Central America is recognized as the place to shop for a top retirement option if you're retiring on a budget. Indeed, a retiree's nest egg can stretch far in this accessible, sunny, and affordable region.
But here's news: A retiree's nest egg can stretch just as far right now in Portugal.
In fact, I'm finding the Algarve, where I'm scouting this month, to be more affordable than Panama City, where I normally hang my hats, and as affordable as other heralded low-cost destinations back in that part of the world.
In 15th-century Lagos, a primary destination in the Algarve, with a lively old town crowded with tourists each day I passed through, one café in the heart of it all, on the main square, offered a hamburger for 2.80 euros, a small pizza for 3 euros, and sandwiches for not much more. Not fine fare, but this is tourist-central.
When I commented on the surprisingly low prices to my traveling companion, a native Portuguese, he was confused.
"These cafes and restaurants are much more expensive than others outside the center of the city," he explained. "Other places elsewhere in the city would be cheaper."
How could a hamburger be cheaper than 2.80 euros? I've been told about hamburgers for $3 in Panama City, but I've never seen one. In the restaurants frequented by tourists in Panama's capital, a hamburger costs $6 or $7.
But there's more to life than hamburgers, you may be thinking...
Here's how I'd compare the cost of living in Panama City with the cost of living in Lagos overall:
In Panama City, a one-bedroom apartment not in one of the highest-rent districts (Avenida Balboa, Punta Pacifica, or Punta Paitilla) but suitable and comfortable for a retiree, rents today for $500 or $600 per month.
In Lagos, you could rent a one-bedroom apartment in the center of the city for 400 euros per month. At the current exchange rate, that's $444.
People live in Panama City without air conditioning, but I don't understand how. That is, living in Panama City, your electric bill can be a not insignificant part of your budget, depending on the size of your apartment and how many hours a day you choose to cool it. Figure at least $100 per month. We're living in a three-bedroom apartment with floor-to-ceiling windows in most rooms. We run the air conditioner whenever we're home. I won't tell you how much our monthly electric bill is (my husband doesn't like to be reminded), but it's more than $100.
In Lagos, you'd need neither air conditioning nor heat. Even if you wanted to invest in these expenses, you couldn't, as many places aren't equipped with either heating or cooling (though some houses have small fireplaces). Living here, you could figure about 75 euros for electricity each month.
In Panama City, we pay $80 per month for a package that includes Internet, cable, and telephone. In Lagos, figure about 100 euros for these combined expenses, slightly more than over in the Hub of the Americas.
I've told you about the hamburgers...
Considered more broadly, eating in Lagos is more affordable in general than eating in Panama City ... and eating out in Lagos is a screaming bargain compared with eating out in Panama City today.
Panama City has been developing itself for the tourist and executive traveler for the past 10 years and today boasts many good restaurants, most of which are priced for the tourist and executive traveler. Prices at Ruth's Chris, Hard Rock Café, and Hooters are slightly higher than at those establishments in Baltimore, Maryland (my frame of reference in the States), and local Panamanian fine-dining experiences will set you back $40 or $50 per person or more.
In Lagos, I've enjoyed some of the best meals I've ever eaten -- menus feature prawns bigger than lobsters I've known and every other kind of sea creature you can imagine, all fresh from the ever-present sea -- never for more than 20 euros per person. A glass of Prosecco is as little as 4 euros.
This is where Lagos really comes out ahead, depending how you like to spend your time.
I like to walk. It's my preferred pastime. You could enjoy many pleasant hours walking around historic, cobblestoned Lagos, window shopping, stopping at outdoor cafes for a coffee or a glass of wine, and wandering around the harbor, the old fort, and the fountains outside the city's main church, for the cost of a few euros ... or free if you skipped the coffee and the wine.
Keep a car, and this whole coast is your oyster. Day trips to Sagres, Silves, Carvoeiro, Ferragudo, and beyond could fill many pleasant afternoons or long weekends. The sun shines year-round in this part of the world, and temperatures are rarely too hot or too cold to keep you from setting out to explore the many old-town squares or the great outdoors. Castles, fortresses, museums, and small theaters charge 3 euros per person entrance fee on average. Cliff walks, beach combing, and bicycling are no charge.
Now, here's where a comparison of Lagos, Portugal, to Panama City, Panama, begins to fall apart. These are very different places.
In Panama City, you're not spending your days climbing rocky cliffs, exploring medieval fortifications, browsing museums showcasing the Age of Exploration, or even beach bathing. Pastimes in Panama City are more to do with shopping, spinning roulette wheels in the casinos, discos, and karaoke. Yes, Panama City has a beach, but I wouldn't bathe on (or in) it.
Panama boasts dramatically beautiful and appealing beaches, but they're to be found beyond Panama City.
As well, costs for things like rent and dining out elsewhere in Panama can be much less (half as much or less) than in the capital. But to enjoy that level of affordability in this country today, you need to be ready to live a little more off the beaten path and to embrace a more local, rather than imported, lifestyle. My point in the context of Lagos is that it's a center-of-the-Old-World destination, not an off-the-beaten-path one, that is offering a bona-fide affordable cost of living right now.
First, no, I'm not dissing Panama. I'm making the point that neither Panama nor Central America in general has the monopoly on affordable retirement these days.
Second, no, I'm not dissing on Panama City. I'm making the point that Panama City is no longer a super-affordable lifestyle choice, not relative to the rest of Central America and not even relative to some spots in Europe. Panama City remains my base and happily so.
Third, I'm not saying Portugal is better than Panama. I'm saying Portugal is today a reasonable option for a retiree on a budget. If you prefer the Old World to the New and want developed Europe, not developing world Central America, this is your chance.
Fourth, the disclaimer I offer often--which is that your cost of living anywhere can be controllable within parameters. Housing is your biggest expense no matter where you're living. Your monthly nut otherwise depends largely on how you choose to live.
This leads to another important point. What if the euro rebounds? That is, what if you move to Portugal to take advantage of today's exchange rate of $1 equals 1.11 euros, but the euro gains 20 percent, 30 percent, 40 percent, or more on the dollar in time? If you're living on a fixed retirement income, aren't you in trouble?
If you're on a fixed retirement income and like the idea of what Portugal (or anywhere in euro-land) has to offer, here's what I'd suggest. Buy a place of your own at today's favorable exchange rate. You could buy on Portugal's Algarve for the equivalent of $150,000 or less. That locks in your housing cost. Given today's overall very low cost of living in this region, even with a modest nest egg, you likely could set a little aside each month. If the exchange rate moves against you, your cost of living would increase in dollar terms, but you'd probably be able to handle it, given the savings you've accumulated and the fact that you're living in your own digs and therefore rent free.
Do the math. I think you'll be pleasantly surprised.