I ran across this awe-inspiring article at Investopedia by Jean Folger recently. First of all, Ms. Folger presents an interesting premise. Retiring in the Philippines with $200,000 of savings. A quick Google search shows some financial experts predicting that even 1 million US dollars wouldn’t be enough to retire.
Golden Year Goals
While a lot certainly depends on the location and lifestyle you choose in your “golden years,” it’s a good idea to start investing in your retirement at an early age.
Furthermore, more people are choosing to retire overseas for multiple reasons: new adventures, access to reasonable healthcare costs, and a lower cost of living.
Cost of Living in the Philippines
Consequently, the lower cost of living in the Philippines strongly appealed to this Crusty Old Expat. When my Filipina wife agreed to move back to her home country over nine years ago, the Philippine Peso to US Dollar exchange rate was hovering around 48 to 1. Today, it’s perched at close to 53 to 1.
How do you combat the issue of fluctuating exchange rates? Well, you could simply do nothing. Stand pat. Hold your cards.
USD to PHP rate over the last 10 years.
Graph courtesy of XE Corp.
Hence, you may face a higher cost of living if the exchange rate moves against you. Then again, the exchange rate could move your way. Therefore, by doing nothing, you take your chances.
This can be fine as long as you have a little flexibility in your budget — say 10% or so. In that case, you should be all right.
The second strategy has to do not with remaining flexible in the face of currency fluctuations, but insulating yourself against them.
You may want to stockpile the local currency (as a means of guarding yourself against the risk of the currency moving against you.) Many expats have done the following:
opened local bank accounts,
made local investments in real estate or stocks or bonds,
Or otherwise made sure they have substantial amounts of local currency on hand. They’ve protected themselves against currency changes.
Retirement Perks for Retirees in the Philippines
Aside from the lower cost of living in the Philippines, here’s some other perks for retirees:
Beaches you can access year-round
Tropical climate (you’ll never have to shovel snow again)
Senior citizen discounts for those 60 and over
Senior Citizen Discounts?
Also, be aware that while there might be some debate over whether foreigner can legally avail of senior citizen discounts, I personally have never had a problem.
While there may be some questions about the legality of such discounts for the old geezers here, like many of the rules and regulations of the Philippines, they’re rarely enforced.
Once you reach the age of 60 you can trot over to your local barangay captain and the barangay can issue you a senior citizen discount card if you’re 60 or over. Our local barangay does.
At least in our island province of Guimaras, this is true for the most part, as virtually all of my expat friends on the island have taken advantage of this perk. In nearby Iloilo City, I also know of foreigners who have obtained their discount cards and use them without any problem.
Stretching your Dollar
In her article, Ms. Folger wisely points out that no matter how much you have saved for retirement, you may be able to live better and cheaper if you live abroad.
International Living’s Cost of Living Index
Each year, International Living’s Global Retirement Index ranks retirement destinations around the world, measuring factors such as climate, healthcare, benefits and discounts, and cost of living.
For the 2018 Index, the Philippines notched 90 out of 100 for cost of living.
International Living revealed that expats can live comfortably in the Philippines for about $800 to $1,200 a month.
If you live on $800 per month – probably the lowest amount on which most retirees could live comfortably – your $200,000 savings account would last about 21 years.
Live on $1,200 a month and your savings would last 14 years.
Above all, this assumes the unlikely situation that your monthly expenses stay the same over the years. Also, it supposes that you have no other income or expenses during retirement.
In addition to savings, many retirees have access to other income sources during retirement. The average retired worker’s Social Security benefit, for example, is $1404 per month for 2018.
Adding Social Security into the mix alone makes retiring comfortably in the Philippines with $200,000 start to seem like a very real possibility.
Your monthly benefit might be enough to cover most of your living expenses – housing costs, food, activities, and basic healthcare.
Consequently, you could have money left over for the occasional trip back home or to cover a sudden expense.
Should You Rent or Buy?
Location is the key to rental costs in the Philippines. Just like it is anywhere else on the planet.
According to city and country database website numbeo.com, as of 2018, the average monthly rent for a one-bedroom apartment in a city center is $230;
Outside a city center, the rent drops to an average of $129 per month.
For three-bedroom properties, the average rent is $505 inside cities and $277 outside cities.
However, if you’re into a long term commitment to the PH, what about a condominium? Affordable rentals are available of course. Maybe buying a condo would be more cost-effective.
Foreigners buying property in the Philippines, in general, is prohibited. That said, expats can purchase condominiums. Essentially, condominium ownership does not convey any type of ownership in the land on which it sits.
The Vacation is over
Reality sets in once you actually retire. Most expat forums recommend visiting the place you plan to retire more than once before making a decision to live there. Also, it might be wise to visit more than one location.
Try to visit from a resident’s perspective, rather than as a tourist.
Above all, don’t act as if you’re still on vacation when you visit your potential new home. Sure, it’s normal to splurge when you’re on vacation, but spending too much on meals and attractions for the long-term can burn through your retirement budget.
Go where the locals go. Discover where they go for meals, groceries and entertainment. Check with other expats, who are always generally more than happy to share such information. Every expat I know all have their favorite hangouts and shopping venues.
By getting to know the local vendors you can find out where to buy things at the “local” rate instead of the “tourist” rate.
It’s a big step in maintaining a low cost of living abroad.
Can You Retire in the Philippines with $200,000 of Savings?
Well, we don’t have any way to predict how long we will live, do we? That makes it difficult to know if $200,000, 10 million pesos, would last. However, with a guaranteed source of monthly income, like Social Security or other pension plan, it’s very possible.
Living in the Philippines during your retirement years can offer a comfortable lifestyle for your money and make those retirement dollars stretch further.