Is this really too good to be true?

There seem to be endless claims that tout nearly free retirement living in this or that location.  Many are unbelievably inexpensive, but what are the "hidden costs"?  Making true apples to apples comparisons requires digging down a bit below the surface.  Some of the hidden costs involve taxes, visa costs, travel costs and housing costs.

Let's start with everyone's favorite: Taxes.  There are income taxes, sales taxes, and property taxes to consider. In Indonesia, individuals residing in the country on a retired visa, pay no income taxes on their pensions. If you put your money into a   time deposit at the bank, you will automatically pay a 20% tax on your interest.  For example, if the published interest rate is 6%, you will actually earn 4.8% after tax. In Indonesia, there are no sales taxes, but there is a 10% tax on tourism related purchases (hotels and restaurants).  Property taxes are quite low in Indonesia, and in the case of Co-op living, property taxes are included in the monthly maintenance fee.  Bottom line, you will pay no income, sales or property taxes on a retired visa in Bali. In addition, when you sell your apartment, you are selling your stock in the co-op incorporated in the USA, therefore no tax is due in Indonesia. 

Next is visa costs.  In Indonesia, if you are at least 55 years old, have a pension of at least $1,500 USD per month (or $18,000 in the bank) and medical insurance valid in Indonesia, you qualify for a retired visa (known as elderly visa). I won't go into all the details here (and there are plenty of details) but will cover the costs.  Once you have your retired visa in your passport, you can enter Indonesia and report to a visa agent with all of the required paperwork.  You will pay approximately $600 USD for a KITAS (temporary permanent resident card) and a MERP (multiple exit re-entry permit) both good for 1 year.  It also covers the cost of the agent and the sponsor letter from a specially certified travel agent (the visa agent will take care of this).  You must renew every year, for five years.  On the sixth year,  you will apply for a KITAP (permanent resident card) and a two year MERP.  This will cost you approximately 5 times what the KITAS cost, or $3000 USD.  Once you have your KITAP, you only check in with Immigration every five years.  When your passport expires, you must get the visa in your new passport, the fee is approximately $200 USD.  So, the first 10 years will cost you approximately $6,500. After that you only pay about $100 per year for the MERP.

Travel costs will vary based on how many trips back to home base you take every year, what airline you use, how far you live from a major international hub and how far in advance you book.  A round trip from LAX to DPS on China Airlines booked three months in advance will cost $818 USD six month return coach, all in per person. This includes two 50 lbs checked bags each person, and a carry on.  Premium Economy costs approximately double and gets you more leg room, priority boarding 24 extra lbs baggage allowance and free drinks. I recommend you find which airline works best for you, enroll in their frequent flier program and get every fifth flight free. Or, use your miles to upgrade from coach to Premium Economy.  For info, total flying time is around 16 hours, depending on the layover location and your flight time to your closest international hub.  

Last, but not least, is your housing costs.  In Indonesia, foreigners are not allowed to own title to land/property. You can have a lease hold title. These are normally 25 years, extendable for another 20. So, you retire at 55, get a leasehold property for 45 years and you are good to go until 100 years old.  Not exactly.  When it comes time to renew the lease at the end of 25 years, you pay.  You can (and should) put this in a contract up front.  At this point you are 80, maybe you don't want to renew.  No problem, you can just walk away.  The land (and any improvements like a house or villa) will revert to the land owner.  You walk away empty handed.  Maybe you go ahead and extend the lease for another 20 years and put it on the market for sale, hoping to recoup what you paid for the leasehold plus improvements.  Best of luck.  The co-op model is a bit different.  The land and improvements are owned by Bali Shanti Graha, the Indonesian foreign investment corporation that manages the property on site.  They have partnered with The Retirement Village at Tegallinggah, the non profit cooperative incorporated in Washington State, USA.  You are buying stock in the co-op and granted an unlimited proprietary lease on the apartment of your choice.  2 shares of stock gives you year round ownership, 1 share gives you six months.  When you decide to sell, you get back all your investment plus 1% per year equity.  The co-op retains the right of first refusal.  In addition to your stock purchase price, you will also pay a $200 USD monthly maintenance fee which covers all maintenance, all hazard/liability insurance, 6 days per week housekeeping, weekly linen service, 24/7 onsite security, twice weekly transport to the supermarket, 30% set aside for future maintenance, concierge service, water, septic, gas, trash, Satellite TV and WiFi.  You pay your own electric ($12 per month if you don't run your A/C) and groceries ($150 per month per person). A couple can easily live on $550 per month.  That is less than half of a $1,200 social security check.

Add it all up, and it will cost a couple on average, $750 per month to live in Bali. Paradise is more affordable than you think.

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