Tuesday, August 23, 2011

Thoughts About Retirement Revisited

It’s time to revisit my thoughts about retirement  two years after I first wrote about it here: http://aboutlifeandrunning.blogspot.com/2009/04/thoughts-of-retirement.html . From time to time when I think as if I’m getting tired of the rat race, my thoughts wander to what it might feel like to retire early. The primary considerations of two years ago still stand as documented at that link above.
            My mortgage is due to be paid off in about 6 ½ years and by then I would also be able to start drawing funds from my retirement savings without penalty, other than taxes, depending on the type of account. I won’t go into the differences between Roth and tax deferred IRA’s and 401K or 403B plans, all of which I have had in the 30 odd years I’ve lived and worked in the U.S. Certainly, paying off the mortgage will be a big reduction in my expenses. It is after all the biggest monthly expense which covers about 60 % of my self imposed strict budget. If and when that expense disappears, will I be able to retire then, or continue working lesser hours just so I can keep my health insurance going? See, health insurance is my biggest concern because without an employer contributing to the cost, it is something very expensive to maintain, if you pay the whole cost out of your own pocket. Just before I wrote this, I looked it up and the costs terrified me. If I retire at 60 when I pay off my mortgage, the monthly payment which used to go to the mortgage lender  will be used to pay for health insurance instead, at least until I qualify for Medicare five years later. Of course the other option is not to retire early.
            But what if I really, really, want to retire early? Will moving back to the Philippines still be an alternative? The dollars go farther there as I previously mentioned. In recent weeks, I have surfed the web to look at the cost of homes in different areas of the Philippines. Metro Manila is definitely out of the question because it’s expensive to live there. Even if that is to be considered, the most I could possibly afford would be a studio condominium unit, which is so tiny I would feel squeezed in. There have been suggestions about living in the following cities: Dumaguete (a lot of expatriates supposedly live there), Davao, Cagayan Do Oro, and Zamboanga were among the ones I looked at. Compared to homes in the U.S. which would cost more than what I have saved so far in my lifetime, for the price of about 1/7th of what I have, one could have at least a 2 bedroom condo or house depending on what city you choose. Even though I looked at Zamboanga where my mother lives, it was not one of the suggested places because it is not as safe as the others mentioned. The homes are cheaper there though. There is just one problem with this scenario. Only Filipino citizens can buy a house and lot in the Philippines, although condominiums are exempt from that law. If anyone from the Philippines reads this, please correct me if I’m wrong. I have no qualms about living in a condo, mind you. I live in one now.
            Ok, now let’s say I decide to retire at 60 and move to the Philippines and buy a home there. There is still the health insurance concern. An expatriate living in the Philippines mentioned in his blog that he set aside $10,000 in case he develops any catastrophic illnesses that requires hospitalization and other expenses that follow.
            After the initial major expense of buying a home, I could possibly live on $500.00 a month until I turn 62 when I can start collecting a reduced amount from Social Security . That would still more than double my budget, that is, if Social Security would still be available then. Farther down the road at 65, I start qualifying for Medicare, which is no good in the Philippines. So what now? Move back to the U.S. just because? By that time, out of pocket Medicare premiums may no longer be affordable to me, and besides, where would I live?
Am I thinking too far ahead? ASTAGPIRULA! This is giving me a headache, LOL!
            Another thing I wondered about is if I can retire now. Well I looked at my net worth a few days ago and the available cash I have which are not part of my tax deferred retirement plans. Here is the nitty gritty: I cannot retire at this moment because if I pay off my mortgage, I would hardly have any money left that’s not tax deferred. And I don’t foresee selling off my condo so quickly that I can vamoose to the Philippines right away. If however I can sell my condo, I may have enough to make it last until I can draw funds from the retirement accounts when I turn 60. So darn complicated. Hmm, unless I win big in the Super Lotto soon. Otherwise, forget about tax deferred and think about retirement deferred instead.
            Having said all that, here are some homes that have piqued my interest because of the price and location. There’s just one possible problem – I don’t know anyone there other than a former classmate from elementary and high school: http://www.philippine-real-estate.net/Camella_Lessandra_Residences.1643.0.html
                Does anyone have thoughts on the matter? Your feedback is appreciated.

Public comments below, private comments: E-mail Me!


F. Francis Cid, MD said...

Here are a few tips:
1. Secure a dual citizenship. Go to the nearest Philippine consulate and apply for one while still in the USA. A dual citizenship will allow you to own property in the Philippines.
2. Think about a second career. While it is nice to dream about retiring, the reality is very different. You are still young and you will get bored.
3. Think of a business. A business will allow you to augment your income and still have personal time to enjoy. Doing something productive will also prolong your life and stave off mental deterioration.

Noel DLP said...

Great tips Francis! Thanks for the suggestions. It's good to see things from a different set of eyes.