Thailand - No Longer A Cheap Retirement Destination

[SteveB2]

Thailand no longer a cheap retirement destination?"

After hearing many tales of woe from retired western friends here in Thailand surviving on foreign pensions moaning about how they can now only afford to go out once or twice a week

… whereas 5 years ago all was wine and roses - I thought I check out to see how much truth there is in these claims.

Thai price Inflation (data from Bloomberg.com)

This has averaged around 5 % during the last 5 years

Prices of Thai goods have thus increased by a factor 1.05 ^5 = 27%

Currency shifts Caused by a strong Thai Baht (data from xe.com)

US Dollar buying Thai Baht... Down from 42.16 to 29.45.

Effectively making Thai goods 43% more expensive for Americans

GB Pound buying Thai Baht… Down from 75.75 to 46.67

Effectively making Thai goods 62% more expensive for Brits.

EURO buying Thai Baht… Down from 53.70 to 38.80

Effectively making Thai goods 38% more expensive for Europeans

Conclusions

A strong Thai Baht/weak western currencies together with annual 5% inflation work together as a 'double wammy' creating an effective increase in prices for western tourists and retirees as follows:-

For American retirees: - 43 %( currency shift) + 27 %( inflation) = 70% price increase

For British retirees: - 62 %( currency shift) + 27 %( inflation) = 89% price increase

For European retirees: - 38 %( currency shift) + 27 %( inflation) = 65% price increase

So there you have it For all western tourists and retirees buying Thai Baht with foreign currency, the prices of everything purchased after arrival in Thailand have increased by at least 65% over the last 5 years

...and for the poor Brit pensioner, prices have effectively nearly doubled.

Edited July 3, 2010 by SteveB2

[Penkoprod]

**Pulls up a chair, gets a few cold ones organised and waits for the games to begin

This is going to be good while it lasts !!!!:cheesy:

Penkoprod

[Xangsamhua]

Not too bad for Australians though. AUD currently at 0.88 of July 2005 level.

http://www.xe.com/currencycharts/?from=AUD&to=THB&view=5Y

[gotlost]

I just don't understand why there are no western tourist.

[richieudon]

Wow!! I thought it was double for the Brits... 62% it is then... can't argue with the graphs...

[jackdawson]

man i am so lucky i came over 5 1/3 years ago

am i blessed or what ?

but now what ?

Edited July 3, 2010 by jackdawson

[gregb]

For American retirees: - 43 %( currency shift) + 27 %( inflation) = 70% price increase

For British retirees: - 62 %( currency shift) + 27 %( inflation) = 89% price increase

For European retirees: - 38 %( currency shift) + 27 %( inflation) = 65% price increase

Sorry. I can't let glaring math errors like this go without saying something. It's like fingernails on a chalkboard.

For American retirees: - 43 %( currency shift) * 27 %( inflation) = (1.43)*(1.27) = 82% price increase

For British retirees: - 62 %( currency shift) * 27 %( inflation) = (1.62)*(1.27) = 106% price increase

For European retirees: - 38 %( currency shift) * 27 %( inflation) = (1.38)*(1.27) = 75% price increase

Whew...feel much better now.

Edited July 3, 2010 by gregb

[Buckeye911]

I had tracked the same statistics for the US dollar at bloomberg.com . I still live in the USA and have been planning on retiring to Thailand in nine or ten years, I sure hope it's still feasible for me when the time comes. I get a little depressed noticing how much more everything seems to cost me every time I travel to Thailand, back in 2005 everything seemed so dirt cheap.

Good research and graphs, SteveB2. Thanks for sharing it.

[Pib]

Good charts but the currency shift values are based on the peaks and lows values, which are short periods in time. Using selected values in time can really skew the true picture. If you went back in time to around the early 1970's you would see the baht/dollar exchange rate was around only 20 baht/dollar...heck, based on this exchange rate I'm now living large at the current 32 baht/dollar. A more realistic picture might be based on an average value over 5 years. Also, there is no adjustment for salary/retirement income increases which are probably fairly close to the inflation values in an expat's home country.

Crank in these adjustments and expats loss in spending power is not nearly as great. And a person also has to consider that similar currency shifts, inflation, etc...etc...etc., has also been occurring in other countries, probably with 3d world nations (like Thailand) making some of the greatest gains GDP/income per person.

[antony77]

You don't take into account that retirees don't pay any tax in Thailand whereas in most countries they would have to do so. This is true for Australia and New Zealand and the EU. I do not know about other countries. So if you take this into consideration, Thailand is still a very good place to retire. You can still get good domestic staff at a reasonable cost and that is one thing elderly retirees need.

However if you came to live in Thailand with a fixed limited small pension then you a

should realize that things can get tough. The UK pound is unreliable. Many years ago I switched my UK investments to Australia and the A$ is up against the baht from 10 years ago.

.

[SteveB2]

For American retirees: - 43 %( currency shift) + 27 %( inflation) = 70% price increase

For British retirees: - 62 %( currency shift) + 27 %( inflation) = 89% price increase

For European retirees: - 38 %( currency shift) + 27 %( inflation) = 65% price increase

Sorry. I can't let glaring math errors like this go without saying something. It's like fingernails on a chalkboard.

For American retirees: - 43 %( currency shift) * 27 %( inflation) = (1.43)*(1.27) = 82% price increase

For British retirees: - 62 %( currency shift) * 27 %( inflation) = (1.62)*(1.27) = 106% price increase

For European retirees: - 38 %( currency shift) * 27 %( inflation) = (1.38)*(1.27) = 75% price increase

Whew...feel much better now.

Oops - I was trying so hard to not make loads of spelling gaffs, embed the graphs, plus correctly reference the data and conclusions that I cocked up the math. dam_n.

Believe me when I tell you, I'm still puzzled how having 2 wives results in a threesome

You corrected math tends to highlight the issue even more...

[SteveB2]

Good charts but the currency shift values are based on the peaks and lows values, which are short periods in time. Using selected values in time can really skew the true picture. If you went back in time to around the early 1970's you would see the baht/dollar exchange rate was around only 20 baht/dollar...heck, based on this exchange rate I'm now living large at the current 32 baht/dollar. A more realistic picture might be based on an average value over 5 years. Also, there is no adjustment for salary/retirement income increases which are probably fairly close to the inflation values in an expat's home country. Crank in these adjustments and expats loss in spending power is not nearly as great. And a person also has to consider that similar currency shifts, inflation, etc...etc...etc., has also been occurring in other countries, probably with 3d world nations (like Thailand) making some of the greatest gains GDP/income per person.

Acknowledged - although what I am highlighting here is the current and recent(5 years or so) trend of the major western currencies reduced purchasing power against the Thai Baht.

As you suggest, a trend line through the data sets would have been better... but I couldn't get it too work on xe.com 'cause I'm too thick, and the final result would have been very similar in this instance.

Whatever, I clearly remember that nearly everything was a fraction of the UK price when I came here 15 years ago - honest, no smoke and mirrors, it really was... or did too much clubbing fry my brains as well as pickle my liver

[richieudon]

Now I'm dizzy...

Time to watch football and drink beer....

[ESB7]

To have a reasonable standard of living, 50,000 a month is approx what is needed, many will say you can live on less, yes you can if you stay in a small fan room and eat noodles till they come out your ears...that isnt a decent retirement. A small bungalow at 8,000, electric, water, transport, health insurance, dvds, televison, phone, internet, socialising, food, books and the ocassional holiday and there wont be much if any change from 50k, thats £1,100 a month and tax is payable on a U.K. pension over £6,400 p.a. at age 65, So anyone without a half a decent private/company pension will not be able to retire comfortably in Thailand at the moment. Food has gone through the roof the last few years with many items 50% more than only 2 years ago. 5 years ago I stayed here comfortably on 30,000...that was only £400......so with the figures now thats almost 3 times a much needed. I aint retired but I know of so many guys that needed to go home or elsewhere as it really isnt cheap here anymore.

[Pib]

As truly cheap living in 3d world nations (like Thailand) becomes more expensive and a thing of the past, a person's home country becomes more cost-of-living competitive everyday--especially when certain home country benefits, which are available only if living in the home country, are considered.

[antony77]

As truly cheap living in 3d world nations (like Thailand) becomes more expensive and a thing of the past, a person's home country becomes more cost-of-living competitive everyday--especially when certain home country benefits, which are available only if living in the home country, are considered.

As we retirees get older our medical expenses rise and health insurance is no longer available. Even using cheap hospitals medicines cost a lot. So one third of our income goes on medical and hospital expenses. All this would be absolutely free in other places we have lived. So Bt50k a month plus another 25k for medical one would need at least Bt75k a month to live a reasonable life here. Thailand also does not offer free or discounted travel like in many countries. So for some they might be better off in their home countries.

[sharking]

well done steveb2,for the input you put in,am for one who lives in thailand for 9 years with out a pension and with the bt strong and the pound on its back side,am back in england yesterday and going back on my tools till things get better,I've notice things where getting more and more expensive,in the last 3 years,so bye bye thailand for now hope to be back in the very near future

[MAJIC]

Well done steve

You have obviously spent a long while getting your facts and figures together.

From the Brit angle they have a double whammy to their finances,as Pensioners living abroad they don't get annual increases so in effect there is nothing for them, but to steadily watch their carefully planned original financial calculations go down and down,and not enough to even keep pace with inflation,there must come a point when they will need to reasess their finances and no doubt some will need to return to the UK,extended holiday over.

But all good things must come to an end,

Mai Pen Rai!

[Naam]

Thailand - No Longer A Cheap Retirement Destination

i fully agree and claim that Thailand is not only extremely cheap for those who would pay 45% (or more) of their income to the taxman in their home countries but live a very comfortable life in Thailand without spending a single penny as all expenses (and much more) are covered by their savings on income tax.

:jap:

[Pacificperson]

Thailand - No Longer A Cheap Retirement Destination

i fully agree and claim that Thailand is not only extremely cheap for those who would pay 45% (or more) of their income to the taxman in their home countries but live a very comfortable life in Thailand without spending a single penny as all expenses (and much more) are covered by their savings on income tax.

:jap:

I am not yet retired, but soon I hope to be on a US public sector pension. My expectation is that I will have to pay US income taxes wherever I live. I don't know of anyway to avoid this.

Also, since my pension will always be in US dollars, I will always face the exchange rate risk. Over 20 years the downside could have a really significant impact. The solution here seems to be to invest early as much as possible in Thailand. Buy a condo or long term lease.

[F4UCorsair]

Australians who are self funded retirees no longer pay tax on their superannuation fund earnings (dividends) or capital growth and that's a significant benefit. The former PM ensured that went through before he retired giving him a tax free income of almost A$400,000 pa.

The collateral benefit for all retirees is that they also have tax free superannuation funds. With the GFC, even that hasn't been enough for many over the past couple of years though and they have found themselves on part/full aged pensions, government funded. That's probably still enough for a couple to do OK in Thailand though their combined pension being B55-60,000/month. A single person may do it a little harder because of the combined expenses, rent, electricity, etc., economies as a couple.

Of course the punters get nothing from the government, so making superannuation funds tax free after retirement versus paying aged pensions, was obviously cost effective for the government in the longer term.

[Buckeye911]

Thailand - No Longer A Cheap Retirement Destination

i fully agree and claim that Thailand is not only extremely cheap for those who would pay 45% (or more) of their income to the taxman in their home countries but live a very comfortable life in Thailand without spending a single penny as all expenses (and much more) are covered by their savings on income tax.

:jap:

I am not yet retired, but soon I hope to be on a US public sector pension. My expectation is that I will have to pay US income taxes wherever I live. I don't know of anyway to avoid this.

Also, since my pension will always be in US dollars, I will always face the exchange rate risk. Over 20 years the downside could have a really significant impact. The solution here seems to be to invest early as much as possible in Thailand. Buy a condo or long term lease.

Exactly my sentiments. I plan on retiring to Thailand on a Virginia state law enforcement pension and social security. I fully expect to continue paying US federal and Virginia state income tax while living in Thailand. I am fortunate because my wife is a Thai citizen and has a permanent resident card for the USA. She owns a house and another piece of property in Thailand free and clear. We jointly own another parcel of land for which I've already been offered nearly double what I paid for it only three years ago so I completely agree with you about investing early.

[richsilver]

Very faulty logic here!

"Example: If you were renting for 35,000 Baht ( US $1084 ) and your landlord/owner did not increase your rent over the past 5 years, you're actually paying 57,750 Baht ( US $1788 ), considering the increase in Thai inflation and Currency devaluation. "

If the owner did not increase your rent over the past 5 years, Thai inflation would have no bearing on your rent whatsoever. No increase is no increase!

Secondly, the Thai baht today stands at 32.4 to the dollar. Five years ago today it was 41.38. That's a change of 22% (not 43%).

Thirdly, I seriously doubt the 5% annual inflation figure. (Remember what we paid for the baht bus in Pattaya 5 years ago? 10 baht. And today? 10 baht). Since most retired Americans are collecting Social Security, I would guess that the cost of living adjustments over the last five years (3.1% average) would make up for most of the Thai inflation.

[JimsKnight]

While it's not quite the apocalypse of financial dire straights it's not as cheap and easy as it once was either.

For those that keep saying it's a double whammy, it's not, it's a triple whammy as you've got fck all interest rates for your savings back in the UK.

Those low interest rates are gonna be pretty long lasting as well if the noises the UK government is making follow through...

[nakachalet]

steve

good post, very informative for many of us....

who appear to be somewhat indifferent to all these fluctuations.... for one reason or another....

[Pacificperson]

Triple wammy - Thai inflation, changes in the exchange rate and low interest rates back home. All of these argue for investing in real assets in Thailand. Inflation is neutralized by investment in real assets. If prices go up, then the price of the real asset goes up too. Exchange rates do not matter if the returns are in Batt. Low interest rates back home are from monetary issues and a lack of growth in the home economy. They are a good reason to change the engine driving part of your returns to the Thai economy.

The biggest issue for most is a lack of trust in the Thai legal and financial system - especially as it impacts farangs. I have seen many times in these forums "don't invest more in Thailand than you can afford to loose." If this is the case, use the Western system to safeguard your investments, but tie a significant portion to the Thai economy and Batt. Its a different set of risks, but it will take the triple wammy out of the picture for the remainder of your retirement. However, it may not be something you want to do if you see retirement in Thailand as a temporary thing.

Edited July 4, 2010 by Pacificperson

[SAW]

To have a reasonable standard of living, 50,000 a month is approx what is needed

I would say your right.

[craigt3365]

Thailand - No Longer A Cheap Retirement Destination

i fully agree and claim that Thailand is not only extremely cheap for those who would pay 45% (or more) of their income to the taxman in their home countries but live a very comfortable life in Thailand without spending a single penny as all expenses (and much more) are covered by their savings on income tax.

:jap:

I am not yet retired, but soon I hope to be on a US public sector pension. My expectation is that I will have to pay US income taxes wherever I live. I don't know of anyway to avoid this.

Also, since my pension will always be in US dollars, I will always face the exchange rate risk. Over 20 years the downside could have a really significant impact. The solution here seems to be to invest early as much as possible in Thailand. Buy a condo or long term lease.

Exactly my sentiments. I plan on retiring to Thailand on a Virginia state law enforcement pension and social security. I fully expect to continue paying US federal and Virginia state income tax while living in Thailand. I am fortunate because my wife is a Thai citizen and has a permanent resident card for the USA. She owns a house and another piece of property in Thailand free and clear. We jointly own another parcel of land for which I've already been offered nearly double what I paid for it only three years ago so I completely agree with you about investing early.

Yeah, hard to avoid paying tax here when all your money comes from out of the country. One benefit is to get a new "home" state. I use Nevada and pay no state income tax. I have many friends who do that. Just get a PO box and there are even services that will scan your mail and email it to you...then mail it if you want. Not that much to have this service.

Prices are rising here for sure. Just like everywhere else in the world. Energy has a lot to do with this...as well as commodity prices rising (steel, etc.). I talk with the guy next door who had his house built about 4 years ago. I am doing a lot of the same things he did, with the same contractors, and the prices are at least 25% more now.

If your housing is paid off, you can live relatively cheap here. But the same is true from where I came from in Nevada!

[IsaanAndy]

To have a reasonable standard of living, 50,000 a month is approx what is needed, many will say you can live on less, yes you can if you stay in a small fan room and eat noodles till they come out your ears...that isnt a decent retirement. A small bungalow at 8,000, electric, water, transport, health insurance, dvds, televison, phone, internet, socialising, food, books and the ocassional holiday and there wont be much if any change from 50k, thats £1,100 a month and tax is payable on a U.K. pension over £6,400 p.a. at age 65, So anyone without a half a decent private/company pension will not be able to retire comfortably in Thailand at the moment. Food has gone through the roof the last few years with many items 50% more than only 2 years ago. 5 years ago I stayed here comfortably on 30,000...that was only £400......so with the figures now thats almost 3 times a much needed. I aint retired but I know of so many guys that needed to go home or elsewhere as it really isnt cheap here anymore.

I beg to differ, I live very comfortable retirement on 50000 THB a month and I don't eat noodles every day, I have a 3 bedroom house with air-con, a pick-up, a Honda 125, read books, magazines, socialise, have 2 TVs and go on at least 2 holidays every year.

You must have expensive tastes, it all relevant to your life style.

Prices ceratainly have gone up but then in which country have they gone down in?

Thailand is alot cheaper and offers a better way of life than most other places, especially IMO the UK where I am from.

[trogers]

To have a reasonable standard of living, 50,000 a month is approx what is needed, many will say you can live on less, yes you can if you stay in a small fan room and eat noodles till they come out your ears...that isnt a decent retirement. A small bungalow at 8,000, electric, water, transport, health insurance, dvds, televison, phone, internet, socialising, food, books and the ocassional holiday and there wont be much if any change from 50k, thats £1,100 a month and tax is payable on a U.K. pension over £6,400 p.a. at age 65, So anyone without a half a decent private/company pension will not be able to retire comfortably in Thailand at the moment. Food has gone through the roof the last few years with many items 50% more than only 2 years ago. 5 years ago I stayed here comfortably on 30,000...that was only £400......so with the figures now thats almost 3 times a much needed. I aint retired but I know of so many guys that needed to go home or elsewhere as it really isnt cheap here anymore.

Retirement pension is usually based on the assumption that you already have paid up for a home (since you have worked for over 25 years) and thus rent should not be part of the expense.