Ah, the cost of living in Panama… something I should have posted about months ago.
As my long-time readers know, the Route to Retire family has decided to move to Panama in a couple years as part of our FIRE plans. I’ve also talked about how inexpensive it can be to retire to a place like this.
It’s interesting that you can actually take advantage of the difference in living costs between two locations to help you financially. And there’s actually a term for this – geoarbitrage.
It might be done to live on less money. Alternatively, it might be to have the ability to afford the “greater things in life” you otherwise couldn’t afford.
You see that used quite a bit on a smaller scale here in the United States.
Think of all the people who work in fancy downtown cities like Manhattan or Chicago. If you decided to live in an apartment in those places, it’s going to be ridiculously expensive and you’ll probably live in a place the size of a dorm room.
Because of that, most folks live outside of the city and commute to work.
They pay less for more. Get the idea?
On a larger scale are those who move to different areas of the country where the cost of living is cheaper.
There’s a sliver of the population that takes this to another level. They might move to a completely different country to truly leverage the cost of living differences to their advantage.
We’re in that sliver.
But keep in mind that the cost of living in Panama isn’t the only reason we want to move there.
We’re excited about the adventure, the country is beautiful, the people are friendly, and the weather where we plan to live is about 75°F (or close to 24°C) every day. This is a great foundation for any place to live!
The question a number of you have asked me though is “what’s the cost of living in Panama?”
When we made our visit in June 2017, we got to experience firsthand a lot of the differences in prices, which kind of shocked us. Although we knew that the prices would be less, there were still times we were in awe.
I’ll go through and break things down a little bit on what we found. I’ll also litter in some numbers from Numbeo. This is a great source of timely information on the cost of living (and other statistics). The site uses crowd-sourced information to supply the numbers for different cities and countries across the world.
What’s cool about it is that you can easily compare two places to see the cost differences. In other words, this was a great way to let me compare living in Ohio (I used Cleveland) versus the cost of living in Boquete, Panama. Here’s a link to that comparison.
Restaurants / Beer!!!
When we first arrived at our condo in Nueva Gorgona (the first place we stayed), it was already evening and we had a long day of flying.
So my wife, daughter, and I decided to just hang out at the tiki bar while we waited for my brother and sister-in-law to arrive.
We had a couple drinks and some loaded chips to snack on while there.
Before we cashed out, we asked for some beers to bring back to the room as well.
In total, we had ordered 13 beers, a lemonade for my daughter, and the loaded chips. Total cost… $17.
$17!!! And this was at the resort where things tend to be more expensive… that’s crazy to me!
A few days later, we went to a nearby restaurant called Rincón Catracho that was highly recommended by the locals. The food was fantastic and the portions were good-sized.
I don’t remember our total bill, but you can see on my photo of the menu that most of the meals were less than $10 each. You can click on the picture to see a larger view of it.
These were not unique instances. Every Panamanian restaurant we went to had really good prices (and great food!).
As a side note, you generally tip around 10% in the country (much lower than the 15-20% were accustomed to here in the U.S.).
The numbers get updated regularly, but here are some of the comparisons from Numbeo…
|Cleveland, OH||Boquete, Panama||Difference|
|Meal, Inexpensive Restaurant||$15||$5||-66.67%|
|Meal for 2 People, Mid-range Restaurant, Three-course||$54||$30||-44.44%|
|Domestic Beer (1 pint draught)||$4||$1.23||-69.38%|
I had made it a point not to book an all-inclusive trip because I wanted us to get out and immerse ourselves in the culture.
Anyone can stay at an all-inclusive resort and think, “I’m gonna live here forever!!!” Unfortunately, that’s not day-to-day reality for most folks.
Because of this, we didn’t do much grocery-shopping while there. We only went a couple times and picked up mostly breakfast items and snacks. And of course beer for later!
When we did go, we also went to the Americanized grocery stores, which tend to be much more expensive.
In other words, the more American-like grocery stores seemed comparable to the prices we have here in the States.
However, if we had done our shopping at the Panamanian stores, we would have noticed some differences (some better, some worse).
Here’s Numbeo to give you some more stats…
|Cleveland, OH||Boquete, Panama||Difference|
|Milk (regular), (1 gallon)||$2.55||$5.70||+123.78|
|Loaf of Fresh White Bread (1 lb)||$1.70||$1.99||+16.82%|
|Eggs (regular) (12)||$2.09||$1.90||-9.17%|
|Tomato (1 lb)||$1.85||$0.68||-63.30%|
|Domestic Beer (0.5 liter bottle)||$1.40||$1.02||-26.52%|
It’s hard to know if those numbers are for the Panamanian or Americanized grocery stores, but it’s interesting to see that some of the numbers are higher (much higher for milk!).
The most important tidbit though was that we were able to purchase single cans of beer while there… no full six-pack necessary!
This is obviously a big one for most folks – particularly for those of us that live in the U.S. where the costs of health care are astronomical. Moreover, those costs seem to be getting worse every day.
In fact, health care is a major factor holding people back from early retirement in general here. In Panama though, it’s a completely different story.
While we were on our visit to Panama, we talked to a number of expats from the U.S. about health care. We wanted to find out how they handle it.
We were astounded by what we heard…
One gentleman in Nueva Gorgona told us that he doesn’t carry insurance at all. He told us about when he had an emergency of sorts and went to the emergency room on a weekend to get things handled.
They ran him through a battery of tests and kept him overnight. They then told him that he should work with a specialist and gave him the cell phone number of the doctor to talk to (um, yes, you heard that right).
He went to the specialist who ran more tests and treated the problem.
Total cost for all of the above: $1,200… with no insurance!!
We talked to an older gentleman in Boquete who does carry insurance. He said he pays around $85 for full coverage insurance… per year!!
When our jaws dropped, he told us that he also pays another $65 per year to a third-party company for emergencies. If something major were to happen, he calls them to act as the liaison. They’re bilingual and will then handle getting him to the right medical facility without him having to worry about the language barrier.
So he’s paying around $150 per year for this setup. I pay almost double that for medical insurance through my job every single paycheck! And that’s with my work subsidizing most of the cost!
In general, a doctor’s visit will run you around $15 (that’s the price, not a copay!).
On another note, a gentleman in Nueva Gorgona asked us if we noticed that it seems like everyone is wearing braces on their teeth. He said that’s because it’s so inexpensive there that most everyone makes this happen for themselves and their kids.
The Facilities / Doctors
Whenever we tell friends and family about these kind of examples, they automatically get defensive and say, “Yeah, but what kind of care are you getting?!”
So this would be a little bit of hearsay because we didn’t visit any doctors or tour any medical facilities while we were in Panama.
After talking with a bunch of expats there, though, it sounds like it’s pretty good. In Cleveland, you’ll find the Cleveland Clinic, which tends to rank as one of the best hospitals in the country, so that could be tough to beat.
However, it’s good to hear that the doctors in Panama are trained in the U.S., France, and Mexico so they should be receiving similar training.
The facilities range depending on where you go. For instance, in Panama City, they have both a Cleveland Clinic and a Johns Hopkins affiliated hospital there! Although we’ll be about a 7-hour drive from there, it’s reassuring to know those are “nearby” if ever needed.
I’m told you receive more personalized care in Panama and the doctors and equipment are similar to what you’d find in the States. I’ll learn more when we get there, but the feedback from the expats was very positive on this.
We still need to dig further into all the finite details, but I want to ensure that we have catastrophic coverage at the very least. If one of us gets cancer or something horrible like that, how to pay those bills shouldn’t be something on our minds.
We’ll probably also still look at some type of international coverage if it makes sense. Not only would that help us sleep a little better, but when we come back to the States to visit, we’d already have something formal in place.
When we make our move to Panama in a couple years, we’re going to plan on renting for at least the first year.
If we decide to buy a house down there, I don’t want to jump in before we’re more intimately familiar with the area.
If you’re not familiar with prices in the Midwest, renting can pretty inexpensive.
We currently have a 5-bedroom, 1,600 square foot rental house here that we rent out for $715 per month.
We also have a duplex with each side being 2-bedrooms and about 1,000 square feet and renting for about $750-800 per month.
If you live in San Francisco or somewhere fun like, those prices probably look like a steal. Well, in Panama, it’s slightly better.
|Cleveland, OH||Boquete, Panama||Difference|
|Apartment (3 bedrooms) in City Centre||$1,627.78||$1,093.75||-32.81%|
|Apartment (3 bedrooms) Outside of Centre||$1,000.00||$853.57||-14.64%|
And buying a home is a little more fun…
|Cleveland, OH||Boquete, Panama||Difference|
|Price per Square Feet to Buy Apartment in City Centre||$64.62||$160.39||+148.21%|
|Price per Square Feet to Buy Apartment Outside of Centre||$46.34||$96.45||+108.12%|
Those numbers might seem a little bit higher than the Cleveland area, but think about it – these are prices for buying a place with wonderful year-round weather, mountain-view scenery, and a growing economy. It’s like buying a vacation home for pennies on the dollar.
Additionally, both renting and buying in Panama tend to come fully furnished. Not too shabby!
To top it off, effective as of January 1, 2019, property taxes in Panama are not a burden like they can be here in the States.
For a new or existing primary residence in Panama with a value of $120,000 or less, you’ll be exempt from paying real estate taxes. Yes, you read that correctly!
If your primary residence has a value from $120,000 to $700,000, you’ll be taxed at only 0.5%.
And for amounts of $700,000 and higher, you’ll be will be taxed at 0.7%.
This is amazing to me and definitely drives the appeal to own versus rent!
So utilities such as electric, gas, and water are something that I didn’t personally get to get a feel for on our visit to Panama.
However, after talking to a few folks, I’m told it’s pretty cheap. And the feedback from Numbeo tends to line up with that as well…
|Cleveland, OH||Boquete, Panama||Difference|
|Basic (Electricity, Heating, Cooling, Water, Garbage) for 915 sq ft Apartment||$127.68||$42.77||-66.50%|
|1 min. of Prepaid Mobile Tariff Local (No Discounts or Plans)||$0.10||$0.08||-23.33%|
|Internet (60 Mbps or More, Unlimited Data, Cable/ADSL)||$45.38||$37.48||-17.41%|
I’m thinking that one of the reasons that this is so low in Boquete is that you have that 75°F weather year-round.
Think about it – for the most part, you probably don’t need heat or air-conditioning. I was told that many of the residents are comfortable with ceiling fans throughout their houses.
You’ll also notice that the cell phone service and Internet costs are pretty similar to my current area as well.
A couple expats there told me that’s still a growing area and some locations have stronger Internet bandwidth than others. However, they said that it’s building up quickly across all areas in the country.
Ok, great – we’re moving down to Panama, but what about our daughter? She’ll have just wrapped up the fourth grade when we leave.
Well, believe it or not, I would love to homeschool my daughter.
Panama’s weird though… it’s not illegal to homeschool your kids, but it’s not legal either.
What the @#$% does that mean??!!
We’re still tossing that around, but in the meantime, we’ve talked to some of the expats down there with kids.
They said that you generally wouldn’t send your kids to local Panamanian schools because they’re all Spanish speaking (unless you speak Spanish fluently).
However, the private schools, aka international schools, are supposedly fantastic. The numbers from Numbeo seem to jive with what the folks we talked to down there said as well…
|Cleveland, OH||Boquete, Panama||Difference|
|International Primary School, Yearly for 1 Child||$18,000.00||$2,160.00||-88.00%|
Yeah, pretty damn good!
The relationship between what you get paid and the cost of goods tend to have a relationship wherever you go.
The higher the salaries, the more expensive the goods. The lower the salaries, the lower the costs.
This isn’t always the case, but it’s relatively normal for most places. The same goes for Panama.
If you’re reading this and thinking, “Great, the cost of living in Panama is dirt cheap! I’ll move there and get a job!”, you might want to hit the pause button.
There are basically two classes in Panama – the rich and the poor.
Most Panamanians aren’t considered to be rich – they work hard and make a small amount of money for their jobs.
The rich tend to be the expats moving there and retiring.
Check out the Numbeo comparison…
|Cleveland, OH||Boquete, Panama||Difference|
|Average Monthly Net Salary (After Tax)||$3,009.38||$400.00||-86.71%|
In other words, unless you’re telecommuting for a good job back in your native country, starting a big business, or doing some type of online job, you’re going to be working for peanuts down there.
That’s why we’re waiting until we have enough money before I quit my job and we move.
I’ll still be maintaining and monetizing this blog, but we won’t be relying on the income to get by.
The cost of living in Panama
As you can see, although there are some prices that are a little more expensive in Boquete, most of the prices are dramatically lower there.
In fact, according to Numbeo’s comparison of Boquete and Cleveland, here are some other interesting stats:
- Assuming you’re renting in both places, a standard of living costing $3,800 in Cleveland would only be around $2,393.65 in Boquete.
- Consumer Prices in Boquete are 40.22% lower than in Cleveland.
- Consumer Prices Including Rent in Boquete are 37.01% lower than in Cleveland
- Rent Prices in Boquete are 28.46% lower than in Cleveland
- Restaurant Prices in Boquete are 50.59% lower than in Cleveland
- Groceries Prices in Boquete are 32.69% lower than in Cleveland
- Local Purchasing Power in Boquete is 78.90% lower than in Cleveland
We’re not expecting everything in Panama to be a bed of roses. However, from everything we’ve read, experienced, and talked to others who moved there about, it sounds like the upsides will greatly outweigh any downsides we run across while we’re there.
And, although we’re planning to move there permanently, if we don’t enjoy it, it’s not as if we’re stuck there. We can always move back to the U.S. (or a different country) if we want to at some point.
The key to obtaining the optimal cost of living in Panama is that you need to be willing to take on a lot of the Panamanian life.
If you eat, drink, and play like a Panamanian, you’ll enjoy the low costs that come along with it.
However, if you need to hold onto a lot of the American culture, your costs are going to be higher.
In other words, if you want to shop at an Americanized grocery store because you can’t live without your Kraft Macaroni & Cheese and your Dr. Pepper, you’re going to pay higher prices.
There are plenty of Americanized restaurants there that can make you feel like you’re back in the States, but they cost around the same as what you’d pay in the States.
It’s not a bad thing to splurge on these things now and again, but know that if you make it your lifestyle, you’ll lose that cost-of-living advantage of moving down there.
I’m sure there will be some foods that we’ll miss and have a craving to get periodically, but we just won’t be doing that on a regular basis.
I hope this gives you a better idea of how the cost of living in Panama can be a great tactic for geoarbitrage.
Be sure to check out Part 1 and Part 2 of our visit to Panama and the fun we had there.
Have you ever considered using geoarbitrage as part of your FIRE plans?
Thanks for reading!!
32 thoughts on “The Cost of Living in Panama… Geoarbitrage at Work!”
Love all the details here and the point you make about living the culture to see the financial benefits. I’ll be interested to keep following your journey here. I have friends who have taught in many International Schools and they loved it. It’s great that there’s one so close to where you think you’ll live. Homeschooling is fine – but having the option for her to go to school and meet more friends and be involved in school activities might go a long way to her happiness there too.
Wow, that’s cool you have friends that have taught in international schools… I might be asking you all sorts of questions down the line! 😉
We still haven’t decided what we want to do yet on homeschooling vs sending her to school, but I definitely get the point of going to meet new friends. I don’t think we’ll have an issue regardless. She’s the social butterfly – when we went on this trip, we watched her make friends with a girl who didn’t even speak any English. They hung out and played together for hours… crazy, right?
Isn’t it amazing what a change of scenery can do for your pocketbook (and the scenery)? Cleveland’s not exactly known for its lush vegetation.
We’re experiencing something similar on a three-week Spanish immersion trip. I don’t see us moving from the US permanently — we can afford to live there, too — but I do envision extended stays away for months at a time in locations like the one you describe. Van Halen was really on to something.
Haha, very true about Cleveland!
That Spanish trip sounds like fun as do taking extended stays down the line… man, the power of FIRE is something, isn’t it?!
When we get out there, we’ll probably be blasting Van Halen’s Panama every day until it gets old. In other words, probably until day 3. 😉
I’m envious of your plan to move to Panama. Cleveland is already a low cost of living place and Boquete is way cheaper! Such a cool little town, and not too far from the ocean. We think about the savings we’d get from moving and using it to achieve FI upon changing locations, but we aren’t planning to do so. Comforts at home keeping us put, at least for now. We’re more likely to take a multi-month sabbatical or maybe a year somewhere instead of a permanent move. You have this all figured out and it’s awesome. Good luck making it happen.
It’s not something everyone would want to do, but we’re looking forward to giving it a shot. And the money savings won’t hurt in the meantime!
Haha, we definitely don’t have it all figured out, but what fun would that be?!
If one of your sabbaticals ever takes you down the way of Panama, keep me in the loop!
This is so awesome! I’d love to live in an affordable country, if not just for a few months for funsies. 😉 Looks like a beautiful and affordable place. I live in Texas and here you can get a very nice house for $150,000. In California that wouldn’t buy a garage. If people don’t want to live abroad, there are also affordable destinations within the States, too.
It’ll be an adventure and full of funsies for sure!
For a lot of folks, using geoarbitrage to move to other destinations within the States makes much better sense. For us though, I figure if we’re going to make the move, we might as well find an affordable destination with perfect weather… that’s much harder to find here.
This is the post I was waiting for Jim! I’m actually surprised how much things cost given the low salaries in Panama.
For example, how would a local afford to live on $400 a month when rent is closer to $1000. My guess is the locals don’t live in those rentals, but have much more modest housing.
Does this create tensions in the local community — the gap between the haves and have-nots? Do you need to worry about crime or theft?
If/When you guys move, I would love to come visit someday!
It’s truly interesting there seeing the difference walking around between the rich and the poort. What’s amazing is that there doesn’t seem to be that tension you would expect. Here in the states you might see riots in the streets.
In Panama, however, that doesn’t seem to be an issue. When you walk around downtown Boquete, you can absolutely tell the difference in the classes, but everyone is so friendly with each other and always smiling and being social.
In fact, we noticed while we were there that it wasn’t unusual to see giant McMansions alternating next to tiny and even rundown houses. From what we saw and the people we talked to, it just seems that social class is not as big of deal as it is here in the States. That’s another reason I’m excited to try living there.
And, of course, if you’re serious about visiting, we’d be happy to have you!
I love all the details you’ve provided. Never been to Panama but sounds like a great place to geoarbitrage and expedite your FIRE journey. We’ve thought about moving to Asia where cost of living is cheaper than Vancouver. We haven’t looked into Central/South America yet. We might have to reconsider this. 🙂
Thanks, Bob! I start to get claustrophobic when being in a plane for too long, so I don’t think I’ll ever get a chance to check out Asia. However, I hear there are some great geoarbitrage opportunities out there!
This is great, but why Boquete? Why not Panama City? I am just curious because I am seriously considering moving abroad within 5 years and Panama is at the top of the list. It also helps I speak Spanish, but ironically I have never been to Panama.
Hey Jason – speaking Spanish puts you a step ahead of me with Panama. I took a few years in high school, but I’m far from fluent.
Panama City is much different than the rest of the country and some would like it better, but I’m not that guy. I’ve heard it compared to Miami and NYC and it definitely has that hustle bustle going on there – too much for me. It’s also much more expensive than areas like Boquete… expensive enough to not make it worth our while. Here’s a Numbeo comparison to give you a better idea.
It’s a beautiful country all around though and small enough that you can visit a ton of places to check out in just a single trip.
Great rundown, and nice to see the beer is cheap! We’ve been looking at Central America for a while now. So far we’ve visited Costa Rica a couple times, and just got back from Belize. The beer in Costa Rica is expensive – $10 for a six pack. Belize was better – $30 for a case. Neither of those however can beat a 30 pack of PBR here in the states for $16 🙂
Generally speaking most things, like groceries and cars, aren’t cheaper. Imported goods are especially expensive. The big benefits seem to be eating out, housing, and healthcare costs. Healthcare being the biggest difference. But it’s also nice to eat out and walk away with bill under $20 🙂
Thanks, Mr Crazy Kicks – that surprises me on the cost of beer in Costa Rica… that alone means we picked the right place to move! 😉
It’s interesting to see the differences in prices in these countries. Like you said, things aren’t always cheaper and can actually be more expensive in some cases. Hopefully, we notice some big savings while in Panama!
Okay, Jim, I’m ready to move to Panama after reading this! Of course, I also have another million bucks to put away before then and a husband to convince…
It is so true about having to be willing to live like the locals to be able to take advantage of the cost savings. When we were expats in Shanghai, we received a large cost of living adjustment each month to cover the difference in paying for every day expenses like groceries and clothing. However, we chose to change our diets and our lifestyles. By not buying very many imported groceries, we were able to save essentially all of that money. We had some great adventures going out into the local markets to find the random things that came up like household supplies and clothes.
And I’m not sure if you mentioned it but the other amazing thing about living somewhere like that is the availability of inexpensive help. Our Chinese ayi made my life so much easier while I was trying to figure out how to live in a new environment and find local places.
Wow, your adventures in Shanghai sound awesome and like a super good deal for you guys!
Awesome point on the help! You can actually hire someone to spend all day cleaning your house for about $20… you can live like royalty if you want to (except I’m too cheap for that! 😉 )
Nice write up! Panama sounds great and as a hidden gem it may not last. Good thing you are getting in early. I have toyed with the idea of leaving it all and going to Mexico or Costa Rica. I figured I would need half as much money. My worry is my kids and other family. Do you find they will want to visit you more if you live there? What about the kids college and future relationships? Chao DOAT
I think only time will tell, but I’m guessing that my in-laws may come stay with us for longer periods during the winters. Other than that, I’m hoping that friends and family would use visits to us as an excuse to take getaway vacations.
College and future relationships for my daughter are still a ways away so we’ll have to create that bridge when we get to it. However, my guess on education is that the dynamic will change by that time. I would think a lot more degrees will be done online. And if she goes back to the States for school, that’s ok too.
I love the detail on all of this. I have spent a ton of time in Nicaragua over the last 6 years and plan to have a place there in the near future. This is a great guide because I feel the countries are very similar in pricing.
Thanks, Cory! Sounds like you’re enjoying living in another country! I’m not too familiar with Nicaragua, but I’m glad my info is helpful to you.
We’ve been to Panama city, Boquete, and Bocus Del Toro and we loved our time there! I can see why so many expats decided to move there. Great weather, nice people, safe, reasonable cost of living..what’s not to love?
Great thorough post with lots of details!
Thanks, FIREcracker – we wanted to check out Bocas del Toro but ran out of time. Guess we’ll get a good opportunity once we’re living in Panama!
I like reading articles of the cost of living in other cheaper countries. My wife and I hopefully will be doing something similar in a few years, at least for the winter months. ( I booked marked Numbeo’s website) Thanks for the info.
Quite welcome, Steve – looking forward to hearing what your plan will be!
Thanks for sharing all this great information!
I hope it was helpful. Like I said, feel free to reach out if you have any questions. I don’t know everything yet, but I definitely feel comfortable enough for us to make the move. 🙂
I think about this all the time. It’s pretty essential to any FIRE plans I have. Curious, how you came upon Panama in the first place?
Funny enough I wrote a post dedicated to that question! 🙂 The #1 Question We’re Asked About Moving to Panama…
Panama and all other surrounding countries are great opportunities if you go with dollars. Ideally having some passive income in the states such as a rental or market investment will allow you to live a fun life with no worries. 20-40k will do.
Distressed countries like Venezuela might also be an opportunity to snatch beautiful beach properties, right on the water, for 15-20k. However, no recommended to live there right now.
Mrs. R2R and I were actually just talking about Venezuela – yeah, probably not the best spot to consider right now. But, yeah, there are definitely some fantastic places around the world to consider retiring to in order to get more bang for your buck!