Financial Planning, Retirement Issues


Alternative Retirement Solution to a Pension Cut

Alternative Retirement SolutionMany people are dealing with reduced or eliminated pensions. Some are finding alternatives which allow them to travel and live inexpensively in another country.

We saw this post a few weeks ago and thought that it might be of interest to our readers, who are planning to travel to Mexico for vacation or are looking to stretch their dollars further – Retiree’s Solution to a  Pension Cut

Alternative Retirement Solutions

This was sent to me by email and I think it is a great idea for many people.

Move to Another Country

One person investigated the cost of living, medical coverage, and lifestyle advantages and has recently bought a house in Ensenada which is only about 70 miles south of San Diego, California.

There is a sizable Canadian and American expat population in and around Ensenada, San Felipe, La Paz and a reportedly largely Canadian community in Todos Santos, all on the Baja peninsula. He and his wife were able to get retirement visas for Mexico based on his Nortel pension. As residents of Mexico, they are also eligible for free medical care, which in major centers can be very good.

He still has to pay the Canadian non-resident’s tax on his Nortel pension but this tax depends on the total dollar value of your income and can be very little or even zero on small pensions. Mexico, on the other hand, charges no income taxes on foreign income. Land taxes are very low compared to Canada and the USA. In his case, these are less than $100 CD. Utility bills as well are low, providing your use is moderate (i.e. the electrical charges are 3 tier system and the bottom 2 tiers are very reasonable). He finds it easy to stay in the lowest tiers and pays less than $10 CD per month.

Sample of Monthly Utility Costs in Mexico

  • Utility Pesos CDN_$
  • Electricity 120 10
  • Tap Water 60 5
  • Propane 300 25
  • Telephone_plus_Internet 420 35
  • Total 900 75

The cost of living in Mexico lets him achieve a comfortable standard of living for much less cost than if he had stayed in Canada. Expats that have lived in Ensenada for some time tell Wayne that a family of two can get by on as little as $600 Canadian per month plus whatever you pay in rent or mortgage, although $1000 per month provides a more comfortable living. Rent and house prices are much lower as well.

However, to qualify for a retirement visa (FM3) you have to demonstrate that you have a per person reliable income equal to or greater than 200 times the Mexican minimum wage or about $1000 CD monthly. There is a reduction for spouses and a reduction for owning your home in Mexico. Showing bank statements with regular deposits was enough for him and his wife to qualify for FM3 visas.

You can check here http://www.inm.gob.mx/index.php/page/pagina_principal/en.html for the requirements (and to practice your Spanish). There are businesses and individuals that help you with the paperwork, but the Snyders chose to do this for themselves. The Mexican officials are very cooperative and helpful. And you get more practice with your Spanish this way. Some expats choose to stay with just a tourist visa which is available for just a $10 at any port of entry.

Supplement Pension Income

There are ways to supplement your pension and still enjoy retirement. He knows expats that work in the USA but live in Mexico. Some manage businesses through the internet. Others work periodically in the USA then return to Mexico. He knows an electrician that schedules all his work in California for 1 week every 2 months this provides for his family. Another travels to Wisconsin twice a year and works for a month each time and this gives him enough for him and his wife.

In the major cities and in tourist areas Spanish isn’t essential but learning it will add to your ease of living and enjoyment.

Owning Property in Mexico

Yes, you can own property in Mexico. If the property is 100 KM from the border and 50 KM from the coast foreigners can own the property outright. If the property is near the coast then the Mexican government has legalized a method for foreigners to own land. This is through a “Fidecomiso” or Bank Trust. This costs $500 US a year. In the past, some foreigners lost their property in Mexico. This was due to a land ownership issue. They bought from someone who didn’t have clear title. But this pensioner’s experience is that now title is thoroughly investigated and title insurance is available. The Real Estate and escrow companies they used were very helpful and competent.

Moving to Mexico

Moving your personal effects to Mexico can be either relatively easy and expense or difficult and economical. There are movers that are authorized to move personal possessions into Mexico but they were prohibitively expensive. They couldn’t find a rental truck that they could drive across the US, Mexico border. So, that meant putting everything in storage on the US side and using a trailer (again you can’t rent one and take it across the border) to move in many smaller loads.

Mexico allows a one time duty free move after you have your FM3, but the form costs $130 US and this was more than the duty on small loads. The first $75 per person is duty free and 16% on the value of property above that. But they are very lenient and often charged little or no duty. You do need a detailed list of your cargo in Spanish with the value. Google translate usually worked well. With the trailer they sometimes want you to cross at a commercial border crossing such as Otay Mesa instead of a tourist crossing like Tijuana. Moving their possessions themselves was the most difficult aspect of the move for the Snyders, but it saved a lot of money.

Crime in Mexico

In the media there are many reports about crime in Mexico however crime varies from area to area.  All the locals that he spoke with report that it is relatively safe. In fact, they felt that it was safe enough that his wife lived there alone for 6 months prior to her husband joining her. They feel safer in Ensneada than where he just finished working in the USA. There is a military base in Ensenada and there are military check points on the highway. These are much, much less invasive than airport security checks. Ensenada’s police force is also very visible thus keeping crime lower.

Other Ensenada attractions:

The weather is wonderful! The ocean and coast are beautiful! Ensenada is one of Mexico’s most prominent educational centers. There are many universities. People from all over Central America come to Ensenada for higher education. And the famous Baja 1000 race starts in Ensenada.

So take heart, at least one pensioner has been able to turn adversity into adventure.  While this won’t work for everyone, it is nice to know that you do have options.

There are many web pages with helpful resources about living in Ensenada and other parts of Mexico. Many are commercial sites, so we don’t want to promote these here. You can search the internet for “living in Ensenada” and pick the information you find most helpful.

If you have a story that you would like to share on how you have reorganized your life to accommodate the coming Nortel pension cut, please let us know by leaving a comment.

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One Response to “Alternative Retirement Solution to a Pension Cut”

  1. There are so many options when you retire and so little time as well. If you move to another country, make sure you do your homework

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