Why Is Panama A Hot Retirement Spot?
Panama has great appeal for retirees for a number of key reasons. One of the main draws is the cost of living. Many North American expats who have made the move to Panama report cutting their living expenses by as much as 50%. You’ll find most everything from food to real estate comes at a lower cost here. While prices have increased in recent years owing to its growing popularity, life in Panama is still a bargain when compared to the U.S.
Your cost of living could be under $1,500 a month for a simple yet fully appointed lifestyle in most of the country’s interior. In the City and popular expat havens like Boquete, you could spend double that or more depending on your lifestyle choices.
Health care is also more affordable here—a doctor’s visit in the capital will run you about $50—and of a high standard, particularly in private hospitals. Panama City is home to Hospital Punta Pacífica, the only hospital in Latin America affiliated with and managed by Johns Hopkins Medicine International.
Small clinics handle everyday ailments, and every doctor I’ve ever met has always been friendly and as helpful as possible, and that includes speaking English most of the time. Many doctors went to school and trained in Canada or the United States and, as a result, speak English.
Whatever your medical needs, you can find the health care treatment you require here. The prices are hugely competitive and the time and attention spent on you by doctors is a world away from the frantic feel of the U.S. health care system.
Panama also offers a great tropical climate and is located outside the hurricane belt. Average annual temperatures range between 77-82°F (25-28°C) in the city and along the coasts, while in the highlands you can expect cooler, “spring-like” temperatures of 63-70°F (17-21°C).
The local currency is the U.S. dollar, making relocation simple for U.S. expats who don’t have to concern themselves with exchange rates or transferring funds. Plus, the country is economically stable thanks to the Panama Canal and its friendly tax policies have made Panama City a base for multinational corporations from around the world.
The capital is cosmopolitan, home to expats from diverse backgrounds, and here, you can find every First World amenity and home comfort you might desire. The culture is familiar for many Americans because of the former U.S. presence in the Panama Canal Zone.
The infrastructure is of a high standard. This is a place where things generally work—the internet, cable TV, phone service, etc., are all the most reliable in the region. The roadways and highway systems are being constantly expanded and improved and you’ll find ATMs on every corner.
Panama City is also an international travel hub, very accessible from North America. Flights from Florida, for example, are as short as three-and-a-half hours.
Outside of the capital, you can take your pick from bustling beach towns, mountain escapes, rural retreats, and long-established expat havens.
Panama offers two long coasts—one with crashing Pacific waves and the other with crystal-blue Caribbean waters—with countless islands on both sides of its shores. This little isthmus also brims with rainforests and jungles teeming with all manner of beautiful and exotic wildlife—Panama is home to more than 940 species of birds as well as 220 mammals and 354 reptiles and amphibians. Some 29% of the country’s land area is protected in 14 national parks, more than a dozen forest reserves, and 10 wildlife refuges.
There are also a range of quick and easy residency options on offer including the gold standard of retirement visas, the Pensionado, one of the most accessible and generous visa programs in the world. The basic requirements include that you are aged 18 or older, in receipt of an income of at least $1,000 per month, have a clean criminal record, provide a health certificate issued by a Panamanian doctor, and that you file your application with a Panamanian lawyer while in Panama.
You can also get by here without speaking Spanish. I don’t recommend it, but, in Panama City and certain expat enclaves, such as Boquete and Bocas del Toro, you don’t have to learn to speak Spanish if you don’t want to.
Add to all that, Panama is a safe country to live in. Panamanians are friendly and not money orientated, meaning they’re not resentful of expats who are perceived as being wealthier.
Armed policemen are a common sight in Panama City and tourist areas in particular, are very safe. A dedicated tourist police patrol these areas and are able to chat in English with visitors.
Muggings and burglaries are the most common crimes for expats to be aware of. You can minimize your exposure to these crimes with care and attention.
How Many Americans Retire In Panama?
Panama has a population of over 4.4 million people. According to estimates, some 20,000 to 30,000 of them are U.S. expats, the greatest concentrations of which live in Panama City, the City Beaches (such as Coronado and Gorgona), and the mountain town of Boquete, Panama’s best-known expat haven. Boquete is home to around 25,000 people, about 5,000 of whom are expats.
Why Is Panama Such A Popular Retirement Destination?
Like I mentioned, there’s the lower cost of living, the variety of lifestyle options, the welcoming locals and established expat communities, quality, affordable health care, modern comforts and conveniences, and the great climate.
For retirees specifically, Panama’s Pensionado residency program which offers resident retirees discounts on everything from restaurant tabs and movie tickets to plane fares and prescription medications, is a big draw.
Its many benefits include:
- Duty-free import of your household goods and vehicle.
- 50% off movies, concerts, and other entertainment.
- Up to 30% off travel fares via planes, boats, trains, or buses.
- Up to 50% off hotel stays within the country.
- Up to 20% off health care bills and prescription medicines.
- 20% off professional and technical services.
- 50% reduction in closing costs for home loans.
- 25% discounts on utility bills.
- Discounts on personal loans, home mortgages, and more.
Plus, you can skip to the front of just about any line from the grocery store to the bank. It’s a small thing, but it might just be every retiree’s favorite perk!
And, not only are the locals friendly and welcoming but the stable, relatively drama-free government is pro-business and foreigner-friendly too.
Panama also stands out as a top choice for property investment which many retirees consider as a way to boost their nest egg. Key local developers here have long track records spanning decades, meaning you can feel confident when buying, and, right now they’re more open to flexible and creative financing rates and plans than they have been in a long time.
What Are The Pros And Cons Of Retiring In Panama?
I’ve already mentioned many of the pros including, easy residency options, welcoming locals, a lower cost of living, affordable real estate, good quality health care, solid infrastructure, safety, a wide variety of entertainment options, excellent food, well-established expat communities, and a great climate.
So let’s consider some cons…
For some, the climate could also be listed here. Panama has two seasons—the dry season lasts from December to April and the rest of the year is the rainy season which peaks in October and November. During this time, you can expect heavy downpours every day.
In the dry season, temperatures can soar in the City so for those looking for a cooler climate, consider the mountain regions where the temperatures are lower.
While health care in private hospitals in the capital is excellent, there are a lack of options in rural areas, so if you need to be close to top-tier medical facilities make Panama City or Chitré, the rapidly developing capital of Panama’s Herrera Province, your homebase.
It’s worth noting that Canadian and U.S. Medicare aren’t honored in Panama. Commercial insurance policies also aren’t accepted unless it’s within their specialized international group.
Local Panama health insurance (which can be good, comprehensive coverage) can cost less than $100 per month, while international coverage can go for two to three times more (and more again if you opt to include coverage inside the U.S.).
In Panama City the traffic is a definite con. The country’s exploding middle class means more people can afford a car. The streets, meantime, remain narrow, the parking as limited. Traffic jams are epic. For a retiree, the best advice is to avoid peak traffic times and be aware that holiday weekends in particular will mean hours-long queues both in and out of the City.
Your best bet for getting around is Uber. It’s often too hot or wet to walk and much of the City lacks sidewalks and when they are present they’re often not in the best condition.
The mañana attitude here could be a pro if you’re looking to slow down and enjoy a more relaxed way of life but if you’re used to things being done in your way and to your timelines you may struggle with the relaxed attitude of the locals. Nobody in Panama is in a hurry to do anything… the best advice here is to slow down and go with the flow.
The language barrier may also be an issue. You can get by in English in the City and other expat hotspots like Coronado and Boquete but to live well and build your social circle beyond the expat community you will need to learn Spanish.
Depending on where you live, noise may be a con to life here. The locals love to party and it’s not unusual for music to be blaring or fireworks to start popping off at holidays or any time at all… In more rural areas barking dogs and crowing roosters might disturb you. If they do, be sure to visit any potential new home at different times of the day and night to be sure it’s the right neighborhood and neighbors for you.
One final con: the bugs. This is the tropics so spiders, cockroaches, mosquitoes, snakes, scorpions, caimans, and other “pests” abound here, even in the City to an extent. Once you leave the capital, these critters will be part of your daily life.
How Does Retiring In Panama Affect Your Finances?
Moving outside the United States does not remove your obligation to pay U.S. taxes. U.S. citizens must file a return with the IRS every year, regardless of where in the world they reside.
However, Panama uses a territorial approach to taxation, so expats can live here without a local tax burden depending on the source of their income. As the country does not tax foreign-sourced income, for retirees that means you do not have to pay local taxes on your Social Security or other retirement income from sourced from outside of Panama.
Plus, living overseas can substantially reduce your U.S. tax bill. There are three main tax advantages available to Americans overseas.
First there’s the Foreign Earned Income Exclusion (FEIE), one of the most well known and most commonly used expat tax advantages. With the FEIE, you can exclude up to $126,500 of your income for 2024 from U.S. taxation. The income must be earned outside the United States, and your tax home must be outside the States too.
There’s also the Foreign Housing Exclusion (FHE) which allows expats to exclude thousands in foreign housing expenses from your U.S. taxes.
Finally there’s the Foreign Tax Credit, for which you receive a U.S. tax credit for every dollar you pay in tax to a foreign government.
The foreign tax credit may suit people who don’t qualify for the FEIE, or Americans who are tax resident in countries with a higher tax rate than the States.
If you pay more abroad than you would have in the United States, you can carry the excess taxes paid as a credit for 10 years.
One big advantage of the FTC is that it can apply to so-called unearned income, such as dividends, interest, and royalties.
Panama is a U.S.-dollar jurisdiction—it has been using the U.S. dollar as its currency for about 100 years, meaning an American living or retired here has no currency-exchange risk to worry about.
It’s also the biggest international banking center in the region and one of the few Latin markets where it’s possible for foreigners to borrow locally to buy real estate.
As a U.S. citizen, you can receive your Social Security payments outside the U.S. for as long as you are eligible for them, in most other countries—including Panama.
Most Social Security recipients abroad receive their benefits electronically to a U.S. bank or financial institution in a country with a direct-deposit agreement with the United States. If you use a bank outside the States, you may be charged fees on international transactions which you will have to cover the cost of.
As an overseas recipient of Social Security payments you will be sent a questionnaire every year or so, asking you to confirm you are still eligible for benefits. It’s important to complete this questionnaire as failure to do so could see them stopping your payments.
Do You Need A Visa To Retire In Panama?
Yes, you need a visa to retire in Panama. The most popular option for retirees is the Pensionado visa. This works for anyone who is receiving a pension, either private or government. For Americans, that means if you’re on Social Security, you can qualify for the Pensionado visa.
The minimum pension income required is $1,000 for a single person and $250 for each dependent, i.e. $1,250 for a married couple.
Anther option for retirees is the country’s Golden Visa program which allows you to invest $300,000 (in real estate or a bank CD) and apply for residency.
Is It Ethical To Retire In Panama?
As anywhere in the developing world, the have-nots are very present across Panama.
A typical middle-class salary in Panama is about $1,200 for a worker in Panama City. However, in the countryside and smaller cities, this drops to around $640 per month. Parts of Panama are still poor and people get by on less than $450 per month.
While it’s true in some cases that foreign retirees create an unnatural inflation for real estate and other goods and services in a hot spot, the flip side is that retirees spend money and create jobs and the need for new businesses and services in places they move to.
The best response is to make an effort to give back. You bring valuable experience, skills, and talents with you from your old life to your new one in Panama. Find a way to put them to good use. Many retirees volunteer locally, giving back to their new community and forging friendships with locals.
The Panamanian government is also actively wooing foreign retirees, specifically via the Pensionado visa. They bring money to support the local economy, new perspectives, and diversity.
Who Should Consider Retiring In Panama?
Panama offers a wealth of choices catering to most every taste. If you like big city conveniences, modern comforts, plush condos, and a host of entertainment options then you’ll find it all in Panama City.
If you’re a nature lover who prefers a quieter pace of life, a mountain town like Boquete or beachside retreat like Pedasí will likely be more your speed.
Or, you could opt to homestead in a rural escape like my husband I do at Los Islotes, our 215-acre finca in the country’s little-explored Veraguas province.
Whether you want a vibrant, action-packed retirement in a fast paced city, a place where you can escape the world and get back to basics, or a midway point with an old fashioned feel and modern comforts, you can find it all and more in Panama.
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