Last month, my wife and I were having lunch with Erika Samuels in Boquete, Panama. It’s a small mountain town at the base of an extinct volcano called Volcán Barú. I’ve changed her name and some details to protect her privacy. But her story reflects the plight and flight of many adventurous retirees.
“When I spoke to my financial advisor, he said I would have to get creative if I wanted to retire,” said Erika, while she sipped a mango smoothie. The fifty-eight-year-old American spent most of her career teaching at private schools around the world. But a change in leadership at her latest school and the strict protocols brought on by COVID-19 was more than she could take. “I needed to get out of there,” she said, “but I didn’t have enough money to retire in the United States, so I decided to try Panama.”
Panama has long been popular among budget-conscious retirees. In 2021 International Living magazine ranked it the second-best place to retire, after Costa Rica. It’s also relatively easy to become a resident.
Qualifying for Panama’s PensionadoRetirement Visa requires proof of income of $1,000 a month from a government agency (like Social Security) or a defined benefit pension. Residents can then take advantage of Panama’s discounts for women over the age of fifty-five and men over sixty:
50 percent off movies, theaters, concerts and sporting events
50 percent off the closing costs when purchasing a home
50 percent off hotel stays from Monday through Thursday
30 percent off hotel stays from Friday through Sunday
25 percent off airline tickets originating in Panama (I spoke to a couple that received this discount on several connecting flights to and around Europe because they flew from Panama).
25 percent off restaurant meals
15 percent off dental and eye exams
15 percent off hospital bills (if the patient is uninsured)
10 percent off prescriptive medications
When I met Erika Samuels, she was partway through her residency application. She’s too young to qualify for Social Security and she doesn’t have a pension or annuity that pays her at least $1000 a month, so she didn’t qualify for the Pensionado Visa. Instead, she applied for Panama’s Friendly Nations Visa residency program. “I knew I had to act quickly,” she said, “because the Panamanian government announced upcoming changes to the Friendly Nations Visa.” Those changes, which take place in August 2021, require that successful applicants either have a job in Panama or invest at least $200,000 USD in real estate. Erika wasn’t alone in her rush to gain residency before the new rule applied.
Kraemer & Kraemer is a law firm that specializes in helping people gain residency in Panama. This month, one of the firm’s associates told me, “Since the government announced the change, we’ve had six times as many people apply for residency, compared to what’s usual. They want to get in before the changes take effect.” Unlike the Pensionado Visa, the Friendly Nations Visa allows people like Erika to work in Panama. She doesn’t have enough money to retire, so she hopes to pick up some online work.
In fact, Panama is seeing a rush of young working residents thanks to a 9-month Digital Nomad Visa that the government implemented in May 2021. It’s tempting to work from a hammock on a Caribbean beach or a deck overlooking a jungle-surrounded section of the 50-mile long Panama Canal.
In many ways, Panama seems to have it all: modern living in Panama City; cool mountain towns like Boquete and idyllic Caribbean beaches on Bocas del Toro.
Panama also uses the US dollar. It’s far safer than Mexico, and you can safely drink water from the tap. But the low-cost of living is often over-stated. I’m writing this from the small Panamanian beach town of San Carlos, after spending six weeks visiting the country’s most popular retirement destinations. As we always do when touring other countries, we’ve documented every cost. We’ve also spoken to several retirees and looked up cost-comparisons on Numbeo.com. Panama isn’t cheap compared to Mexico, Southeast Asia or most of Central and South America. But the term, “low-cost” is always relative.
For example, according to Numbeo.com, Panama City’s rental prices are almost 50 percent cheaper than in Austin, Texas. Consumer prices are about 10 percent lower in Panama City and restaurant meals are about 25 percent lower. According to Numbeo.com, a standard of living that would cost $4,800 a month in Austin would cost about $3,500 a month in Panama City.
If, however, we compare Panama City to Memphis Tennessee, it doesn’t look as cheap. A standard of living that would cost $3,900 a month in Memphis would cost $3,500 a month in Panama City. And while plenty of Panama City’s buildings are first class, the building quality codes are more consistent in Memphis. You can say the same about the roads and sidewalks. When I was cycling with groups of local Panamanians, we kept yelling, “Hueco!” to warn other riders of massive potholes ahead.
And one day, while cycling in El Valle de Antón, I fell off my bike on a slippery descent. You’ll find good medical facilities in Panama City, but in smaller towns, you might be in for a shock.
Having said this, they cleaned my wounds well for just two dollars.
However, if you insist on first-world levels of service and a quality of living that you get in the United States, then Panama’s not for you. As with most developing countries, it has modern elements. But if you’re bringing American, European or Canadian expectations into such an economically diverse culture, you’re going to be disappointed. On the other hand, if you’re looking for simpler living, enjoy embracing different cultures and you’re patient, Panama might just be the place you’re looking for.
Andrew Hallam is a Digital Nomad. He’s the author of the bestseller Millionaire Teacher and Millionaire Expat: How To Build Wealth Living Overseas