Is the Third World the Only Possible Refuge for Today's Retirees?

I read a recent article by Robert Powell in the "webmag" Market Watch, entitled "Time to rescue America's retirement plans. Commentary: Savings reforms need to be on Obama's radar, and soon." The article got me thinking about retirement issues again. (Note: until very recently the stock market crash had me feeling so numb, I could hardly write anything or think of anything but survival.) In his article, Powell notes, the following "facts:"

1. Median household income in America is about $50,000.

2. Many experts suggest that Americans will need to save 20 times their income to retire.

3. The cost of health care in retirement will likely be $200,000 to $500,000.

To me, that translates into this:

1. If you're average, with a household income of $50K, you'll need $1 million to retire.

2. Subtract the cost of health care and you'll only have $500K to $800K to fund your day-to-day retirement spending (food, clothing, housing, transportation, entertainment, etc).

3. If these are the real numbers, most Americans are in big trouble.

That is, of course, unless you head to the Third World for your retirement.

I'm currently hiding out in an historic, colonial town in Mexico with 500 year-old cathedrals, narrow cobblestone streets and lots of old world charm. I've found that, with the increasing value of the dollar (caused by the financial crisis) and the relative low cost of most Mexican goods and services, I can get by on much less than I can in the U.S.

Imagine a visit to the Emergency Room where the first person you see is a U.S. trained doctor, who reviews your history, diagnoses your medical problem, does some lab work, AND fills your prescription for $75. That's it 75 bucks. No forms, no copays, no pre-approvals and no waiting. Imagine dinner for two out at a nice restaurant for less than $20. Imagine Starbucks coffee for less than 2 bucks. The Third World doesn't sound so bad does it?

But consider what would happen if hoards of Americans decided to do what I have done. It's not as far-fetched as it sounds. With the cost of retirement in the U.S., as estimated by the so-called experts, most Americans won't be able to afford a U.S. retirement. Thus, they may be forced to choose between leaving the U.S. in order to enjoy a comfortable retirement or eating cat food in their sunset years. So, in the next 18 years we might see a good portion of the 67 million Baby Boomers heading to Mexico, Thailand, Costa Rica or other low-cost retiree havens.

Mr. Obama's task may be even bigger than Robert Powell's article suggests (as if Mr. Obama doesn't have enough on his plate). Even if Obama is capable of "rescuing" America's retirement plans for the 20, 30 and 40 somethings, he may also have to figure out how to stem the diaspora of retiring Baby Boomers who have lost 40% of their nest eggs. Imagine the side effects of such an exodus: Millions of U.S. homes would come on the market, exacerbating an already depressed housing market for years to come, with trillions of dollars of consumer spending shipped out of the U.S., further stressing the United States' consumer-driven economy.

But most Baby Boomers are red-blooded, Joe Six-Pack or Plumber (your choice), true-blue, dyed-in-the-wool Americans (key up Lee Greenwood's song here), and you would expect most to vehemently resist something as unpatriotic as abandoning the land of the free and home of the brave for some banana republic. Or would they? Are we sure retirees would choose living in patriotic squalor over retirement comfort? Yeah, yeah, sure they would. Wouldn't they? After all these are Americans we're talking about; credit-card-loving, no-money-down, 30-years-to-pay, interest-only, fiscally-conservative Americans. They'd never consider an easy way out of their retirement conundrum.