Currency Trends and Retirees

Currency Trends and Retirees

A major result of globalization is that people everywhere in the world learn more about other parts of the world. This has caused many people to realize that there could be advantages to retiring abroad. For some people it is the environment such as beaches, mountains, or access to activities. For other people the driving reason is financial. They can live a much better lifestyle with the fixed income they have in retirement.

The decision to retire abroad can be difficult. If a retiree buys a home in an area where prices don’t increase or where properties are hard to sell, it could tie up or endanger a big part of their retirement nest-egg. The retiree may find that children, grandchildren and friends do not come to visit or do not come as often. Sometimes there are medical issues.
On the other hand there can me many benefits. Taking advantage of a favorable currency trend can be one of them. For example:

The Nicaraguan Cordoba has lost value against the US$ at the rate of about 5% per year since 2002. This would mean an increase in income for someone with a dollar-based retirement fund of 5% per year. That same person, living in the USA would have seen their purchasing power diminish because of inflation. In order to make a true comparison one would need to compare the inflation rate in Nicaragua. How effective are official inflation rates. If the Cordoba had improved the retiree would have lost even more purchasing power.

Governments have a tendency to make these rates appear artificially low; because of their effects on entitlement programs and the appearance of their economy and government. The only way to really measure inflation on a personal basis is to examine the personal budget. Find some old newspapers and discover what the cost would have been at some point in the past and then compute the change to the present time.

In the case of Nicaragua, the price of fresh vegetables and meats is considerably cheaper than in the USA. Real estate in exotic locations is not a great deal cheaper. If the retiree is content to live in a property similar to what the local inhabit, a really nice home can be had for considerably less than in the USA. It may be a really good idea, wherever one retires, to rent a home for 6 months or a year and get used to living in the new location and get familiar with the neighborhoods and the markets. It may be possible to find a job in the new environment and really get to know some people there.

In the first episode of this blog “What and Why”, working abroad was not mentioned as a reason for buying international real estate. That was a serious omission. The next blog will discuss the currency implications of that.

Concerning future postings…Next Tuesday, I will go to Chicago. On Wednesday and Thursday I will participate in a National Association of REALTORS (NAR) Presidential advisory group meeting on the Future of International Real Estate and NAR’s position in that future. The posting for those days will focus on what I learn. Friday and Saturday I will teach an “International Real Estate for Local Markets Course” for the Las Vegas Assn. of REALTORS. I will report on international real estate investment in Nevada on those days. The following week the topic will be working abroad as a form of subsidized travel. I will ask some friends who have more knowledge about that subject to make some guest blogs.







David Segrest is a REALTOR in Charlotte, NC

David S. Segrest, CIPS, CCIM, TRC, CEA
david@segrestrealty.com
http://www.segrestrealty.com
Serving the world in the Carolinas, Serving the Carolinas in the World