05/23/2013 08:14 am ET Updated Dec 06, 2017

Our Retirement Strategy -- With Or Without Social Security

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Last year, 2012, marked the first year since 2009 that U.S. retirees saw a cost-of-living adjustment (COLA) of +3.6 percent in their Social Security benefits.

In other words, along with suffering through a tough global economic situation, retirees who depend on Social Security endured three consecutive years without a cost-of-living raise. This was an historical event, mind you -- the first time in three and a half decades that no cost-of-living increase was forthcoming.

And while news of the COLA increase is welcome, the downside is that the COLA will be offset by rising Medicare premiums, which are usually deducted from Social Security payments. And that's not to mention the costs of food, housing, gas, and other items that have risen far more than 3.6 percent in recent years.

And now, least you forget, the president proposes to cut $400 billion from Medicare and other health programs over the next decade. And that's in addition to cutting Social Security and Veteran's Benefits by $146 billion..

While Dan and I are more than a few years shy of being eligible to collect Social Security retirement benefits, this latest news doesn't make us happy -- mostly because of the effect it has on friends of ours who do depend on it.

It does, though, reinforce the fact that we made the right decision when -- in midlife and at the height of our earning potential -- we decided to turn our lives upside down and move overseas.


We had a modest amount of savings. But even more, we had a desire to do something fun and exciting. We didn't want to eventually arrive at the end of the road with any regrets.

We were new subscribers to International Living. We'd read the electronic postcards, poured over the magazine articles, special reports, and more. The message just made sense: you can live a better life for less money overseas.

So we sold our house, cars, and furniture, and moved to Ecuador. We did, indeed, find life to be far less expensive there. And the fun and adventure was well worth anything we may have given up.

In fact, after a decade living in Latin America, we no longer see much difference between the "First World" and what is perceived as the "Third World." Modern supermarkets, high-tech malls, high-speed Internet, complete cell phone coverage, and excellent doctors and healthcare facilities... we have all that in Latin America, of course.

In those early years of living overseas, we did what International Living has always recommended: we rented. ($600/month for a four bedroom/two-bath house in Quito with a garden and separate guest casita.) Only after we were really sure that we were cut out for the expat lifestyle did we buy our first overseas property.

Today we live in a condo in Cotacachi, Ecuador. We pay less than $30 for our annual property taxes. We have a comprehensive private health insurance plan that costs us one-fourth what a similar policy back home would cost. Our homeowner's association fees are $100 a month. We spend $5 or $10 at the local farmer's market each weekend for produce to last a week or more.

Because our daily living costs are so low, we can afford to splurge on someone to clean our house -- our condo is small and we pay just $10 for two-and-a-half hours of work. These are good, fair wages. (Ecuador's minimum wage is $318 a month -- and the cost of living is equally low.)

So can you live a good life on your Social Security income when you live overseas? Yes. We know people who are doing it. And while no one is happy about the idea of budget cuts to Social Security and Medicare... frankly we're not worried. Our retirement strategy has always been to do just what we're doing now. Live better for less overseas. Now that's security!

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Fantasy Retirements