Get to know the authorMore and more United States citizens are considering retiring in Panama — leading them to wonder what everyday life in Panama is like, what kind of health insurance is available, whether there are any established expat communities there, etc. And it’s no wonder — Panama is a beautiful country that offers an excellent quality of life at a fraction of the cost of the US.
But leaving your home country in North America to start a new life in Latin America is a big decision — one that requires lots of research and reflection before you can truly make up your mind. Fortunately, we’re here to help you out.
Read on for a guide on how to retire in Panama, the best places for retirees to live, how taxes work, and more.
Benefits of retirement in Panama
So, what exactly is it that makes so many people eager to retire in Panama? Here are a few of the top reasons:
- Cost of living: Panama is, by some estimates, as much as 47% less expensive than the US.1
- Tax benefits: Panama only taxes income sourced from within the country — any foreign-sourced income is exempt.2
- Climate: Panama has a tropical climate with temperatures typically ranging from 75° F to 90° F.3
- Safety: While there are some places that should be avoided, Panama is the second-safest country in Central America, second only to Costa Rica.4
- Landscapes: Panama is a beautiful country with lots of geographic diversity, from beaches to rainforests, mountains, volcanoes, and more.
Best places to live in Panama for retirees
You can find retirees all throughout Panama, but these tend to be some of the most popular destinations:
- Panama City: For those who prefer city life, Panama’s capital offers it all, from beaches and watersports to excellent dining, museums, and parks. The neighborhoods of San Francisco, Casco Viejo, and Punta Pacifica are particularly popular among US expats. Check out the historic Panama Canal for views of both the Pacific Ocean and the Caribbean Sea!
- Coronado: This beach town, located a little over an hour away from Panama City by car, has become a US expat hotspot. Those who live there enjoy the gated community, golf course, and access to great healthcare facilities.
- Boquete: This small, safe mountain town sits at a high elevation, resulting in spring-like weather year-round. It also has a sizable US expat community. Popular activities include hiking, birdwatching, and coffee plantation tours.
- Chitre: Chitre has all of the charm of a small town with the amenities and infrastructure of a larger one, such as a hospital and movie theater. The area is particularly well-known for its festivals and holiday celebrations.
- Bocas del Toro: Those seeking a true tropical escape will find themselves right at home in Bocas del Toro, a province that encompasses both the Panamanian mainland and several islands. The area is laid-back and relatively undeveloped, despite having some of the best beaches in the country.
American retirement communities in Panama
While there aren’t many planned communities solely for retirees in Panama, the following communities are popular among US retirees:
- Red Frog Beach in Bocas del Toro
- Tucan Country Club just outside of Panama City
- Costa Pedasi in Pedasi
Panama vs. Costa Rica: Retirement Edition
When considering retirement options in Central America, many US expats think about Costa Rica as well. While both countries offer retirement visas and have similar landscapes, each one has its unique strengths:
- Costa Rica is the safest country in Central America, while Panama is the second-safest
- Panama is generally less expensive than Costa Rica
- Costa Rica is slightly more eco-conscious than Panama
- Panama offers better tax benefits than Costa Rica
- Panama’s retirement visa offers discounts and benefits from the government (e.g. 25% discount on flights, 10% discount on medicine)
The Panama Pensionado Visa: Retiring in Panama as a US citizen
Panama offers a special visa for retirees called the pensionado visa. To be eligible, you must meet the following qualifications:
- Have a monthly pension of at least $1,000 USD, OR $750 USD if you’ve bought property in Panama valued at $100,000 or more
- For each dependent you bring, you must make an additional $250 per month
- Have a clean criminal record
- Be at least 18 years old
The visa application process involves:
- Authenticating the following documents at your nearest Panamanian consulate in the US:
- Birth certificate
- Notarized proof of income
- Certified marriage certificate (if applicable)
- FBI background check
- Flying to Panama
- Having a Panamanian attorney file your application, which — besides the aforementioned documents — should also include:
- Completed registration form
- Health certificate issued by a Panamanian doctor
- Four passport-sized photographs
- Original passport & copy
- Background statement drafted by a lawyer
- Documents for dependents, if applicable
- Collecting your pensionado visa in person in Panama, once approved
How much does it cost to retire in Panama?
Panama’s average income is about $1,279 USD per month5 — nearly $300 USD more than the minimum income required for the pensionado visa. With this in mind, $1,000 USD per month alone may not be enough to support your lifestyle in Panama. However, it shouldn’t take too much more — retired couples living in Panama can often get by on about $1,200-$3,000 USD per month.6
Retiring in Panama on Social Security: Considerations
The average monthly Social Security check is about $1,827 USD,7 which means it is feasible to live off of your Social Security income alone. That being said, you’ll probably feel more comfortable having a little bit extra for unexpected costs and extras, like vacations.
Healthcare in Panama for US Expats
US expats who hold a pensionado visa have a few different options for healthcare:8
- Public healthcare: Panama’s government offers two primary health insurance options:
- The public system is managed by the Social Security Fund, which covers those whose payroll taxes contribute toward the fund (about 79% of the population)
- A low-cost system run by the Ministry of Health for anyone who doesn’t contribute to the public system through payroll taxes (e.g. independent contractors)
- Private healthcare: Many expats, however, opt for private insurance, as private facilities tend to have higher-quality amenities and provide care without long delays between appointments. They can generally choose between one of two options:
- Panama-specific coverage: While these plans are quite affordable — often just $50-$90 USD a month9 — they don’t provide coverage in any other country, which could be a problem if you often go back to visit the US (or any other country, for that matter).
- International coverage: Premiums for insurance plans with international coverage are typically $200-$900 USD a month, with an average premium of $500 USD.10 The exact amount will vary depending on things like your health, age, amount of coverage, etc.
Retiring in Panama: Pros and Cons
As with any decision, there are pros and cons to retiring in Panama. Some of the pros include:
- A lower cost of living
- No risk of double taxation on income from outside of Panama
- Beautiful, diverse landscapes
- Great weather
- Safer than many other Central American countries
- Established US expat/retiree communities
- Government discounts and incentives
- High-quality healthcare
- Close proximity to the US
Some of the cons include:
- Some parts of the country should be avoided due to crime
- Although the country’s infrastructure is highly developed for Central America, it may not be as advanced in certain areas (especially rural ones)
- You may have an easier time accessing cutting-edge healthcare technologies in the US
Do Americans pay tax in Panama?
Americans living in Panama as retirees are subject to taxes by both the Panama and US governments, but don’t worry — that doesn’t necessarily mean you’ll be taxed on the same income twice.
US Taxes
All US citizens and permanent residents — even those living abroad — are subject to taxation on their worldwide income, as long as they meet the minimum income thresholds. There are tax breaks that can offer relief for expat retirees, however, such as the:
- Foreign Earned Income Exclusion (FEIE): Allows those who qualify to exclude up to $120,000 of foreign-earned income (for tax year 2023) from taxation
- Foreign Housing Exclusion: Expats who meet either the Physical Presence Test or the Bona Fide Residence Test can use the Foreign Housing Exclusion to write off qualifying housing expenses like rent, utilities, property insurance, and more
Keep in mind, too, that withdrawals from post-tax retirement accounts, like Roth IRAs and Roth 401(k)s, are tax-free. Additionally, only up to 85% of your Social Security payments are subject to taxation.
References:
- Panama vs United States – Cost of Living Comparison
- Panama – Individual – Taxes on personal income
- Climate and Average Weather Year Round in Panamá
- 2023 Global Peace Index – Overall GPI Score
- Panama Average Monthly Wages
- How Much Does it Cost to Live in Panama?
- How much Social Security will I get?
- The Panama Healthcare System
- What is Panama Health Care and Insurance Like?
- International Health Insurance – Worldwide Coverage for Foreigners
- Panama Retirees and Pensioner Visa
- American Expats Find Opportunity in Panama, Despite the Pandemic
