This article was written for US News & Report by Emily Brandon:

Most Americans don’t have a big enough nest egg to permanently become expatriates in Paris or kick back with a daily glass of Chianti in Tuscany. But surprisingly, your current 401(k) balance could be more than enough to retire in a lost-cost country with a favorable exchange rate. Many foreign cities boast consistently beautiful weather and allow you to stretch your dollars further than would ever be possible in the United States. “In Nicaragua or Ecuador, you can live on somewhere between $18,000 and $25,000 a year,” says Barry Golson, author of Retirement Without Borders: How to Retire Abroad—in Mexico, France, Italy, Spain, Costa Rica, Panama, and Other Sunny, Foreign Places (And the Secret to Making It Happen Without Stress). But lifestyle is a key factor, he says: “That’s probably [on] tacos, not steak.” On the other hand, some countries that seem affordable require at least a little more than Social Security payments to get by. “If you’re going to go to Costa Rica or Panama, you’re not going to be happy with much less than $30,000 a year,” says Golson. Still, it’s essential to look beyond cost when it comes to choosing a retirement destination. Here’s how to decide if retirement in a low-cost country is right for you:

1. Take a test drive. Spending a week or two at a resort and driving through town is a much different experience than taking up permanent residence in a low-cost locale. Before making any major purchases, rent and spend a few months in the country. Rosanne Knorr, author of The Grown-up’s Guide to Running Away From Home: Making a New Life Abroad, worked as a dog sitter for a month at a 5,500 square-foot house filled with antiques in Ajijic, Mexico, in exchange for living accommodations. “Go to the local markets and shop and get involved with the local people,” she says. “You can imagine yourself living there, and I think it increases you comfort level if you actually move.” An extended stay also allows you to get the inside scoop on housing options, medical care, and social atmosphere. Before you buy property, make sure you get all documents translated to English and have a lawyer look them over.

2. Practice your foreign accent. It’s no surprise that some retirees gravitate to foreign countries with large English-speaking communities. “I recommend that anyone who wants to go to a foreign county makes sure they go to place where there’s a big English-speaking enclave, so [there is] a support group,” says John Howells, author of Choose Costa Rica for Retirement and other retirement books. “You will be so lonely if you go to a place with only natives around with a different world view.” Still, your experience will likely be more enriching if you at least attempt to speak the same language as the locals. Clyde Dietz, 59, of Ocean Shores, Wash., purchased land in Panama and plans to retire there in 2010 with his wife, Dana. “I think this challenge of moving to Panama and learning a new language and a new culture will keep us young,” he says.

3. Streamline your standard of living. Some Americans will find that they can afford luxuries in other countries that they couldn’t in the United States. Says Howells, who lives in California and has a vacation home in Costa Rica: “People who couldn’t afford housekeepers or gardeners here can do it there,” she says. “We have a gardener and a housekeeper in Costa Rica and we pay them about $2 an hour apiece. Here in California, we have someone who works on the house and she charges $15 to $25 dollars an hour.” But if your objective is to make your nest egg last longer, don’t go overboard with luxuries. Billy and Akaisha Kaderli, authors of The Adventurer’s Guide to Early Retirement: A Common Sense Approach, have retired 19 years ago and spend 70 percent of their time outside the United States traveling through low-cost paradises like Mexico, Thailand, and Vietnam. “We’ve spent under $30,000 a year the whole time we have been retired,” says Billy, 56. “When we go to Asia or Mexico, we can easily eat for $1 a meal and when we splurge, it’s $5 a person.”

4. Embrace the relaxed pace. It’s relatively easy to open a bank account or call a plumber in the United States. But that’s not always so in many parts of the world. “A main misconception is that life is going to go as smoothly as it does in the U.S.,” says Golson. “Often, life in these countries is more like a Department of Motor Vehicles [experience] with lines and inefficiencies.” Adjusting to a more relaxed pace may take some adapting. Says Dietz of Panama: “They work on Latin time tables; If they tell you they are going to be there with a piece of furniture on Tuesday, any time between Monday and Friday is fair game.” The laid-back lifestyle rubs off, Dietz says: “You can go out on your porch and watch the parrots and the toucans and lounge around.”

5. Get health coverage. Generally, Medicare doesn’t cover health services outside the United States (although the hospital insurance part of Medicare is available to most Americans who return to the States.) So you’ll need to hunt for an insurance policy. Luckily, quality health care is typically much more affordable outside the United States. When they took up residence in Merida, Mexico, former Omaha resident Dan Prescher, 54, and his wife Suzan Haskins, 53, bought a private Mexican health insurance policy covering both of them for $2,200 a year. “Susan and I are living here in Mexico on about half what it would cost to live in the U.S., and a lot of that is saving on health care and taxes,” says Prescher, a publisher of InternationalLiving.com, a Web resource for living abroad. “When we self-insured in the U.S., it was multiples of that for a comparable policy.” The couple uses their health insurance primarily for emergencies and pays for doctor’s office visits out-of-pocket. “I can go to the dentist and get my teeth cleaned for $30 and an internist I see is $35 bucks,” he says. Those with permanent residence visas can also buy into Mexico’s national health plan. Keep in mind that if you plan to return to the United States and sign up for Medicare later, your premium will be 10 percent higher for each 12-month period you could have been enrolled but were not.

6. Consider taxes. Some foreign governments offer tax perks to retirees. Panama, for example, has a Pensionado program for foreign retirees with guaranteed pension or Social Security income that offers property tax exemptions for new construction, a 1 percent mortgage reduction for a primary residence, and even discounts on utility bills. Also, many foreign governments don’t tax U.S. Social Security benefits. Contact the country’s embassy in Washington, D.C., for more information.

7. Maintain several bank accounts. Banking abroad presents a unique set of challenges when your Social Security payments, pension, and investment income are in U.S. dollars. “It’s wise to keep your money in dollars,” says Golson. But you don’t want to get hit with currency exchange fees and ATM withdrawal charges every time you need some cash. It’s also a good idea to set up a local account for everyday expenses. “I think you need both,” says Knorr. “Use a local checking account to pay the bills in the country, and just transfer money from a U.S.-based account when you need it.”

8. Keep in touch on the cheap. A common drawback of moving abroad is watching your grandchildren grow up through photographs, says Golson: “It’s distance from your grown kids and grandkids that is often a deal-killer.” Fortunately, E-mail and Internet phone services make it easier and more affordable than ever to keep in touch with friends and relatives still in the United States. Howells sometimes spends time in Costa Rica while his wife is in the United States, and he calls her using Skype, an internet phone service, every morning. Says Howells: “The only drawback of calling my wife in the morning is if she [finds out I'm] drinking a beer instead of a coffee, she calls me out.”

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