The currency exchange rate between the USA and the country that you retire to is one of these “external budgeting factors” that has an influence on how much foreign currency you will have available. If you retire abroad to a country where the US dollar is strong, you will be able to obtain more foreign currency for living. On the other hand if the US dollar is weak at your retirement destination, you will have less income available for your monthly budget.

In addition to the currency exchange rate, the second most important “external budgeting factor” will be the purchasing power of the foreign currency when living abroad. The Economist magazine has developed the Big Mac Index which is a useful tool for estimating how much it costs to live in a particular country.

If you are planning to retire overseas, the Big Mac Index may help your planning for living abroad. The price of a Big Mac has evolved into a nice economic standard for estimating the cost of living around the world. For better or worse, McDonald’s maintains uniform standards for making Big Macs internationally. While the quality of the hamburger (or lack thereof) may be relatively standardized, the price of a Big Mac is not from one country to the next.

Using the Big Mac Index to Find an Affordable Retirement Destination

If you are planning to retire abroad, one of the things that you might be seeking is an affordable place for your retirement. The Economist publishes a Big Mac Index annually that was intended to show the relationship between the purchasing power of different currencies. You can use it as a quick and dirty way of determining what the cost of living will be like in different countries.

For example, in 2009, the average price of a Big Mac in the United States was $3.54. Using this as a base, you can then guesstimate what the cost of living is like in other countries by comparing the price of the Big Mac in another country.

Expensive Countries to Retire Abroad:

The price of a Big Mac is the highest in western and northern European countries. The price of a Big Mac is $5.79 in Norway, $5.60 in Switzerland, $5.07 in Denmark, $4.58 in Sweden, and averages $4.38 in other countries with the Euro as its currency.

Obviously, the average person will not live entirely on Big Macs in their retirement, but the basic cost of the ingredients: two beef patties, special sauce, lettuce, cheese, pickles, onions and a sesame seed bun combined with the labor costs of making, packaging and selling are high in this part of Europe.
Thus, the cost of the Big Mac in Norway is a reasonable indication that the cost of food and labor in northern Europe could be 60% higher than in the United States. On a tight retirement budget, Northern Europe may not be an ideal retirement destination for living overseas. If budget is not a limiting factor for you, then of course you would use other criteria for selecting a retirement destination and Northern Europe might just be one of the best places for retiring abroad.

Mid-Priced Countries to Retire Abroad:

Countries where the price of a Big Mac is comparable to the cost of a Big Mac in the United States include Israel ($3.69), Brazil ($3.54), Canada ($3.36) Britain ($3.30), Japan ($3.23) and Turkey ($3.13).

In very rough terms, the price of Big Macs in these countries suggest that the cost of living in these countries is comparable to that in the United States. This is not 100% true because of variations in the cost of other things in these countries (besides the two all beef patties…), but it is a good first approximation of the cost of living.

Reasons to retire overseas to countries in this category would not be so much for the economics of lowering your costs of living. If you live comfortably in the United States, other factors such as climate may be a more important determining factor.

Low Cost Countries to Retire Abroad:

The price of the Big Mac is much lower in Russia and Eastern Europe ($1.73 to $2.92) and the lowest in Asia ($1.52 – $2.07). Depending on which of these two regions you select for living abroad, the cost of living could be as much as 60% less than in the United States. If you are looking for a cheap place to retire, these are likely to be viable retirement destinations.

Again, although you are not likely to live on a diet of Big Macs, the index is a reasonable reflection of how much it costs to live in different parts of the world. If you were to retire abroad, the best location for a Big Mac attack would have been in Malaysia for $1.52.

In 2009, if you required a low cost of living to retire abroad, but in an economy developed enough to sustain a McDonald’s franchise, then the old Eastern bloc, Russia, and the newly developing Asian economies seemed the best bet for retiring overseas.

For a complete listing of Big Macs prices, you might want to take a look at the Economist.

Purchasing Power: Summary

The currency exchange rate tells you how much foreign currency you can obtain for one US dollar. It is a measure of how much foreign currency you will have available when you convert your retirement dollars into another currency.

Purchasing power is different from the currency exchange rate. It is a measure of how much goods you can buy with a set amount of money. In countries with high purchasing power, your money will buy more goods than in countries with a currency that has low purchasing power.

 (Photo by: TheD)

When you make the decision to retire abroad, management of your household budget becomes more complex. Living abroad exposes you to many “external budgeting factors” that are not really within your personal control. Sound management of your household budget requires you to take into account these “external budgeting factors”. The major external budgeting factors that you will need to consider are currency exchange rates, purchasing power, and inflation rates in other countries.

Some Basic Definitions: Currency Exchange Rate and Purchasing Power

Currency Exchange Rates: the value of one US dollar in the currency of a foreign country is the currency exchange rate between the USA and that country. For example, in January 2010, the currency exchange rate between the US dollar and the Philippines peso was about 46 pesos. During that month, one US dollar (USD) could be exchanged for about 46 Philippine pesos.

The currency exchange rate is determined by the supply and demand of both currencies on the world market. When the US dollar is in high demand, the dollar tends to be “strong” and may be exchanged for more foreign currency. On the other hand, when the dollar is not in demand and there is an oversupply of dollars on the world market, then the dollar tends to be “weak” and is worth less of a foreign currency.

Since the currency exchange rates changes from day to day, one needs to keep an eye on the trends in the currency exchange rate. If the dollar is growing stronger, one is able to obtain more foreign currency for your household income. But, if the dollar weakens, you will find yourself with a shrinking income each month. You must be prepared for these kinds of fluctuations in the future if you want to manage your household budget effectively.

Purchasing Power: while the currency exchange rate establishes the equivalence between two different currencies, it is not an indication of the purchasing power of the two currencies. For example, although 1 USD may equal 46 Philippine pesos the purchasing power of the two currencies in each of their home countries are not necessarily the same. In the USA, one Big Mac meal might cost $5 USD (230 Philippine pesos), but in the Philippines that same $5 converted into pesos will purchase two Big Mac meals.

Thus, the purchasing power of the US dollar or its equivalence in Philippine pesos is much greater in the Philippines than in the USA. If you are living abroad and are blessed with a strong US dollar and good purchasing power, management of your household budget is made easier. But a weak dollar and poor purchasing power spells trouble for your budget.

Historical exchange rates for the Philippines peso, Thai bhat and Singapore dollar.

An Historical Review of Currency Exchange Rates

Currency exchange rates are not constant. They change from minute to minute. To see how currency rates change, we explore the US currency exchange rates for three currencies: the Philippines peso, Thailand’s bhat and the Singapore dollar over the past 15 years. To make comparative changes easier to examine, the value of each of these currencies have been normalized to a value of 1.00 beginning in 1994 (see graph above).

The currencies are evaluated in four different periods so that it is also possible to explore different economic factors that influence currency exchange rates.
 
1994-1997: Currency Exchange Rates During the Southeast Asian Economic Growth Period

From 1994-1997 the Philippines, Thailand and Singapore were experiencing solid economic growth. Singapore’s economy is the strongest in the Southeast Asia region and is comparable to any modern developed economy. Thailand and the Philippines are newly industrializing countries that are following the development path of Singapore, but are still significantly behind in terms of economic power and stability. During this period Southeast Asia was doing well economically and making great progress in economic development.

However, during this period, the currency exchange rates worked against the US dollar. You can notice a modest downward trend in the graph during this period. This meant that during this period, the US dollar was growing weaker against these currencies because the US dollar traded for smaller and smaller amounts of these currencies. If you were living abroad during this period, your income was “decreasing” during this period each year.

The Singaporean economy was the strongest during this time and the US dollar weakened the most against this currency. As a general rule of thumb, if a foreign economy is doing very well, it is likely that the US dollar will be weak and purchase less of a given foreign currency. The stronger the foreign economy, the weaker the US dollar will tend to be.

1997: Currency Exchange Rates During the Asian Financial Crisis

In 1997, the Asian Financial Crisis adversely affected most Asian economies. Overnight, Southeast Asia was hit pretty hard as their stock markets crashed and their economies weakened. From 1997-1998, there was a huge downward swing in the value of these foreign currencies and they all grew weaker against the dollar. During this period of time the US dollar rose in value and was able to purchase more of the three foreign currencies.
Thailand was hit very hard during this year and within a year, the US dollar could be exchanged for almost twice as many Thai bhat as the year before. The Philippines was not as hit as hard initially but the US dollar could purchase almost 50% more pesos than in 1996. The most developed of these three Asian countries withstood any major fluctuations but even the Singapore dollar lost some ground against the US dollar. During this year, the currency exchange rates greatly favored Americans who were retired overseas in these countries. For example, if you were retired in Thailand, your income in bhat almost doubled over night.

There are distinct currency advantages to living in a country with a relatively weak economy. In general, the US dollar will tend to be stronger in these types of countries.

1998 – 2008: Currency Exchange Rates During the Gradual Economic Recovery Period

The decade that followed the Asian Financial Crisis was marked by gradual recovery. The strong Singaporean economy recovered the fastest while the economies of the Philippines and Thailand recovered at a slower pace. From 2005 – 2007, the rate of recovery of these currencies began to speed up and Americans living or traveling abroad noticed a “weakening” of the dollar against these currencies.

Detailed view of the rise and fall of the Philippines peso against the US dollar.

In the case of the Philippines, one US dollar jumped from about 25 to over 40 pesos per dollar at the beginning of the Asian financial crisis in 1997-1998 (graph above). The Philippines peso continued to weaken against the US dollar until about 2006 when the Philippines economy began to show signs of recovery. From 1994 to 2005, the Philippines peso weakened greatly and the value of the US dollar increased by over 100% against the peso.

From a peak of 56 pesos to one US dollar in 2005, the peso grew stronger and by 2008 one US dollar could only be exchanged for 42 pesos. In this three year period, the value of the dollar decreased by 25% against the peso.

One of the disadvantages of living in a country with a relatively weak economy is that the foreign currency may be very volatile. Depending on your retirement income, such volatility in the currency exchange rate could be problematic as the value of the dollar rises and falls from year to year.

2008-2009: Currency Exchange Rates and the Recent Global Economic Crash

The economic crash that started in the United States in 2008-2009 affected the USA significantly, but its impact on these Asian currencies was fairly modest. The value of the Singapore dollar changed little, while both the peso and bhat lost some ground against the dollar. Still, the peso and bhat were not as adversely affected as during the 1997 Asian Financial Crisis.

Although the USA was adversely affected by the Global Economic Crash, American retirees in the Philippines and Thailand still saw their incomes “rise” as a result of a dollar that remained “strong” in relation to the peso and bhat.

Currency Exchange Rates: Summary

National Economies: The value of a foreign currency is affected by many things. In the examples provided, it is clear that the stability and strength of foreign economies plays a big role in the stability of currency exchange rates. Singapore for example, was least affected by two major global economic crashes while both the Philippines and Thailand were more vulnerable and experienced large swings in their currency exchange rates.
While weaker foreign economies may result in a relatively “strong” US dollar, the currency exchange rates may be quite volatile as a particular country experiences economic changes. This type of volatility may be undesirable for some retirees living abroad on a fixed income.

Regional Economies: It is also clear that currency exchange rates are affected by regional economies. The regional Asian financial crisis affected many countries in Asia significantly. The US dollar soared against many Asian currencies when Asia was plunged into its financial crisis. However, Southeast Asia was able to recover and within a decade their currencies seemed to grow stronger against a “weakening US dollar.

When living abroad, one should develop a feel for the regional economy. As these regional economies rise and fall, so will the economies of individual countries within the region.

The Global Economy: the recent credit crisis in America also had some impact on these Asian economies. Economic linkages between countries today are fairly strong and one cannot ignore these global influences and their ability to cause huge changes in currency exchange rates overnight. Although the USA experienced many economic challenges, its dollar remained relatively strong against currencies in Southeast Asia.

This child and his family will join me in my new home.

Rather than trying to develop a single plan for my retirement, I’ve followed a multi phased plan for adjusting to my retirement abroad in the Philippines. For those who are new to this blog, the first few months of living abroad provided me with a gradual transition into a new culture, lifestyle and home.

I began my retirement abroad by moving to Cebu City, the second largest city in the Philippines. Urban living insured that I would never be too far from the kind of amentities that a typical American expatriate would expect. I lived in a condominium with security among a large population of other expatriates from the United States, Japan and Korea.

I had easy access to the upscale malls that provided a wide range of stores, boutiques, and services. I was never too far from a cup of Starbucks, a Big Mac, a TGIF dinner, or a Pizza Hut meat lover’s pan pizza. On top of those familiar sights, I now had access to affordable dental and medical care, regular massages, and the nightlife of any large urban center.

When I turned on the television set, I was greeted by the Sci Fi, National Geographic and Disney channels among many others. For all intents and purposes, I had been able to create and establish a new life that mirrored my old life back in the United States.

But, to be honest, as much as I enjoyed a continuation of my comfortable old life … it was kind of boring at times. It did not provide me with the kind of adventure that I had sought by my decision to retire abroad. It did however, provide me with a nice and comfortable transition to a new country, with little or no culture shock.

During that time, the most fun part of life was exploring beyond my cultural boundaries. It was a pleasure to make new friends, to learn a new language, and to explore a multi leveled culture. That really was what I had been looking for in my retirement abroad. Adventure, fun, and experiencing a new part of the world.

So, I am now currently posed to move to phase two of my retirement abroad. I intend to integrate myself more fully into Filipino culture. I am currently seeking out new housing accommodations in the Filipino community rather than an expatriate community. I’m not doing anything too radical yet. I’m seeking accommodations in a middle class Filipino neighborhood and forcing myself into a tighter budget.

This will require some changes in my lifestyle. I will be a little further away from the central business district of the city. I will have less access to the large malls and taxis. Instead I will have to do more shopping at small local markets and employ a combination of trikes, motorcycles, and taxis to get around.

My neighbors will be primarily Filipino. I will have to adapt a little more to Filipino culture. Finding a suitable apartment that was not designed for Western tastes has been an interesting exercise in cultural compromise on my part. Hot water is not the norm here for showers. Use of a washer and dryer for laundry is also not the norm. On the plus side, the apartments that I’ve been looking at provide ample space for a wash area, for outdoor living activities, and a lot of terrace space – things absent from my condo.

I will actually probably get a fixer upper that will need some TLC to get into proper shape. The advantage to me of all this? Well, I am now slowly immersing myself deeper into Filipino culture and living the real Philippines. That’s a plus. I will have a rental unit that’s twice the size of my condo, but at less than half the price of the condo. That will enable me to save even more than I am able to now.

Oh and one other thing. The friend who built the sari-sari store? Well, the store is now up and going, but has been passed on to her family. Interestingly enough, she’s now developed into a romantic interest and we’re setting up these lodgings to also raise her children. But that’s another story …

Kuala Lumpur's Zoo and Aquarium are memorable visits.

Kuala Lumpur is the capital of Malaysia and is emerging as one of the best places to retire in Southeast Asia. It has a population of nearly 2 million, but has grown into a larger metropolis of over 7 million inhabitants. Its rich cultural heritage combined with a low cost of living and modern infrastructure truly makes it one of the best places to retire in Asia, if not the world.

Today, Kuala Lumpur is known for its affordable first class tourist accommodations, international culinary options, impressive architectural attractions such as the Petronas Twin Towers, and world class shopping malls. Combined with an aggressive strategy for attracting retirees and expatriates, Kuala Lumpur has become a first class retirement destination.

Kuala Lumpur originally emerged as a small mining town on the west coast of the Malaysian peninsula. The mining of tin gave birth to the city, but although the tin industry has since declined, it has been replaced with high technology industries and a high powered business and finance sector that are propelling the country forward as one of the newly industrializing countries in Southeast Asia.

Putrajaya Mosque reflects Islamic architecture and culture.

Malaysia Retirement: The People of Kuala Lumpur

Kuala Lumpur is a truly multicultural capital. During Europe’s Industrial Revolution, the mining of tin grew into a major economic activity for the country. Many Chinese laborers were brought into the country to fuel the expanding tin industry. Today, Chinese make up over 40% of Kuala Lumpur’s population. Another 40% of the population are Malay.

A large influx of Indian laborers during the British colonial period infused Indian culture into Kuala Lumpur, and today about 10% of the city’s population is of Indian ancestry.

In the late 1900’s when Malaysia began to emerge as a rapidly developing country built on business and finance, construction, and tourism there was once again a need to bring in labor. During this period, a large influx of workers from across Southeast Asia once again changed the country’s demographic profile. Today, nearly 10% of the city’s population are foreign residents from across Asia and the world.

Of course, these demographic changes also resulted in major changes in the country’s religious base. The predominant religion is Islam, but other significant religions in the city are Hinduism, Buddhism, Confucianism and Christianity.

Typical Kuala Lumpur supermall.

Malaysia Retirement: Activities in Kuala Lumpur

Shopping in Kuala Lumpur: the city boasts a large number of very modern supermalls serving its international population of residents. For something a little more traditional, there is no shortage of smaller local open markets as well. The Petaling Street night market is perhaps the most well known. The Central Market of Kuala Lumpus is a very popular shopping area for many of the tourists seeking that unique Malaysian gift.

Natural and Historical Activities: the Lake Gardens provides residents and tourists alike with a botanical park with an abundance of Malaysian flora and birdlife. The National Zoo and Aquarium offer insight into the country’s wildlife. The National Museum offers a historical and diverse cultural perspective of the development of Malaysia and Kuala Lumpur. The many mosques and temples of the city reveal the true diversity of the city through its Islamic, Chinese and Indian religious influences. The Jamek Mosque (Islam) and Sze Ya Temple (Chinese) are popular sites. The National Art Gallery and Islamic Arts Museum are ideal destinations for viewing the history and culture of Malaysia through its art.

Kuala Lumpur Architecture: Kuala Lumpur is just a little over 150 years old.  In some parts of the city, the architecture reflects a period of British colonialism. In other areas, the architecture reflects the rise of Malaysia following independence, into a center of industry and commerce. The 88 story Petronas Towers, once the tallest building in the world, probably captures the “New Malaysia” better than any other local landmark of progress and change.

Kuala Lumpur Communities: of course, the main downtown commercial center reflects the modern Malaysia of today. However, it is still possible to experience the multicultural heritage of the country. Chinese (Chinatown), Malay (Kampung Baru) and Indian (Little India) communities still provide their own unique ethnic atmosphere.

Expatriate living in Malaysia is characterized by a great deal of cultural diversity. It is embedded in the city’s life, architecture, communities, commercial and entertainment activities. If you retire abroad to Kuala Lumpur, you will retire into a truly rich and internationalized lifestyle.

Malaysia Retirement: Amenities in Kuala Lumpur

Kuala Lumpur Transportation: From Kuala Lumpur, it is possible to travel throughout the country and to nearby countries (Singapore, Thailand) via rail transportation. In addition to the rail network, one can hop a short flight to surrounding destinations from Kuala Lumpur International airport.

Kuala Lumpur Housing: the cost of living in the city will vary depending on the type of accommodations that you desire. Natural market forces are at work here. The closer you are to the city center, the greater the demand for land and rent. As one moves further out of the city, prices begin to drop noticeably. Typical apartments are a basic two bedroom, living room and kitchen units.

Kuala Lumpur Healthcare: the larger hospitals in Kuala Lumpur are modern and equipped with state of the art facilities that are regulated by a national Malaysian medical accrediting body. Some of the top of the line private hospitals serve a medical tourism function primarily. If you retire abroad to Kuala Lumpur, you will have ready access to modern medical care. 

Petronas Towers in the distance - once the tallest building in the world.

Malaysia Retirement: Beyond Kuala Lumpur

 

Beyond Kuala Lumpur, other possible retirement destinations include Georgetown, which is the capital of Penang. Its population is about 200,000 – making for expatriate living in a smaller urban setting.

Subang Jaya is a small city in Petaling with a population of about 1,000,000. It’s medium size provides modern shopping, education, and commercial activities for the Malaysian expatriate.

Kota Kinabalu has a population of 600,000 and is the capital of Sabah. Unlike the other cities mentioned, Kota Kinabalu is found on the island half of Malaysia. Despite its distance from Kuala Lumpur, expatriate living in this city still provides a wide range of convenient amenities that an expatriate would want – whether its medical, shopping, housing or entertainment.

Whether on the Asian continent or on the island half of Malaysia, expatriate living will tend to be affordable but without any major compromises to the types of amenities that a modern expatriate might want.

Malaysia Retirement: Kuala Lumpur Summary

Kuala Lumpur is a young and rapidly modernizing city in Southeast Asia. The country of Malaysia has bent over backwards to attract expatriates to their country. Kuala Lumpur hosts a large resident population of foreign workers and expatriates, and is a multicultural city in its own right. Given the city’s economic progress and friendly policies towards expatriates who wish to retire abroad, Kuala Lumpur is definitely one of the best places to retire today.

(photos by: Mejmankani, Meelin, PaulMT, Alfa Domino)

Sveti Stefan, Montenegro - a Mediterranean environment on the coast.

Mediterranean Europe was the most affordable region to retire in Western Europe. However, if cost is a major factor to you, one of the best places to retire might be Southeastern Europe. Southeastern Europe is an even more affordable region for retirement than Portugal – which was the lowest cost country in Western Europe.

For purposes of this article southeast Europe is considered to include the following countries: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Macedonia, Montenegro, Romania, Serbia and Slovenia. For the most part, these were countries that were part of or had ties with the Soviet Eastern bloc during the Cold War era. Many of these countries made up the former Yugoslavia.

In the late 1980’s the “Eastern bloc” countries began to separate from the Soviet Union and chose to follow the more democratic and market based economies of Western Europe. All indications suggested that this was the more successful to economic development than the communist model.

Today, that transformation is taking place, but progress has been more difficult than originally imagined. These countries had to slowly change the entire fabric of their society. Private ownership laws and institutions needed to be created to replace the collectivist ownership model. Industry needed to be reoriented away from heavy industries to light industries, a service based economy, and consumer goods. A centrally planned political model had to be replaced by democratic institutions and more market oriented institutions.  

The countries of southeast Europe are on a peninsula surrounded on three sides by the Adriatic, the Mediterranean and the Black Seas. Inland areas are mountainous and dominated by the Balkan Mountains. Historically, the mountains have made travel through the region difficult and have kept people separated in small ethnic groupings. The region is often called a shatter belt for this reason and is reflected in the many small countries in the peninsula that are very diverse ethnically.

Romania's more northerly location gives it a more continental type climate.

Southeast Europe Retirement: Physical Landscape

 In southern coastal regions, the climate is a typical Mediterranean type of climate – mild in temperature combined with a wet and dry season. As you move inland and further north, the climate becomes more continental. Continental climates experience pronounced variations in temperature from season to season. And of course, throughout the region, the climate becomes much cooler as you move up into the mountains.

Typical natural resources for a region like this are forests, minerals, and hydroelectric power. Good agricultural land is scarcer due to the mountainous terrain.

The region offers retirees with a range of climates and environments. However, the region is also geologically active and prone to earthquake activity due to the many tectonic plates in the region. Earthquakes combined with a mountainous region heavily impacted by man also create risks for landslides. 

Although the Balkan mountains make travel through the region difficult, Southeast Europe has always been a critical crossroads between Europe and Asia and has been shaped by the ebb and flow of various European and Asiatic empires throughout history.

An open market in Slovenia.

Southeast Europe Retirement: Cultural Landscape

 Today, the region is a shatterbelt with respect to religions, with the Catholic, Eastern Orthodox, and Islamic religions being the dominant religions in the region. Croatia and Slovenia have majority Catholic populations. Albania and Bosnia and Herzegovina are predominantly Islamic. The Eastern Orthodox religion is the major religion in Bulgaria, Romania, Macedonia, Montenegro and Serbia.

Ethnically, each country has a majority national ethnic group, but often with several major minority ethnic groups as defined by language, religion or national origin. While the diversity definitely makes the region a fascinating one, it has also greatly contributed to the political instability of the region. Even when under Soviet domination, Albania and the Yugoslavian countries managed to retain some degree of independence. Later, as the Soviet empire fell, Yugoslavia ultimately broke up into several smaller states around different ethnic groups.

As the Soviet empire dissolved, Southeast Europe experienced a number of growing pains as ethnic unrest and separatist movements lead to the breakup of Yugoslavia. However, today the region appears to have stabilized significantly and is making progress more in terms of economic development than internal conflict and seem to be good destinations for anyone who might want to retire abroad in this region.

Per capita incomes for the region are: Albania ($6,600), Bosnia and Herzegovina ($7,700), Bulgaria ($11,200), Croatia ($15,000), Macedonia ($8,500), Montenegro ($10,300), Romania ($11,000), Serbia ($10,200), and Slovenia ($26,600).

Veliko Tarnovo, Bulgaria - older part of the city reflecting a pre-market oriented past.

Southeast Europe Retirement: Economic Landscape

 In comparative terms, countries that are economically closer to Western Europe are Croatia and Slovenia. Portugal, for example has a per capita income of $20,900.

The remaining countries, have per capita incomes in the range of many Central American countries. Costa Rica, for example has a per capita income of $10,700.

The two countries that are the furthest behind economically are Albania and Bosnia and Herzegovina. These compare to the more advanced developing nations in Southeast Asia. Thailand, for example has a per capita income of $7,900.

When looking at these countries from the perspective of their educational, medical and economic infrastructure, most of these countries rank as countries with a high human development index.

Southeast Europe Retirement: Summary

The fall of the Soviet empire has opened up Southeast Europe as potential retirement destinations. The collapse of the Soviet empire introduced two major challenges to the region. The first major challenge has been the restructuring of the socialist economy to a more market oriented economy. This has not been easy since it involved the revamping of the country’s political and legal systems, property ownership, and industries. For many people, the transition to a market economy has not been an easy one.

The second major challenge to the region has been the “devolution” of large states like Yugoslavia into a number of smaller states along ethnic lines. On some occasions, the devolution was marred by fighting and political unrest. Today, things seem to have stabilized a great deal and are less of a political risk than a decade ago.

The gradual development of the region provides the region with lower costs of living and make it one of the best places to retire in Europe. However, the infrastructure is not as strong as those in the Western Mediterranean countries. Most of these countries are gravitating towards becoming part of the European Union and access to advanced markets, healthcare and other amenities are not all that difficult since travel to Western Europe is relatively easy.

Although not on the radar of most retirees, Southeast Europe is definitely emerging as one of the best places to retire in Europe and giving the traditional retirement destinations in Western Europe more competition.

(Photos by: Szendrencs, Alesia17, EJBevan, Walker_M)

The United Nations publishes the data for international comparisons in an annual Human Development Index report each year. This report ranks the countries of the world into countries with very high human development index values to low human development index values. One is then able to compare countries in terms of their development along a variety of different measures.

The values for the human development index can range from 0 to 1. A score of 1.00 indicates very high levels of human development. A score of 0.00 indicates very low levels of human development.

Human Development Index: Highest Levels of Human Development (0.95 to 1.00)

Countries falling in this category include the most economically developed countries in the world. Their human development index values are almost a perfect 1.00. These high human development index scores indicate that these countries have relatively high life expectancies, high levels of educational development, and very high standards of living.

These are probably the most ideal countries for work and the raising of families. They are also probably countries with highly developed health care systems and other infrastructure. If you retire abroad to these countries, you are retiring to a country with all of amenities that you are used to in America.

However, the one downside to countries in this category for a retirement abroad is that the high level of human development translates into a relatively high cost of living.

• Norway:0.971
• Australia:0.970
• Iceland:0.969
• Canada:0.966
• Ireland:0.965
• Netherlands:0.964
• Sweden:0.963
• France:0.961
• Switzerland:0.960
• Japan:0.960
• Luxembourg:0.960
• Finland:0.959
• United States:0.956
• Austria:0.955
• Spain:0.955
• Denmark:0.955
• Belgium:0.953
• Italy:0.951
• Liechtenstein:0.951
• New Zealand:0.950

Human Development Index: Very High Levels of Human Development (0.90 to 1.00)

Almost all of the countries that fall into the very high human development index category are developed countries. There are a handful of developing countries in this category that are oil producing nations that have been able to build modern educational, medical and economic infrastructures (e.g. Brunei Darussalam and Kuwait).

If you retire abroad to countries near the top of this category list, you will enter a country with a very high level of development and cost of living. However, there are a handful of location located in the bottom half of this category list with more moderate costs of living (e.g. Portugal, Czech Republic).

• United Kingdom:0.947
• Germany:0.947
• Singapore:0.944
• Hong Kong, China (SAR):0.944
• Greece:0.942
• Korea (Republic of):0.937
• Israel:0.935
• Andorra:0.934
• Slovenia:0.929
• Brunei Darussalam:0.920
• Kuwait:0.916
• Cyprus:0.914
• Qatar:0.910
• Portugal:0.909
• United Arab Emirates:0.903
• Czech Republic:0.903
• Barbados:0.903
• Malta:0.902

Human Development Index: High Levels of Human Development (0.80 to 0.90)

The countries with a high human development index score are all developing countries that have begun to make substantial investments in their basic infrastructure. The retiree will generally find that the major urban centers of these countries are well developed and modern. However, it is likely that there are significant parts of these countries that are not well developed with high levels of poverty.

The cost of living in these countries will be in the low to moderate range and these may make decent destinations for someone who wishes to retire abroad on a budget.

• Bahrain:0.895
• Estonia:0.883
• Poland:0.880
• Slovakia:0.880
• Hungary:0.879
• Chile:0.878
• Croatia:0.871
• Lithuania:0.870
• Antigua and Barbuda:0.868
• Latvia:0.866
• Argentina:0.866
• Uruguay:0.865
• Cuba:0.863
• Bahamas:0.856
• Mexico:0.854
• Costa Rica:0.854
• Libyan Arab Jamahiriya:0.847
• Oman:0.846
• Seychelles:0.845
• Venezuela (Bolivarian Republic of):0.844
• Saudi Arabia:0.843
• Panama:0.840
• Bulgaria:0.840
• Saint Kitts and Nevis:0.838
• Romania:0.837
• Trinidad and Tobago:0.837
• Montenegro:0.834
• Malaysia:0.829
• Serbia:0.826
• Belarus:0.826
• Saint Lucia:0.821
• Albania:0.818
• Russian Federation:0.817
• Macedonia (the Former Yugoslav Rep. of):0.817
• Dominica:0.814
• Grenada:0.813
• Brazil:0.813
• Bosnia and Herzegovina:0.812
• Colombia:0.807
• Peru:0.806
• Turkey:0.806
• Ecuador:0.806
• Mauritius:0.804
• Kazakhstan:0.804
• Lebanon:0.803

Human Development Index: Moderate Levels of Human Development (0.70 to 0.80)

Countries with a moderate human development index score are all developing nations that still have a way to go in the development of their educational, medical and economic infrastructure. Urban centers are likely to be well developed and modern, but there is a wide variation in the level of infrastructure development. Rural areas are most likely not well developed and lacking in modern infrastructure.

If you retire abroad to these countries, there may be some missing pieces in terms of modern infrastructure, but the costs of living for these countries will be relatively low.

• Armenia:0.798
• Ukraine:0.796
• Azerbaijan:0.787
• Thailand:0.783
• Iran (Islamic Republic of):0.782
• Georgia:0.778
• Dominican Republic:0.777
• Saint Vincent and the Grenadines:0.772
• China:0.772
• Belize:0.772
• Samoa:0.771
• Maldives:0.771
• Jordan:0.770
• Suriname:0.769
• Tunisia:0.769
• Tonga:0.768
• Jamaica:0.766
• Paraguay:0.761
• Sri Lanka:0.759
• Gabon:0.755
• Algeria:0.754
• Philippines:0.751
• El Salvador:0.747
• Syrian Arab Republic:0.742
• Fiji:0.741
• Turkmenistan:0.739
• Occupied Palestinian Territories:0.737
• Indonesia:0.734
• Honduras:0.732
• Bolivia:0.729
• Guyana:0.729
• Mongolia:0.727
• Viet Nam:0.725
• Moldova:0.720
• Equatorial Guinea:0.719
• Uzbekistan:0.710
• Kyrgyzstan:0.710
• Cape Verde:0.708
• Guatemala:0.704
• Egypt:0.703

Human Development Index: Moderately Low Levels of Human Development (0.50 to 0.70)

Countries in this category are all developing that require a significant amount of development of their infrastructure. Major urban centers may have access to modern amenities, but there is a wide level of variation between countries and it is hard to generalize. Overall, costs of living will be quite low, but these will be challenging countries to retire abroad to because of gaps in their medical, educational and/or economic infrastructures.

• Nicaragua:0.699
• Botswana:0.694
• Vanuatu:0.693
• Tajikistan:0.688
• Namibia:0.686
• South Africa:0.683
• Morocco:0.654
• Sao Tome and Principe:0.651
• Bhutan:0.619
• Lao People’s Democratic Republic:0.619
• India:0.612
• Solomon Islands:0.610
• Congo:0.601
• Cambodia:0.593
• Myanmar:0.586
• Comoros:0.576
• Yemen:0.575
• Pakistan:0.572
• Swaziland:0.572
• Angola:0.564
• Nepal:0.553
• Madagascar:0.543
• Bangladesh:0.543
• Kenya:0.541
• Papua New Guinea:0.541
• Haiti:0.532
• Sudan:0.531
• Tanzania (United Republic of):0.530
• Ghana:0.526
• Cameroon:0.523
• Mauritania:0.520
• Djibouti:0.520
• Lesotho:0.514
• Uganda:0.514
• Nigeria:0.511

Human Development Index: Low Levels of Human Development (less than 0.50)

The typical American retiree will most likely not select these countries as a retirement destination. The infrastructure in lacking in many areas and one will have to make major adaptations for expatriate living in these countries. Of course the cost of living will be very low, but access to quality medical, educational and economic amenities will be difficult.

• Togo:0.499
• Malawi:0.493
• Benin:0.492
• Timor-Leste:0.489
• Côte d’Ivoire:0.484
• Zambia:0.481
• Eritrea:0.472
• Senegal:0.464
• Rwanda:0.460
• Gambia:0.456
• Liberia:0.442
• Guinea:0.435
• Ethiopia:0.414
• Mozambique:0.402
• Guinea-Bissau:0.396
• Burundi:0.394
• Chad:0.392
• Congo (Democratic Republic of the):0.389
• Burkina Faso:0.389
• Mali:0.371
• Central African Republic:0.369
• Sierra Leone:0.365
• Afghanistan:0.352
• Niger:0.340

Human Development Index: Summary

Your ideal retirement destination depends on a number of different factors. The Human Development Index can help you identify which countries are most suitable for your particular needs. For example, if access to modern healthcare is a major concern to you then countries that are high on the scale are best for you. If a low cost of living is the primary factor that you are concerned about, then the countries in the middle or lower range of the scale are more ideal.

As always, use statistics like this as a starting point, not for final decision-making. They can help you narrow down your options, but the final decision should be based on a more detailed analysis and assessment of where to retire abroad.

(Photo by: Auro Quieroz)

Bali is a popular destination for the surfing crowd.

In 1997, Indonesia was falling apart at the seams from the Asian Financial Crisis that swept through Asia.In 1998, the country’s gross domestic product had declined by 13%, its currency had devalued by over 800% against the dollar, and Indonesia’s financial system was on the verge of collapse. However, an Indonesia retirement today is becoming increasingly viable as the country moves through an amazing recovery.

Indonesia Retirement Today: Indonesia’s Economy

 Prior to the Asian Financial Crisis in 1997, Indonesia was seen as one of the newly industrializing economies of Asia. Many thought that the country would be developing rapidly and would soon emerge as one of the new Asian Tigers behind the likes of Singapore and South Korea.

The country’s large resource base which includes fertile agricultural lands, petroleum and natural gas, and a wide range of metals like tin, copper and gold, seemed ready to launch the country into becoming one of the major players in the modern global economy. The country’s population of 230 million people made it the fourth largest market in the world. The country’s resource base and market attracted large inflows of foreign investment that accelerated the country’s growth. All the pieces for success seemed in place.

Then, in 1997 the Asian Economic Crisis rippled throughout the country causing the Indonesian economy to decline by almost 14%. Coupled with the collapse of the rupiah and ethnic violence, Indonesia seemed nothing more than an ailing Asian pussycat and nothing close to being the tiger as many had hoped.

Sunset over Jakarta with all the appearances of an economic recovery.

However, within a span of five years, Indonesia seemed to have picked itself up and is on its way to fulfilling its economic promise. Economic growth has increased to over 5% a year, the Jakarta stock market seemed to have recovered, foreign debt has declined as a proportion of its national income, its has risen to becoming the 16th largest economy in the world, and the election of a reform oriented government are all positive signs of the country’s recovery.

Today, nearly 42% of the country’s population still remain employed in the agricultural sector. About 39% of the population work in services and 19% in manufacturing. The large agricultural workforce is characteristic of a developing country indicating that the country still has a long way to go, but it now seems to be on the right course for success. Although today’s current Global Economic Crisis is slowing down Indonesia’s economic recovery, the country does not appear to be as heavily affected as some of the more developed nations as the world.

Indonesia continues to form strong economic ties to other Asian nations. Over 50% of its export trade is with other Asian countries, with Japan being the largest recipient of Indonesian exports. In turn, close to 60% of its imports come from Asia – primarily from Singapore, China and Japan. Foreign investment increased from $59 billion USD to $67 billion USD from 2007 to 2008 – a good sign that investors see a lot of potential in the country.

For retirement purposes, Indonesia seems to have turned the corner and now offers the retiree a stable and growing economy. The country still does have many problems associated with economic development, but one should be able to retire abroad to any of Indonesia’s major urban centers without a great deal of difficulty.

Curried chicken on a stick.

Indonesia Retirement: Indonesian Cuisine

The cuisine of Indonesia reflects it’s diverse history and its location along major trade routes between Europe and Asia. The Dutch, Spanish, and Portuguese left their cultural imprints on the country. India and China were trading partners with Indonesia long before European colonization. The archipelagic nature of the country also insures large regional differences among the many islands of the country.

And today, Indonesia’s emergence in the global economy insures that a retirement abroad in Indonesia will provide many of the American comforts of home for expatriate living – from supermarkets with international goods, to international fine dining restaurants catering to the tourists, and to the ubiquitous Kentucky Fried Chicken franchises.

Indonesia Retirement: Indonesia’s Healthcare System

Indonesia’s healthcare system is widely criticized for being inadequate. Although medical care is available in major urban centers, medical care is probably inadequate in most rural areas. The level of government funding for healthcare is relatively low in comparison to other countries.

It is estimated that each year, over a million Indonesians seek medical care overseas in Singapore, Australia or Malaysia. Indonesia’s healthcare system is ranked 92nd in the world by the World Health Organization. While it is likely that your average expatriate living in Indonesia’s major urban center will be able to obtain basic medical care without difficulty, it may be a more reasonable option to fly to a neighboring country with more advanced healthcare facilities for serious healthcare problems.

Indonesia Retirement: Housing

Cost of housing is quite variable in the country. The cost of living in any of the major cities is typically much higher than rural living. Expatriates report that the cost of living (including housing) will range from $400 to over $1,000 per month depending on one’s needs and style for housing and daily living expenses.

Despite social and political problems, most people are looking forward to a bright future.

Indonesia Retirement: Social and Political Issues in Indonesia

There are a number of separatist movement in the country, most notably in the provinces of Aceh and Papua that occasionally leads to open fighting. However, a ceasefire has been in effect since 2005.

Although Indonesia is a predominantly Muslim country, the government has cooperated with other nations in the fight against global terrorism from groups such as Al-Qaeda. There have been bombings as recently as this past summer which have taken lives. Many of these bombings targeted tourist areas such as major hotels and restaurants.

Jemaah Islamiyah is a regional “terrorist” group that has the goal of reuniting many of Southeast Asia’s countries into a single unified Muslim state. It is suspected that this group has been behind recent bombings of luxury hotels in Jakarta and in the southern Philippines in the summer of 2009.

Indonesia Retirement: Indonesia’s Infrastructure

The country has a well developed communications infrastructure. It is the 6th largest market for cell phone users in the world, hosts nearly a dozen national television networks, and has well over 30 million internet users.

Similarly, the country’s transportation network is relatively developed in the major urban centers of Indonesia. The country hosts several major international airports, world class ports, and a reasonable road and highway system.

While not perfect, an expatriate living in any of the major cities will have access to the kind of communications and transportation infrastructure that a typical American might expect.

Indonesia Retirement: Summary

Popular retirement destinations for expatriate living has been the capital city of Jakarta and the tourist mecca on Bali. The cost of living in Indonesia is relatively low, but can be pricey if you want a very high end lifestyle. The economy of Indonesia seems to be in recovery and growth mode, which bodes well for the future stability of the country.

If you decide to retire abroad to Indonesia, access to quality healthcare for major medical needs might be your major concern, but these can be obtained in neighboring countries which actively promote medical tourism.

Another potential concern are the separatist movements that resort to bombing in high profile tourist areas. While not frequent, they do occur and should be something to keep in the back of one’s mind.

Indonesia can be an ideal destination for a retirement abroad as long as you keep in mind the limitations and risks associated with the country. Aside from those risks and limitations, the country offers a wide range of retirement options from modern city living, to more rural mountain living, to miles of white sand beaches. Indonesia is emerging as one of the best places to retire in Southeast Asia.

(Photos by: Denzani, JazzPearl, Alex_F, Nikkers)