Why Retiring Abroad Could Save You Money

In a previous blog post, I wrote about one of the key perks of living in Latin America - affordability.

I wrote that you can live quite comfortably in Latin America on your Social Security benefits, despite the fact that those benefits have only risen 3.6 percent in the last three years. For a retiree in 2012, the average Social Security benefit is $1,230.

One of my favorite treats, I mentioned, is that in Ecuador, I can afford to hire someone to clean my home. It costs me all of $10, which, I said, "is a good, fair wage."

But a reader of that blog didn't agree, and posted a comment, saying: "I would object to paying my household help $10. No, that is not a good fair wage. Would you want to do the same work for that price? That is exploitation and taking advantage of the poverty of the area."

So let me explain....

In general, the cost of labor is far less in Latin America than it is in the U.S. It's the reason just about everything costs less here -- housing and food prices, especially.

The minimum wage in Ecuador has risen considerably in the past five years, from $170 a month in 2007 to $292 a month this year. That's causing prices to rise across the board. Still, based on a 40-hour workweek, this makes the hourly minimum wage $1.65.

That's exactly how much I made as a supermarket cashier back in 1973, and in many ways, I am happy to report, Ecuador feels (and costs) very much like the U.S. of my youth. But I digress...

My housekeeper is paid $10 to clean my apartment, which is small at about 800 square feet and with a 300-sq.-ft. terrace. It normally takes her less than two hours to clean the entire place. Do the math and you can see that she is getting about three times the minimum wage.

While I understand that $5 an hour may not sound like much to you, it is, as I said, a good, fair wage in Ecuador. She doesn't work for me full-time, but only once a week. She has several other clients she works for, too, and she enjoys the flexibility of being her own boss. If she worked full-time for a generous local family she could expect to get somewhat less than $20 for an eight-hour day.

If I were to pay her more, others in the local labor pool would only want to work for those who pay more...the foreigners. And my Ecuadorian neighbors would not be able to afford to hire local workers. It's already a pinch to them that the minimum wage has risen more than 30 percent in the last two years alone.

(And need I point out that this is far more than the 3.6 percent increase in U.S. Social Security benefits over the past three years?)

I'd love to hear your thoughts about this or any of my blog posts. In fact, in my next post, I'll address another reader's comments about the inability to use Medicare outside the U.S. The options may surprise you...

Photo of Ecuador coins from Flickr user marshlight.