The New Math for Retirement


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Jim Donahoe
Back in the day there was a lot of talk about buying a second home at some great paradise location, like La Paz and splitting time in retirement between a principal residence at home and the second home. My, how the world has changed for so many baby boomers looking to retire to a comfortable lifestyle envisioned for so long. The economic abyss that has consumed such a large part of many folks’ nest eggs has forced us to re-evaluate our retirement plans.
We have started to re-analyze the cost of maintaining the lifestyle we had planned. What will it cost for health care, food, transportation, entertainment, travel and such? We are also reviewing home ownership costs – maintenance, mortgage, insurance, utilities and property taxes?
For many, after examining the numbers, buying a dream home in Mexico appeared as more of a mirage than something actually attainable. The numbers simply wouldn’t work. Enter the New Math for Retirement. For some, a revelation takes place after this financial check up. What about considering La Paz for the primary residence?
If your dream was to live in paradise for 3 or 4 months…why not make La Paz your primary residence? How much could your sell your current home for? What could you buy as a replacement in La Paz? Here, you can purchase a home or water view condos starting around $150,000. By selling there and buying here you are applying the New Math and your depleted nest egg will begin to grow again. Now, compare home ownership costs. Start with one element – property taxes. My friend, who owns a half million-dollar-La Paz-home recently paid his 2012 property taxes – $325. He sold his US home for $600,000. His annual property tax bill for that home was $6,500. The $500 per month saving works well for him in maintaining a comfortable retirement lifestyle.
Now compare other cost of living expenses. How about health care? Did you know that you can purchase an individual Mexican health insurance policy for less than $400 per year, not per month? The quality of health care in La Paz is very good. Recently, my friend, who just moved here and does not have insurance, got the flu and went to a local clinic. 45 minutes, English speaking doctor cost $40 pesos – a little over $3 US and prescriptions filled next door for $97 pesos – $8 US. How does this compare to a visit to your doctor back in the US?
How about food – groceries and eating out? If you insist on brand names and top restaurants you will not experience a big savings. However, once you get to know La Paz you will find great local grocery stores and terrific, affordable restaurants. For example, my friend and I love shrimp tacos. So we go to Pepe’s on Prieto. We each have two shrimp tacos and a drink. Total bill – $76 pesos or $6 US for both of us.
As much as I disliked the New Math when going to school in the 60’s, I love the New Math as it applies to affordable cost of living in La Paz.
By the way, the rumors are true. Summers get a little warm in La Paz. If you do need a break from the summer heat, take a holiday. Visit family and friends or travel to some other exotic locations. After all, you can afford it, simply by applying the New Math.
Jim Donahoe has been a licensed real estate broker for 30+ years, has consulted throughout Western Mexico for the last 9 years and has been a full-time Paceño for nearly 3 years. Jim is the Broker Manager for Linda Neil Properties in La Paz. jimdonahoe@me.com (612) 140 1054.www.lindaneil.com

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