Are Americans Leaving Panama?

Presented with permission from Bob Adams, of Retirement Wave.

Are Americans leaving Panama?

From time to time, I have received messages from various RW Members over the last six years asking, "Why are expats leaving Panama?" or they ask, "Why are Americans leaving Panama?" Some get a little colorful and say that American retirees are "fleeing" Panama! The same thing happens once in awhile when I meet Members face-to-face here in Panama. I ask them, why do you ask? They usually tell me, "I read it somewhere on the Internet." I also read people insisting this is the case on various websites, often saying it as if it was a well-known fact. What is going on here? Is it true?

A Little Background

Let me first give you a little background. I will be "walking you through this" as I want to be as clear as I can.

For starters, this story of Americans moving back to the US in large numbers first came up in 2008 as the US real estate bubble began its collapse. As the financial crisis worsened in 2009, it became a very common story. Since then, it has popped up fairly frequently on the Internet. This is not something new.

In my experience, the great majority of people and websites talking about this appear to be American. The word "expat" seems to be defined as simply "American", sometimes "American and Canadian" (but rarely). Europeans, who clearly appear to be the fastest growing group here at Retirement Wave, are hardly ever mentioned and the vast majority of expats in Panama are completely ignored. These are people from other Latin American nations. If you actually get to know any of them personally, you will quickly discover that they very much consider themselves to be expatriates too.

Further, the comments seem also to be solely directed toward retirees or people of retirement age. So we are not really talking about all the Americans who are part of the growing foreign business community here, or the many young Americans who live and work here. Those Americans in the business community alone have hundreds of children enrolled in private schools here (nearly 900 in just two of the "international" schools as of a couple years ago when I took the time to check), but that ignores the many who are single or childless couples, also common in the business community.

Okay, we are basically talking about Americans who are retirees or at least of retirement age, a very small portion of Panama’s total expatriate community. But Bob, I am not an American or a retiree. Why should I care? Well, you might find it interesting to know what others are doing and, after all, Americans, as a nation, have a very long record of experience here. If they were leaving or "fleeing" Panama in large numbers, you probably should be aware of that and wonder, why? I would, if that was the case. So what can we do to help understand this situation?

Unlike many nations, the US does not require its citizens to notify them if they are going to be residents of another nation. This is the practice in other nations where it is important for tax reasons or for access to social benefits. Therefore, there are no real statistics showing the total of Americans living outside the US or only Americans of retirement age living outside the US. None. There are only estimates and they are guesswork.

That is the reality facing any analyst, but it does not mean nothing can be done. Since there are no specific statistics of Americans of retirement age living outside the US, we need to find a solid, objective statistic that is closely related and which, at least, can show us the trend.

Finding a Useful Statistic

There is such a statistic. It is the number of Americans receiving monthly Social Security checks who claim to be residents in nations outside the US. Is this the same as the number of Americans of retirement age living outside the US, or even the number of actual Social Security recipients living outside the US?

No, it is not. In the US, the government’s retirement benefits do not begin at a specific age for everyone. You have to apply. Some will apply at 62 or 63 or 64 or 65 or 66 or 67 or 68 or 69. At the age of 70, Americans automatically receive their checks, regardless of whether they apply or not.

Why do Americans choose to wait? Why not apply immediately? Every month that you wait to apply, the amount of money you get in each monthly check rises. In other words, there is a financial incentive to wait and many do wait. It is a little complicated to explain in detail, but the details are not important. Just remember that there are Americans who are clearly of retirement age, even fully retired, who are not yet Social Security recipients.

In addition, Americans may reside in Panama or another nation, but maintain a legal address in the US. The Social Security Administration does not care where you reside. They just accept whatever address you provide as your residence. So many Americans resident in Panama are not included in this "foreign resident" statistic. They still use their American address.

Okay, so how many Americans receiving Social Security payments claim to reside in Panama? As of the latest figure available for 2012, the number is 2,363. What? Only 2,363? Keep in mind that more than one person may be benefiting from one check, but above all, keep the other points above in mind.

"But Bob, I hear they estimate about 45,000 Americans live in Panama. That does not seem right if only 2,363 Social Security recipients claim to reside here." Well, look at Mexico where they have made a serious attempt to count foreigners resident in their nation. In 2012, they claimed 870,103 Americans were residing in Mexico. The US embassy in Mexico estimates that there may be as many as 1,000,000. How many Social Security recipients were there in 2012? Only 53,074. In other words, Mexico’s statistics showed more than 16 Americans for every Social Security resident and there may be even more. So the social Security stat is simply not the number of Americans living in a nation or even those of retirement age for the reasons mentioned earlier.

This statistic certainly does not tell us how many Americans live in Panama and it does not even tell us how many Americans of retirement age or who are actually retired live in Panama.

So what good is this statistic to us?
However, there is good news. It is perfectly reasonable to assume that if there were any major decline in the number of older Americans living here, that decline would also show up in this Social Security statistic. We cannot know the actual numbers, but we can look for a trend.

Even better news is that, if there is a major decline in the number of older Americans coming to Panama, it should show up quickly in this statistic. Why? We know from the earlier discussion that many Americans of retirement age do not receive Social Security payments yet or, if they do, they still show a US residence. Over time, many may apply or may change their residence to Panama officially, but that is not necessary immediately.

However, if they live in Panama and return to the US, they are required by law to inform Social Security and, more to the point, they are gone! They have to change their residency and, if their payments were sent to Panama before, you can bet they do not want them being sent to Panama now! So if there is a major shift away from Panama that should show up in this statistic rapidly.
A Decade of Change
To see how the situation has changed over time, we need statistics for more than 2012. Fortunately, these statistics are available for 2002 and every following year through 2012. The 2013 stats are expected in May of this year.

This eleven-year period includes 2002, 2003, 2004, 2005, 2006, and 2007 when everyone was aware that many older Americans were arriving to live in Panama and nobody was talking about them leaving. It also includes 2008, 2009, 2010, 2011, and 2012, the period during which this talk about Americans leaving became an "issue".

So if the rumors are true and the numbers moving back to the US are dramatic, we should see a sharp rise in the early years, followed by a decline in the later years, or at least a flat line.

But I want to do a little more. I want to compare Panama’s results with three other groups. First, we can include Mexico, also a popular US retirement destination. We can also include Costa Rica, a nation that has a long tradition of attracting older Americans. Finally, we can include the total for all those Americans receiving Social Security payments and claiming residency outside the US, the global total.

But the problem is that making a graph with one number around 2,000 and another around 600,000 (the total worldwide) will make for a crazy graph that makes comparison difficult. So what can we do?

We can "index" the statistics. Briefly, we can use 2002 as our base year and represent each group as "100". Then if one area goes up 8% the next year, the index number is 108. If it goes down 8%, the index number is 92. In other words, we are showing the percentage gains and losses, but since each group is set at 100, they can be shown in direct comparison in a graph. After all, we are not really concerned with the numbers, we are concerned with the trend and this will show up quickly on a graph using this approach.

Finally, after all my blah, blah, blah, what are the results? Here they are.
US Social Security Recipients for Panama, Costa Rica, Mexico and Worldwide for 2002 - 2012 – Best Places In The World To Retire – International Living

Okay, let’s start at the bottom with Mexico, the green line. You can see that Mexico has been "flat", even losing in some years. Why? Probably because this period is a time when the Mexican government and the drug cartels have been at war with each other. Just a few years ago, many people were concerned that the Mexican government was losing control of much of its countryside. However, the last couple years have seen a real improvement in that situation, so the increase in 2012 may indicate that Americans are beginning to feel more comfortable in Mexico. It will be interesting to see if this continues when the 2013 statistic is available.

Just above it is a purple line that represents the number for the entire planet. You can see that is rising steadily.

Next up is Costa Rica, the red line. Oops, we see a fall in 2012, the first fall since 2002. That was a significant fall, the sort of thing we are looking for in Panama, if the rumors are true. This is another statistic we need to watch for in the 2013 results.

Finally we have Panama, the blue line. Notice how it started out at about the same level of Costa Rica, but then sped up and increased much faster. We see it slow down a little in 2009 during the worst emotional moments of the financial crisis, but it still went up. Since then, it has gone back to a steady increase and is rising more rapidly than the other three, and not by just a little bit, but by a lot.

Remember, these are trends. They do not predict the future, but they do show what has happened in the past and they make a legitimate comparison of Panama with two other nations and with the total, worldwide. This is a statistic that can be accepted as accurate and "hard", as opposed to someone’s estimate or guess. And it is entirely reasonable to look for a downward trend, if the stories for the last six years are true. But the trend is upward, steady and strong. If Americans are "fleeing", there is no indication they are fleeing Panama.
Last Words
I know that I could have put together three paragraphs and the graph, and left it at that. It would have been much faster to read, but you would not really understand how I got those numbers, why I chose them, why they have limitations, why they remain useful, etc. And although it makes my life a little more difficult to put all this together (and for you to read!), I have always tried to do my best to share more than just the superficial results, but to help explain how they came about.

Too many websites insist on treating their readers as children who must be entertained and who have too short an attention span for anything over a few paragraphs. I will not do that. I may lose a lot of people who want it "fast", but I do not care. Retirement Wave members are not children.

Are there Americans leaving Panama? Of course there are, naturally. Over the last decade, I have corresponded or met with quite a few. They leave for many reasons. The most common is health. They cannot access the US government's Medicare health system outside the US, so when they need it, they have no real choice. Some leave because their partner has passed away. Some leave because of divorce. And some leave because they just do not "fit" into Panama. There is nothing unusual about any of that. It happens in every nation. It is normal human behavior. But I have never felt that anywhere near a large number have left because they do not like Panama. These people certainly exist and I certainly sympathize with them, but they are a very small part of a much bigger story. You need to focus on your own life and the chapter you choose to "write" here in Panama or wherever you go, but do not let unsupported claims of a big shift mislead you. Americans and all of us from all nations are still welcome here and we are still coming...and staying.

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