Is It Possible To Retire In The Dominican Republic on US$2,000 Per Month?
Over the years there have been a
plethora of articles about retiring abroad on shoe string
budget. Articles with the title come to Panama, come
to Costa Rica, live in Thailand, and of course retire in
the Dominican Republic. But is it true one can
really live well on less in the Dominican Republic (and
perhaps some other destinations also)? The honest
answer is yes, but it all depends. It depends upon
your lifestyle, it depends upon what is important to you
and it also depends what you want to use as a basis for
living costs. In other words, just like many other
things in life, the devil is in the details.
Let us start off with one monthly budget item that certainly has gone up in cost the world over: food. Interestingly enough, the recent devaluation of the US Dollar (read inflation, and I know, I know – the US Government says inflation is low and not to worry) has pushed up food prices globally, and it has been worse in any country that uses the US Dollar as it's own national currency (aside from the United States, this means Panama, Ecuador and El Salvador). On average, inflation in countries outside the US that use the US Dollar has been roughly 10 percent, whereas in neighboring nations that have their own currency inflation has been around 5 percent.
With regards to inflation inside the US, the popular financial commentator, Mr. Jim Willie, noted food prices for a specific list of various food brands and items back in January of 2013 and then checked the prices for those very same items in January 2014. What did he find? Prices had gone up anywhere from 10 percent to 30 percent in some cases, for some products. And despite the rhetoric to the contrary, the United States via it's own fiscal policies (or fiscal mismanagement, if you prefer) has in fact been exporting inflation to the rest of the world.
So, with that said, you will find various supermarket prices in the Dominican Republic higher in September 2014 than they were say in September 2012. And of course, as has always been the case, imported items will cost more than the prices in the native country of manufacture (regardless if from the US or Europe). Stated more plainly and more directly, Heinz Ketchup, French's Mustard and Green Giant canned peas will cost more in a Dominican Republic supermarket than it will at a supermarket inside the US. So, if those items are must have on your monthly shopping list, then be prepared. However, there is some good news and this is where the Dominican Republic offers a dramatic benefit over other Caribbean destinations such as The Bahamas, St. Martin, St. Kitts, Barbados and any other island nation that has very limited home based agriculture or food industries.
The Dominican Republic is actually situated on the second largest island in the Caribbean, by square mileage, and it has a very diversified and developed agricultural industry. In fact, the country produces enough food to feed it's own population and it exports excess production of rice, chicken, eggs and so on. And because it is a self sufficient nation in regards to food, and because wages are of course a fraction of what they are in the US or Europe, prices for locally grown produce (or food products, like pasta, ketchup, cooking oil, or even laundry detergent of which there are local brands) is going to cost much less than their imported counterparts. As an example, yellow bananas can be purchase for about the equivalent of 12 cents US, avocados for about the equivalent of 25 cents US each, etc. As the old saying goes, man (or woman) cannot live on avocados or bananas alone, but this just gives you a basic idea of how locally grown produce will save you money. And the same is going to be true for beef, pork, and chicken.
The Real Deal About Dominican Republic Real Estate
estate is of course the other large expenditure albeit
only time if you buy and pay cash, or monthly if you plan
to rent. The Global Property Guide (a real estate
guide from the UK) says that prime beach front property in
the Dominican Republic sells at an average of US$2,000 a
square meter, compared with US$10,400 in Barbados. There
is nothing wrong with Barbados, but it is worth 5 times
the cost of similar, beautiful beach front property in the
Dominican Republic? We think not. Even if you
compare real estate costs in Panama (which is technically
Central America and not the Caribbean) per square foot or
meter, you will usually get double for your money in the
Dominican Republic. For example, you might see a
condo apartment advertised in Panama City for US$175,000
and you might see the same price for something similar in
Santo Domingo, The Dominican Republic. However,
check the square footage of the Panamanian Condo and
compare it to the size you are getting in Santo
Domingo. Chances are the Santo Domingo property will
be anywhere from 30 to 50 percent larger and possibly have
more amenities. If you investigate real estate
prices in Caribbean jurisdictions such as St. Martin, The
Bahamas, St. Kitts (just to name a few), once again we
think you are going to find a drastic difference in prices
PLUS what you get for your money in the Dominican Republic
in comparison with regards to size and amenities.
However, as a general rule, beach front or properties in a tourist area usually are always going to cost more than say similar properties in other parts of the country. In terms of the tourist areas, while many people may fall in love with the idea of living in a beach front setting, the fact of the matter is that real estate will usually cost more, and cost of living will be higher as well. Part of the reason for daily living costs (such as food shopping) being higher is the fact that local permanent population tend to be small in comparison to tourists, and while there may be smaller convenience store businesses, usually you will not find the larger and less expensive supermarket chains represented. And of course tourists staying in an all inclusive resort are not going to go food shopping or spend money on furniture (or other things). So, if you are really looking for the best value for the money, a home or condo in Santo Domingo, Santiago and other non tourist areas are where you want to look.
Urban areas such as Santo Domingo (the capital city and largest populated city with about 4 Million inhabitants) and Santiago (the second largest city) are going to offer a wide variety of shopping, medical care facilities, bi-lingual or English only private schools, and a number of other amenities as well. With larger variety of buying options comes competition and lower prices. As such, whether trying to find a good private bi-lingual school or the best price for tomatoes, cities such as Santo Domingo will offer a wide variety to choose from.
Real estate options in Santo Domingo are varied enough to fit any budget and we can say your will get more square footage for your money with a condo apartment in Santo Domingo than you will looking at something similar in a tourist area. As an example, you can expect to pay about US$120,000 for a 1-bedroom 1,000 (or more) square foot apartment in a higher end more upscale area in Santo Domingo (with secure parking, 24 hour security, gym facilities for tenants, etc.). For a 2 or 3-bedroom 1,500 to 2,000 square foot (or more) apartment in a more upscale building, you can expect to pay anywhere from about US$165,000 up to maybe US$230,000 all depending upon size, location and so on. And if your budget is more modest, there are new apartments and single family homes to be found in the US$80,000 to US$120,000 range. Likewise, you can find very nice single family homes similar to what you might find in an upper middle class Florida private residential development for roughly US$250,000 to US$350,000 and condo penthouses of 3,000 square feet (or more) for perhaps US$300,000. There is not enough space to highlight everything, but the point is when retirees ask: Is there any affordable real estate in the Caribbean – our answer is YES, in The Dominican Republic.
In terms of finding one bedroom condo apartments (often of interest to retirees), there is one interesting phenomena taking place regarding new construction in Santo Domingo. Which is to explain that 20 years it was almost impossible to find a new condominium apartment building with one bedroom units (builders just did not build them). And previously the norm in The Dominican Republic was that young people graduated university but lived at home with parents until such time they did get married and could afford a 2 or 3 bedroom rental (with the long term view of owning rather than renting). Today, what we are seeing is a larger number of new higher end buildings going up with one bedroom units. Granted, what is driving this are primarily the young university graduates which are more affluent than that age group was in the past, but it also means that retirees seeking a new one bedroom unit in a higher end building can certainly find a number of options today. And it is very rare to find a building project that is ALL one bedroom units (least you think you might be walking into the equivalent of a post graduate frat house). Rather, such buildings with be a mix of one bedroom, two bedroom and three bedroom units, so the nature of the tenants will be mixed to include young families as well (who may not be interested in living in a building with any non stop parties – as they have to go to work in the morning). What is the average cost of a brand new one bedroom condo in an upscale building (with off the street parking, door man, reception area, etc.)? About US$115,000 on average in 2014.
While many people have decided to liquidate their real estate holdings in the US or Europe, buy a home in the Dominican Republic and put the rest into investments paying about 10 percent interest – there still are some people that would prefer to rent. So, if that is the case, keep in mind that using Santo Domingo as a guide, one can find a 2 to 3 bedroom apartment ranging from US$250 up to US$700 per month all depending upon location, size and amenities. But these calculations are for apartments rented in Dominican Pesos, translated into US Dollars. As a general rule, rent in Pesos, it will cost less and it will save you headaches in the future regarding and US Dollar devaluation. And if you have some of your liquid assets invested in Pesos for the higher interest, then you have no exchange rate issues in terms of monthly investment income – monthly living expenditures.
Banking In The Dominican Republic
people have chosen the Dominican Republic for their own
banking or investment needs. Bonds (which might have
maturities currently ranging from 2 to 5 years) or
commercial paper investments (90-day or longer) offer the
opportunity for higher rates of interest than what may be
found elsewhere. As an example of the rates
available for locally issued US Dollar bonds (as of
September 2014) maturing in 5 years, recent issues offered
have paid about 4 to 5 percent annual interest.
Making a comparison for 5 year commercial paper
denominated in Dominican Pesos, interest rates now in 2014
are about 9.5 percent. And interest for such
deposits is paid monthly, which may be direct deposited to
your bank savings account if you set it up that way with
Should it be appropriate for you, investing in time deposits denominated in the local currency, the Dominican Peso, could offer yields up to 9% for a bank CD or up to 16% for commercial paper. Again, the term can be anywhere from 30 days up to 360 days, or in recent cases 36 months or more. You may deposit funds or make withdrawals via bank wire transfer, or any personal or other kind of check drawn on any banking institution regardless if a US bank or not. This is of course assuming the funds are in US dollars (which you may send directly to the bank for deposit), and if the foreign bank issuing the check has a US correspondent banking relationship whereby the check is payable through the US banking system (this will be indicated directly on the bank check issued to you). In addition, you of course may conduct your business in person as well or utilize the debit card / secured credit facilities as explained below.
Many of the local banks will offer US Dollar savings accounts, Euro Savings Accounts, US Dollar Certificates of Deposit, Euro Certificates of Deposit, ATM debit card facilities and a secured VISA & MasterCard program. If you would like to have some sort of investment providing the maximum tax-free monthly interest that is possible, then you may wish to consider either bonds or commercial paper over a bank certificate of deposit.
In terms of using a regular VISA or MasterCard issued by a Dominican Bank, such cards can be used at any establishment worldwide that accepts such credit cards and also at ATM teller machines, as well. If a credit card issued from a Dominican Bank is used outside of the Dominican Republic then the charges, regardless of the country the card is used in, will usually be billed in US Dollars. If used inside of the Dominican Republic, then of course the statement or card charges will be billed in the local currency, which is the Dominican Peso. When establishing the card, you have the option of requesting that your monthly charges be paid in full from your US dollar savings account or Peso savings account. You also have the option of having your statement held by the bank and faxed to you on demand. Your account officer would then obtain your monthly credit card statement and hold it in your file pending your instructions (if you wanted it faxed or emailed to you, etc.).
With regards to using an ATM debit card, some banks will offer a debit card containing the Visa or Master-Card logo, allowing the card to be used at those merchants that accept such cards (the card is swiped and you would enter your pin code). The ATM card may be used to access funds at any ATM machine worldwide, which was a member of the associated card network. Some banks now also offer a Debit Card that works directly the US Dollar Savings Account as well (ask your bank as not all currently offer it). However, in most cases, the ATM card will be issued or connected to your Dominican Peso Savings Account.
Monthly Cost Of Living Expenses - Will US$2,000 Do It?
have already discussed food shopping and real estate in
general, but not how that applies to the monthly bottom
line in terms of your own budget. So, again, it will
all depend upon where and how you want to live, but let us
try and make some real world assumptions.
Looking at housing, obviously if you buy your own home or condo for cash, then monthly rental payments do not come into play. If you do rent, you can probably figure on about US$500 per month in rent for a 2 or 3 bedroom apartment in a more upscale building with an elevator, door man, etc. There are of course apartments for rent in fairly decent buildings that are walk ups and without the other amenities, and in such a case you can figure on about US$300 per month. Regardless if you buy or rent, you will need to calculate monthly maintenance fees for the building which on average will usually come out to US$50 per month (in some cases, this may be included with the rent, so be sure to ask). Some newer buildings do offer a central gas system (for cooking) and in such a case you can figure on a slightly higher maintenance cost to cover it. Otherwise, you would need to refill your apartment's own gas cylinder (located on the ground floor and connected up to your condo) roughly every 2 months for about US$60.
In terms of electricity, your biggest expense will be air conditioning usage, but taking that out of the equation you can figure on about US$150 per month for an average electricity bill. If you do have two air conditioning units running about 10 hours a day, then your monthly bill can jump to about US$300 per month.
Cable television is certainly available and in many cases with 300 or more channels, with perhaps 10 to 15 in English (CNN, ABC, NBC, CBS, FOX, Warner, Disney, HBO, Showtime, Cinemax, ESPN, and other channels). Assuming you opt for the high end package with all the various movie and sports channels, you can figure on a monthly bill of about US$75.
Last but not least comes the issue of monthly food shopping, which will be the most variable monthly expense all depending upon your own personal preferences. But for the sake of coming up with a number, let us assume two people and let us also assume it is someone that will prefer some imported items on their shopping list, including better cuts of imported beef. Let us also assume it is someone that may want to purchase a few bottles of good wine from Chile or Argentina per month (about US$50 each). So, based upon all of that, we can roughly calculate a weekly food bill of US$200, or what sums up to US$800 per month. Not that may seem like a high number for some, or an average number for others. Again, if someone sticks to local produce and local products, that number can be possibly cut in half.
So, all told what do we have as a final monthly living expenses number? If if we add up all of the numbers on the high side, including the possibility of paying rent, we get a monthly tally of about US$1,700. However, if someone purchases a condominium for cash, puts the equivalent of US$100,000 in fixed income investments (bonds, commercial paper) paying 10 percent annual interest, then it is quite possible to cover your monthly expenses from your local investment alone (with additional pension income or other income as extra money to be used for travel or another purpose).