2005 Annual Global Retirement Index--The world's top retirement havens

by Laura Sheridan
Research by Eoin Bassett and Ellen Gwin

And the winner is…

Can you guess?

For the fifth year in a row, Panama has taken top honors in our Annual Global Retirement Index. It comes out on top in every category, including the Special Benefits (for retirees) category, boasting the world's best pensionado program, better than the famed Costa Rica program of the 1980s. Plus it boasts a low cost of living, affordable real estate, great weather in the interior, and, extraordinary and unique in this part of the world, First World Panama City, with infrastructure that works, U.S-style shopping malls, nightclubs, restaurants, cafés…even Dunkin Donuts and The Colonel's fried chicken.

On top of all that, Panama is one of the world's biggest international banking centers and few remaining offshore and tax havens. The political system and the economy are stable (Panama uses the U.S. dollar as its currency, so there's no exchange risk), and The Pinkerton Global Intelligence Agency recently gave Panama its highest rating for tourist safety.

Retire at 18

One extraordinary thing about Panama's pensionado program is that it is not age based. You can enjoy "retirement" benefits even if you're as young as 18. If you can document a minimum monthly pension of $500 (plus another $100 per dependent), you are eligible for a long list of perks, including:

? Import duty exemption for household goods.

? Tax exemption to import a new car every two years.

? 50% off entertainment anywhere in the country (movies, theaters, concerts, sporting events).

? 30% off bus, boat, and train fares.

? 25% off airline tickets.

? 50% off hotel stays from Monday through Thursday.

? 30% off hotels stays from Friday through Sunday.

? 25% off at restaurants.

? 15% off at fast-food restaurants.

? 15% off hospital bills (if no insurance applies).

? 10% off prescription medicines.

? 20% off medical consultations.

? 15% off dental and eye exams.

? 20% off professional and technical services.

? 50% reduction in closing costs for home loans.

? 25% discounts on utility bills.

? 15% off loans made in your name.

? 1% less on home mortgages for homes used for personal residence.

A chorus of praises for Panama

We've been telling readers of these pages about all that Panama has to offer for more than a dozen years, but this year we've noticed that the mainstream press is finally catching on to this country's delights, too. An article in Harper's Bazaar reported that: "Panama is the most beautiful retreat in the world and almost undiscovered." The Boston Globe called it "…an undiscovered tourist paradise." The Los Angeles Times, The New York Times, and National Geographic have also published long travel articles praising the undiscovered delights this country has to offer.

Not only that, but The Tripartite Committee ranked it Number One in the region for low cost of living; Political Risk Services named Panama one of the top three countries in the hemisphere for best-risk investments; as I mentioned already, The Pinkerton Global Intelligence Agency recently gave Panama its highest rating for tourist safety in this part of the world; and, according to Canada's Fraser Institute, Panama is at the top of the list of the world's freest economies, ranked eighth with Australia, Ireland, the Netherlands, and Luxembourg.

Panama has a stable government, a stable currency (pegged to the U.S. dollar since 1904), and virtually no inflation. In other words, this country is the exception to the rule in Central America. As The Economist recently reported, in Central America, "Panama has stood apart, sustained by its canal, banks, and free-trade zone."

Better quality of life, for less

Panama City might feel like New York City in some ways-but not to your wallet.

A full-time, live-in maid costs $150 a month…you can see a first-run movie in English for $3.90.

Most everything you read categorizes Panama as a Third World country. But the infrastructure, diversity, and sophistication of the city's capital will make you question that.

In fact, Panama City is our number-one recommendation worldwide if you're looking for inexpensive cosmopolitan living. You'll find world-class restaurants, five-star hotels, international banks, hundreds of multinational businesses, a Manhattan-type skyline, and every imaginable convenience…all at about half the price you'd pay in Miami, or any other U.S. city for that matter. All this with a Latin undertone, a tropical climate, and a whole lot of friendly people, most of whom, at least in the capital, speak enough English to make you feel welcome.

Property, both to buy and to rent, is affordable. You can buy a brand-new two-bedroom apartment downtown, with a deck, private parking, and a pool, for as little as $75,000. Plus: walk just about anywhere in Panama City, and you have an ocean view. In general, expect to pay about US$100 per square foot for a renovated or new condo downtown.

You might even be able to find something outside the prime areas for as little as $50,000, though, at this price point, the place would probably require renovation. Not a problem, as labor is cheap and plentiful, and the quality of workmanship can be very good. We don't recommend that you take on a renovation project, however, unless you know something about construction, and speak at least passable Spanish.

Cooler in the mountains

Biggest downside to life in Panama City? The temperature. This city is hot and humid, all year-round. If that's not for you, look inland to the little valley of Boquete. Located in Panama's mountainous Chiriqui region at an elevation of 3,500 feet, this is one of the world's most idyllic refuges. Its lush green hills, flower-covered mountainsides, and spectacular waterfalls help to make it one of the most unspoiled retirement retreats anywhere. Plus, in Boquete, spring reigns eternal. You might even need a sweater come sundown.

Because of its near-perfect climate (temperatures hover year-round in the mid-70's), the area around Boquete is lush and verdant. Panamanians call it the "valley of flowers and eternal spring." It's a great refuge for the outdoor enthusiast-offering hiking, biking, bird watching, horseback riding, whitewater rafting, trout fishing, and gardening. Raw land prices start at about $3,000 per acre, and you can build a home here for about $45 per square foot.

Isla Contadora

Bill Bonner, founding publisher of International Living, made a good point in IL's special May Silver Anniversary issue, when he said: "The beach is like gold-there's not that much of it. You can't make more of it. You can't print it. There's less and less of it all the time, and more and more people who want it."

For this reason, we recommend you look to Panama's island of Contadora. This piece of Paradise is a closely guarded secret among the wealthy and famous of this country…and some of the world's jet set. It's private, peaceful, and pristine, with 13 white-sand beaches.

Contadora is a place to disconnect and disappear…a real escape…and a good place to take your family. If you are looking for karaoke bars, bikini contests, and Spring Break parties, you won't find them here. For a better idea of what you will find, see www.contadoravillas.com.

We've been sold on Panama for years and, five years ago, established one of our International Living Local Offices in Panama City, where our team is standing by to assist with any queries you might have on retiring, investing, or visiting Panama. You'll find them in Casco Viejo, at the corner of Plaza Catedral, across from the Canal Museum. Otherwise, you can get in touch by e-mail: Panama@InternationalLiving.com.

Retirement on the Continent

Not interested in the Tropics? How about the Old World?

France ranks second in our Index this year. It's a country of snow-capped Alpine peaks, stylish beach resorts, and a glorious green and golden interior, where ancient towns cast shimmering reflections into lazy rivers. So many locations rightly belong in an art gallery…and there is so much for the would-be retiree to do and see.

We aren't the only ones who hold this country in such esteem, of course. France is the world's favorite destination, receiving in excess of 70 million overseas visitors each year, attracted by the culture, the architecture, the food, the wine, and the centuries of history…all the civilized pleasures the French have got down to a fine art.

Outside the capital, prices can be surprisingly low. In northern and central France, for example, you wouldn't have trouble finding a country house to renovate for $50,000 or less.

Paris, of course, is a region of this country unto itself, but even Paris can be affordable. Grade A real estate right now is selling for 10,000 euro per square meter and more…but it's possible to buy in the less fashionable arrondissements (say the 10th, the 11th, or the 19th) for as little as 4,000 euro a square meter. And consider what you're buying. The romance…history…culture…the food…the shopping. In truth, we'd argue that no city anywhere compares.

Furthermore, France boasts the world's best health care (according to the World Health Organization, website: www.who.com), excellent infrastructure, safety, and, again, outside Paris, an affordable cost of living. Interested to know more? Get in touch with our office in Paris by e-mail at: Paris@InternationalLiving.com.

Downsides to life in France? The red tape and the tax system. The red tape, though, is manageable (our in-country staff is expert at this)…and the tax burden is, too, with good advice. Again, our team in the country can help.

Malta-second runner-up

Lying south of Sicily, a quintet of sunny islands makes up the Republic of Malta. Malta, Gozo, and Comino are all inhabited-though with a mere handful of families, Comino only just qualifies. The remaining islands, Cominotto and Filfla, are for boat-trippers and seabirds.

These unknown islands have so much going for them. On both Malta and Gozo, the living is easy and affordable. Crime hardly exists, the locals are hospitable, permanent foreign residents can take advantage of a 15% tax rate, and nobody pays property taxes. And you'll encounter no language difficulties…everybody speaks English. To top all this, the health care is top-notch.

Plus, the Maltese islands have fair weather, averaging 5.2 hours of sunshine a day even in December. Right into November, daytime temperatures often nudge 70° F. And, while the islands boast few sandy beaches, there are compensations. Summertime brings a round of colorful village festivals complete with fireworks. Diving and sailing are excellent. You can play golf, go horseback riding, and attend trotting races. There are theaters, cinemas, and opera.

Houses of Character

A spacious seafront apartment could be yours for $76,500…or you can rent for $4,590 annually. Of course, apartments aren't the only option. Hidden behind high walls are "houses of character," centuries-old dwellings with patios embellished with Arabic-style fountains or citrus trees. Like the islands' smaller farmhouses, these start at just $127,500 for foreign buyers. Malta is hot-and we don't just mean its summer weather. With little room for new building, values have nowhere to go but up. Prices are likely to rocket further now that Malta has joined the E.U. Over the past 20 years, property values have risen by an average 200%. Predictions are for another 100% gain over the next 10 years. Provided they're in prime locations, upscale apartment residences, seafront properties, spacious villas, farmhouses, and "houses of character" are likely to rattle up the highest increases. These are always in demand with foreign buyers.

Little Gozo

Home to less than 30,000 inhabitants and a minuscule 26 square miles in size, tranquil Gozo provides a nostalgic escape. This is a world of deep blue sea and hidden coves, green fields, prickly pear hedges, and scattered windmills, church spires, and sleepy villages. Some farmers still travel by horse and cart, single sheep ride in solitary splendor in toy-size trucks, and almost all the older generation attend daily mass. Homes are cheaper than on most parts of Malta, but word is getting out about slow-paced Gozo. Sought-after properties with foreign buyers are its flat-roofed, honey-hued stone farmhouses. They still often surface at around the $125,000 mark.

Close, safe, and still affordable

Moving up three places to take fourth position this year is Mexico. According to Dan Prescher and Suzan Haskins, our husband-and-wife team on the ground in San Miguel de Allende, a big plus to this country is that the cost of health care is generally half or less than what you would pay in the U.S., and the same goes for prescriptions. And, unlike the U.S., doctors make house calls here, and the cost of even home health care is reasonable.

The country is safe, its infrastructure is good and improving every day, and the cost of living is still low. Although properties are not as cheap as they used to be, they're still nowhere near U.S. levels. For example, you can buy a charming colonial home in Merida, with three bedrooms and three bathrooms, right now for $230,000. Or a beachfront lot in San Crisanto, on the Gulf Coast, for $80,000.

Maybe the best part: You're not too far from home. Mexico is the easiest place for any American to "retire overseas." In some regions, it's even reasonable to drive back to visit family in the States.

For more information on the good life in Mexico, contact Dan and Suzan at: Mexico@Internationalliving.com; website: www.mexicoinsider.com.

Romania is moving up

Romania offers vacation experiences unique in Central and Eastern Europe: medieval towns in Transylvania offer such wonders as the painted monasteries in Bucovina, their exteriors covered with Byzantine-influenced frescoes of biblical scenes. Among the most notable monas-teries are Voronet-built in 1448 and known as the Sistine Chapel of the East-Sucevita, Humor, and Moldovita. Seek out traditional villages in Maramures, the magnificent architecture of Bucharest, the romantic Danube Delta with its fairy-tale castles, the Black Sea resorts, and the majestic Carpathian Mountains.

Bucharest, known as "little Paris," was significantly renovated around 1900 by French architects and today is resurgent in a dynamic way. Its tree-lined boulevards, eccentric mix of architectural styles, and Latin attitude together create a vibrant city atmosphere. Furthermore, according to Mercer's "Cost of Living report 2005," Bucharest is the least-expensive European city.

In the northwest is a land where rural farmers might invite travelers into their homes for refreshments, and where they still attach benches and boxes to their gates to hold bread and water for passing strangers. Romanians remain close to their cultural heritage and are proud to show it off to visitors.

The Black Sea coast

Romania is scheduled to join the E.U. in 2007, and when it does, property prices are sure to rise. For now, they remain reasonable-in fact, Romania hides some of the best bargains in all Europe, especially along the "Romanian Riviera," a continuous belt of seaside resorts: Navodari, Mamaia, Constanta, Eforie Nord, Eforie Sud, Techirghiol, Costinesti, Olimp, Neptun, Jupiter, Aurora, Venus, Saturn, and Mangalia.

Many of the big resorts along this country's coast were built during the 1960s and 70s and are good examples of the best communist architects could muster (that is, some of the world's least appealing seaside structures). Regardless, back in the 60s and 70s, the Black Sea coast of Romania was popular with North Europeans, particularly Germans, who flocked to Romania because it was so cheap. However, when dictator Nikolai Ceaucescu was at the height of his power, foreign tourism dried up entirely. The region deteriorated to nothing more than a bunch of mediocre at best resort facilities with terrible service. Huge advances are being made to rectify this, but the legacy is largely still present.

The average price for apartments in Constanta, in eastern Romania, for example, is about $100 per square foot…rising to almost $200 per square foot for an apartment in a good state of repair. Five years ago, prices were about $30 per square foot. In the suburbs, a two-bedroom apartment that cost $9,000 in 2000 is now selling for $48,000. This is one country squarely on our radar screen in 2005 and beyond.

Nicaragua now

Nicaragua's President Bolaños has made the development of his country's tourism industry one of his number-one priorities. He's increased the tourism budget 150% in the past year and is aggressively working to increase the number of foreign visitors from the current 475,000 per year to 800,000 per year by 2006. Revenue from tourism is up. The number of hotel and B&B rooms has increased 30% in the last year, and occupancy rates are rising. Anecdotally, we can tell you that Granada, Nicaragua's colonial treasure of a city, has never been busier. On our most recent visit, the restaurants, the cafés, the shops, and the central square were crowded with tourists speaking English, Spanish, Dutch, and German.

In January of this year, more than 80% of the country's international debt was forgiven by the IMF and others, with the stipulation that the money that would have gone to service that debt be plowed into infrastructure. Last month, steps were taken by the finance ministers of the G8 to cancel the rest of the debt.

Roads and highways are being improved and widened. International hotel chains and major corporations have set up shop. Stores and restaurants you're used to seeing in the United States are open for business here.

Everyone from Conde Nast Traveler to The Wall Street Journal is waking America up to the big potential in this until now under-appreciated country. Critically, it's not too late to position yourself in this market, though we'd recommend you act sooner rather than later.

I'm spending two months right now on the Pacific coast of Nicaragua, living in a private oceanside community called Rancho Santana (www.ranchosantana.com), and it's easy to understand why foreign retirement real estate is becoming big business in this country. As the first of the 76-million-strong Baby Boom generation turn 55 this year, the foreign home, second home, and retirement home industry in this part of the world is going to continue to grow. We think in a big way. All these adventuresome, open-minded souls are in the market for places just like Rancho Santana, places offering privacy, safety, warm weather, and a relaxed lifestyle. Last week I met Doug and Beverly, who had just arrived from the States that day-their first time to this country-and were celebrating their recent purchase of two lots here at Santana. For more, take a look at www.RanchoSantana.com.

Nicaragua offers advantages few other places can match. Its cost of living, for example, is a fraction what it is back home. A full-time maid can be employed here for less than $100 per month. To see a movie costs $2, and a haircut in Granada is $1.25. Two people can have an excellent meal, including a good bottle of wine, for less than $20.

To qualify for Nicaragua's retiree program, you need only be 45 years old and able to show a guaranteed monthly income of at least $400. Under this program, you pay no income tax on out-of-country earnings, and you can import your household goods and your car duty-free. For more information, contact our in-country team in colonial Granada by e-mail: Nicaragua@International Living.com.

A hundred thousand welcomes

The editorial office's home base of Ireland doesn't fare well in our Index this year (it comes in fourth to the last). Ireland loses points due to its high cost of living and expensive property prices. However, this is not enough to deter some of our readers who are drawn by its Celtic mystique. If Ireland is your choice as a retirement haven, you can take advantage of the many retirement incentives this country has to offer, including free health care and public transportation.

Important note: In the interest of full disclosure, we want you to know that International Living receives commissions from sales at Rancho Santana and Contadora.

How our Global Retirement Index is scored

? Real estate. Countries where real estate prices are low and the purchase of real estate is relatively easy receive the highest scores. We use our own experiences plus reports from our contributing editors and real estate contacts around the world to rate each country. Weight: 15%

? Entertainment, Recreation, and Culture. This category considers the number of newspapers per 1,000 citizens, the number of museums and cinemas per capita, the number of university students, the literacy rate, and the variety of cultural and recreational offerings. Weight: 10%

? Cost of living. This score is based on statistics from the Indexes of Living Costs Abroad, Quarter Allowances, and Hardship Differentials, published by the United States Department of State, and on data published by Business International. We also use our firsthand experiences living and traveling in these countries. The lower the score, the higher the cost of living. Weight: 20%

? Safety and stability. This measure of unrest in each country is based primarily on Interpol data and State Department statistics. It also takes into account the civil liberties and political rights granted by each government. Our own experiences and reports from expatriates living in these countries also influence the safety scores. Weight: 5%

? Health care. Considered in this category are the cost of a typical visit to a general practitioner and the cost and coverage particulars of health insurance. Weight: 20%

? Climate. Countries with temperate weather throughout the year, moderate rainfall, and little risk of natural disaster come out on top in this category. We use data representing each country as a whole instead of favoring one region over another. Weight: 5%

? Special benefits. This category considers government provisions that make moving to and living in each country easier and more affordable for foreigners. Taken into account are property rights for foreign residents, property tax rates, duty-free imports on personal belongings, currency controls, employment restrictions, voting rights, and transportation discounts for seniors. Weight: 20%

? Infrastructure. This section considers the number of cars and telephones per 1,000 residents, the length of railroad track in usable condition, the number of airports, the quality of the country's road and highway network, and the availability of telecommunications. Weight: 5%