Currency risk can be a legitimate concern when preparing for a move overseas. The exchange rate between the U.S. dollar and the currency of the country where you decide to retire could change dramatically over time. You could move to a place where your retirement income of $1,500 a month affords a rich, comfortable lifestyle, only to find that five years from now you need 25% more to maintain the same standard of living. That’s exactly why Belize ranks highly on this list by Yahoo News for best places to retire overseas that use the U.S. dollar.
How to Avoid Currency Risk in Retirement
You can mitigate currency risk by investing in a home of your own in the country where you’d like to live. Housing is typically the biggest part of any retiree’s budget, and by buying your home rather than renting you can eliminate fluctuations in monthly costs and your exchange-rate exposure. However, not everyone can afford to buy a home overseas in retirement.
You could also convert U.S. dollars to the local currency in advance with the help of a foreign exchange service. Ideally, you could buy the foreign currency you need to pay your bills when the dollar is strong. However, this requires trying to time exchange rate fluctuations, which even professionals are not always able to do.
The other way to protect against exchange rate risk is to move to a country where no exchange of currencies is required. The list of places that accept the U.S. dollar isn’t long, but it includes some of the world’s best options for living, retiring, and investing overseas. For example, Ecuador uses the U.S. dollar as its official currency. Belize and Panama don’t use the dollar but peg their currencies to it.
Popular retirement spots overseas that accept U.S. dollars include:
- Ecuador swapped its sucre for the U.S. dollar.
- Belize pegs its dollar to the U.S. dollar 2:1.
- The dollar is the de facto currency in Panama.
Why You Should Choose Belize For Your Overseas Retirement
Belize is a sun-drenched retirement haven where English is the official language. The country pegs its dollar to the U.S. dollar at a rate of two to one. You can easily and freely spend U.S. dollars in Belize. They are accepted everywhere, alongside Belize dollars. If you give a shopkeeper $20, he’ll give you change for $40 in Belize currency.
However, when you take money out of a U.S. bank account from a Belize ATM or wire funds to a bank account in Belize, the bank will make the exchange of currencies not at the rate of two to one, but at a less favorable rate of perhaps $1.98 or $1.99 to one, and then take the difference as the transaction fee.