with banana, pineapple, mango and passion fruit.
My other very basic staple now is aji, especially Tari, the sauce created by Peru's leading chef, Gaston Acurio


C-Dawg
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Post by C-Dawg »

I'm really enjoying your journal. Particularly because I'm projecting to be in almost exactly the same situation financially at the end of this year as you are going into it and have set the end of the year as a goal to make some sort of major change in my life.
What is your internet service like? I don't think I'll be ready to quit working entirely and would love to do something like this while continuing to do consulting work remotely on a part-time basis.


secretwealth
Posts: 1948
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Post by secretwealth »

JeanPaul, great pictures--thanks. Very interesting!
Where do you buy groceries? When I was in Guatemala, there were two options: supermarkets and local markets. The latter was below my own personal hygiene comfort level, but the supermarkets seemed fine. The price differential between the two was big. How's that compare to Peru?


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