The oro years
AS DEBATES OVER Social Security and Medicare heat up, Americans might feel like doing what the old urban myth says the Inuit do: Ship the old folks out on the ice floes. It’s cheap, simple and good for the polar bears.
It is also, arguably, a bit coldhearted. So here’s a warm and loving alternative that the U.S. government should endorse: Send the old people to Mexico, Central America and the Caribbean.
By one estimate, almost 20% of gross domestic product will go to seniors by 2030. Baby boomers are the first generation of grasshoppers in U.S. history. Their parents and grandparents, scarred by the Depression, scrimped and saved. The boomers put it on plastic. With private household savings rates near all-time lows, bills are coming due and the facts are increasingly clear: Some boomers not only won’t be able to afford the retirement they dream of, many won’t even be able to afford the retirement they fear.
The cost of retirement is also going up. In 1940, the median price for a house in Arizona was less than half the national average. Today, with two generations of retirees swelling its population, Arizona’s housing costs are well above the national average. Prices at assisted-living facilities are rising at more than twice the rate of inflation.
There are simple, though not painless, steps individuals can take to improve their prospects. Put the plastic away for a while, pay down debts, build up savings. Delaying retirement a few years gives you higher Social Security payments, lets you squirrel some money away and allows any investments you already have more time to grow. And you can always develop a more realistic set of expectations: Do they have to be golden years? What’s wrong with silver?
But don’t underestimate the economic wisdom of migration.
Adventurous seniors already know this. Up to 1 million Americans live in Mexico (up 500% in five years, according to some figures), and tens of thousands more live in Costa Rica and Panama, countries that market themselves as retirement havens. An income that can barely cover a double-wide in Florida can swing a condo south of the border. For the price of a condo in Phoenix, you can often have a villa in Mexico.
Seniors who go south have to be brave and smart. The laws are confusing and sometimes rigged against foreigners. Crime can be a problem, the tax systems are tricky and sometimes unfriendly, and those who don’t speak Spanish are further disadvantaged.
Worse, because the United States does not extend Medicare coverage to U.S. seniors living overseas, they have to find their own healthcare solutions. Though healthcare and prescription drugs can be far cheaper south of the border, serious illness is a financial issue anywhere. As younger and active retirees become older and more frail, they often have to return to the U.S. to obtain better services.
Still, helping seniors move to where costs are low could give Medicare a boost while giving seniors more choices. To that end, the federal government should smooth the path for seniors looking to retire abroad. Congress should pass legislation to allow Medicare to cover eligible seniors using certified, inspected and qualified providers. Medicare payments should be lower to these providers, reflecting different cost levels.
The executive branch should negotiate retirement agreements with neighboring countries to provide an appropriate legal framework for millions, possibly tens of millions, of U.S. seniors moving south. Consular services would need to be stepped up for expatriate seniors. Organizations such as Fannie Mae should find ways to extend the U.S. mortgage system to Mexico and beyond so that retiring seniors can enjoy affordable, long-term housing financing.
These policies would be a godsend for U.S. neighbors. Regional retirement agreements would create millions of new jobs. The influx of retirees would finance badly needed new infrastructure and vastly enhance medical services. By zoning certain regions for retirement development, countries such as Mexico could create economic growth in underdeveloped areas and help reduce congestion in major metropolises.
For the United States, this does more than reduce Medicare costs and allow more seniors to have higher living standards. Creating millions of new jobs in Mexico and beyond would reduce flows of illegal immigrants across the border. It would raise wage levels in neighboring countries, reducing low-wage competition for U.S. jobs and increasing the market for U.S. products. U.S. business, including healthcare companies, real estate developers and retailers, could follow their customers into new and lucrative markets abroad.
This is not a Democratic or a Republican program. It cuts spending, expands choice, promotes market-based development abroad and protects some of our most important entitlement programs.
Let’s do it.