Live, Retire, Invest In Nicaragua

As I explained to those assembled with me in Managua for last week’s Live and Invest in Nicaragua Conference, we Americans bring considerable baggage to the table when the topic of conversation is Nicaragua… The Sandinista Revolution…the Contra War…Ollie North…

And that’s a shame because this country has a great deal to offer that is often overshadowed by the Sandinista specter.

Kathleen began hosting conferences and tours in Nicaragua almost 20 years ago. However, this is our first event here since 2006. We pulled back in 2006 and 2007, when interest in this country’s property market was at full boil. Then came 2008, when the bubble burst. Kathleen and I didn’t pull out. We continued and continue now to hold investments in this country, but we understood others’ reluctance to invest time or money here post-2008.

When we sat down a year ago to finalize our conference calendar for 2014, we agreed that this would be the year to put Nicaragua back on our—and your—radar.

So…welcome to Nicaragua.

Years ago we got an email from a reader in response to a report from Latin America Correspondent Lee Harrison on Ecuador. The reader wrote to ask where in Central America Ecuador was located. He’d been looking but couldn’t find it on a map. Ecuador, as I’m sure you realize, is not in Central America.

Nicaragua, however, is, meaning it, like other Central American countries, has the advantage of being just a few hours from most U.S. exit points. Accessibility is one of Nicaragua’s big advantages. If you’re looking to relocate overseas but don’t want to be too far from the grandkids, Nicaragua is a good option. The major airlines offer daily flights.

The population of Nicaragua is 6 million people, relatively large for the region. However, thanks to the country’s size, population density is low.

The official language is Spanish, but you’ll find a fair amount of English for a couple of reasons. One is tourism. In the colonial city of Granada, for example, which is a primary tourist draw, hotel and restaurant staff speak English.

The other reason a lot of Nicaraguans speak English is because they left when the Sandinistas took over. Many went to the United States, had kids, raised families, and learned English. Now they’re back working hard to develop their country.

Tourists come for the history (Granada and Leon vie for title of “oldest city in the Americas,” and Granada has been continually inhabited and maintained for more than 500 years) and for the surfing. The breaks along this country’s Pacific coast are some of the best anywhere on this planet. The beaches are world-class, too, and the climate is not as wet and humid as in Panama, for example. It’s drier here; you even see cactus growing along the coast.

However, you’re not here this week as a tourist. You’re here to consider your options for living, retiring, and investing in this country. From that perspective, perhaps the biggest thing Nicaragua has going for it is its cost of living. This is one of the most affordable lifestyle options in the Americas, as affordable as Ecuador, for example. A couple could retire to Granada, which offers a very comfortable standard of living, for as little as US$1,100 per month, including about US$500 per month for rent.

You don’t even need that much monthly income to convince the Nicaraguan government that you could support yourself here in retirement. To quality for this country’s pensionado visa, you only have to show US$600 per month in pension or Social Security income. That’s the lowest income requirement amount for any retirement residency program in the world.

Another noteworthy thing from a residency point of view is that it’s easy to establish here even if you’re not retired and even if you don’t have a pension. In addition to its pensionado program, Nicaragua also offers what’s called a rentista visa. To qualify for this, you only need to prove income (from any source…could be investment dividends or interest payments, for example) of US$750 per month. The minimum age to qualify for rentista residency is 45.

You have to answer that question for yourself, of course. On the plus side are the low cost of living, the year-round sunshine, and the great beaches. You could live a healthy lifestyle here, eating locally grown organic foods and spending most of your time outdoors.

It’s not only easy to get to Nicaragua but also easy to get around the country once you’re here. Everywhere you’d want to spend time is a couple of hours away from everywhere else you’d want to spend time. The zone of interest extends from Managua north to Leon, south to San Juan del Sur, and east to Granada. Nicaragua is much easier to navigate than Ecuador, for example, or Panama. Because of its elongated shape, places can be deceptively distant in Panama. It’s a six-hour drive from Panama City to David, for example.

It’s easy to get around Nicaragua thanks to its geography. On the other hand, the infrastructure is lacking…though improving.

This is the second-poorest country in the Americas. There’s not a lot of extra money in the budget. The country is underdeveloped in every way, and there is a lot of poverty. As one expat friend who lives here puts it, “If you can’t stand poverty in your face, then you probably don’t want to be in Nicaragua.”

Kathleen and I were here together in September. We stayed at the Hotel Gran Francia in Granada. One night we went for dinner at one of the restaurants along the pedestrians-only area leading down to the lake. We sat at an outside table, on the sidewalk, and, during the two hours of our meal, we were approached by no less than a dozen little kids. Some were selling things—trinkets, chewing gum, etc.—some were begging. These Granada street kids really get to Kathleen. These kids stay with her. She can’t stop thinking about them. So we’ve had to make a decision. Either we were going to stop going to Granada, or we were going to try to do something to help all the homeless kids there. We’ve chosen to try to do something to help the kids.

Spending time in this country, you’d eventually come face-to-face with this conflict, too. Either you don’t see the poverty, or, if you do, you decide how to deal with it.

For us, taking Nicaragua off our radar wasn’t an option. We’ve loved this country since the first time we visited and appreciate it more each time we return…

Lief Simon

“Lief, I am 60, and the bulk of my savings are in an IRA, 401k, or annuity. So how would I diversify using your recommendations in Simon Letter? I would owe taxes on the money I take out of an IRA or 401(k), wouldn’t I? Also, how many times per year can I make those withdrawals?”

J.G.

In fact, no, you wouldn’t owe taxes. You can move your IRA and 401(k) investments offshore without taking them as withdrawals and, therefore, owing taxes. To do this, you need to transfer your IRA to a custodian that allows for offshore investments.

It’s not the IRS that prohibits investing in most nontraditional financial investments, including real estate in another country; it’s some custodians. Switch custodians to one like Midland IRA out of Chicago, and your IRA investment options broaden. You’ll have to invest according to some restrictions (to do with self-dealing, for example, and collectibles), but you’ll be able to diversify overseas without taking a tax hit.