Tag Archives: retirement

Ready to Semi-Retire – What About Your Business?

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“What about your business?”  This is among the top three questions I get when I mention our pending Ecuadorian move and quite frankly, it is a question that I spend a significant amount of time mulling over.  The fact is, I run a contractual service business, so once our contract is finished later this year, I could go into hibernation/quasi-retirement for a year, and then resurface the following year with a new contract.   However, the concerns I have, have nothing to do with getting hired again, and everything to do with the people I employ and the families we serve.

I am reminded daily about the positive impact we have on children, their self-esteem, and academic success and I see the relationships we build with parents and guardians who are trying their best to raise these young people in urban environments that most of us would never want to live in.    So, is there gratification and pride in the work I do?  Yes!  I also know that our employees rely on this income to help them achieve personal goals, such as car payments, family vacations and gifts.

But an ex-boyfriend once told me that travel was like my lover…and I have to agree.  The thrill of pulling out my passport and whisking off to some location where the first language is not American English…is for me exhilarating.  Like encountering love afresh.  My cheeks even get rosy…or maybe that’s just my blush.

I have also been reminded that there are multiple companies that do my same work (though in my opinion, not as well) and my students and families will just migrate to them.  Reality check!  While I like to think I am indispensable, I can be easily replaced…shucks!  So with that in mind, I am reminded that my staff can find positions with these other companies and I no longer feel bad about shutting down my operations.

I am fortunate, given my business model and the fact that I can essentially walk right back into it, that letting go of the business for a year,  or more, is really not that big of a deal.  I also enjoy rather spartan living, so moving to a less expensive locale will help with the drop in income. However, this solution does not work for many cases, so I leave it to you to decide how you want to retire.  But I do think the decision should be your own and not someone else’s.

For those of you who have been following this blog, you know that I like to keep my decision making relatively simple and stream-lined. I am no different when it comes to running a business and thinking next steps.

 

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A Word on Banking in Ecuador

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The benefit of Ecuador being a US dollar based economy is that, for the US investor, it eliminates the inherent risks associated with foreign currency exchange fluctuations and it allows us to take full advantage of significantly higher short-term interest rates.

I am still learning about the Ecuadorian banking system and I am not an investment professional; however, if you are considering a long-term stay in Ecuador, there are some clear advantages to short-term (1 year or less) investing there.  Just compare the interest rate on your current savings account or any CD’s you may own.  The rate is probably somewhere close to zero versus 6.0% (on average) for a one year CD in Ecuador.

I have a particular focus on CDs (certificates of deposit) because I like the fact that it is a relatively liquid asset and I know exactly when my money will be available to me, without any withdrawal penalties (however, early withdrawal penalties can be about 2%).  CDs are like temporary savings blocks.  You can invest for a minimum of 30 days to 1 year and you earn interest as a reward for locking up your money with the bank for that amount of time.   The reward, or interest rate, increases with the amount of time you are willing to let the bank(s) in essence “borrow” your funds.

With Ecuadorian bank investments, CDs are a great choice because you can stagger your investment across different periods of time and in varying amounts, based on your comfort level/risk tolerance.  In addition, the minimum investment is low, $1,000 or less.  This flexibility can be a safeguard so that you know, for example, your money will not be tied up at the end of 60 or 180 days.

To understand how to calculate the amount of interest you can earn in a given period, take the following steps:

  1. Determine how much your initial investment will be, for this example let’s say it is $5,000
  2. Determine how long you want the CD in place for, let’s say 30 days at a rate of 3.50% (Banco del Austro as of Jan. 2012).
  3. Multiply your investment amount by the interest and divide by the number of periods in 1 calendar year (30 days = 12, 60 days = 6, 180 days = 2, and 360 days = 1) So,  $5,000*3.50%/12 = $14.58
  4. This means your interest earned at the end of the 30 day period will be $14.58
  5. You can then decide if you want to do another CD or just take your money and do something else.

Two final thoughts

  • The difference between banks and cooperatives is similar to the difference between banks and credit unions in the US.  Both are financial institutions offering similar products, however cooperatives (like credit unions) are governed by a different set of laws and regulatory bodies.  As a result, cooperatives may be perceived as inherently more risky and they therefore offer the highest interest rates on CD investments.
  • The requirements to open a bank account will vary between institutions. Some require only a passport, others require an Ecuadorian resident card and a utility bill.  All require you to open the initial account in person, so get to know your bank and the investment professional you will be working with, because when you are away, they will typically be able to help via phone or email.

For a list of some of the banks and cooperatives available in Cuenca, Ecuador and their respective interest rates, click on the Ecuador Investments page.

Cuenca Day 4 – In the land of English

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Today, outside of speaking to ourselves in English, saying hello to our neighbors, and spotting someone we had met on the plane ride over, our entire day was spent in Spanish.   That said, I did spend some amount of time speaking with Cuencanos about the growing community of English speakers and visitors.

Two of these conversations centered around the frustration that it is sometimes  difficult and frustrating to provide Americans with the highest level of service because of language barriers.  While welcoming everyone, the lack of communication seems to have frayed some nerves. However, people here are so patient and nice that being able to  attempt some Spanish (even if you completely butcher it) it makes all the difference in the world.  It makes people feel like you have a stake in them personally, as well as in Cuenca.  Some words to learn –

  • Buenos Dias- good morning, Buenas Tardes-good afternoon, Buenos Noches – good evening
  • Perdonna-me – excuse me, muchas gracias -thanks very much, por favor – please
  • Cuanto cuesta – how much is it
  • Perdonna me por favor mi espanol no es bueno – please excuse me, my Spanish sucks.
  • Donde esta el bano – where is the restroom

Another conversation centered on not understanding how a person can move to a new country but (in essence) refuse to learn/speak the language.  This was different from the first set of conversations because it had nothing to do with wanting to provide better service to the expat community.  It had to do with a distaste for the imagery of complete buildings filled with expats who want nothing to do with the larger Cuencano community (except as domestic workers, taxi drivers or other service providers).

This certainly does not mean that these conversations mirror a brewing resentment in the local community; rather, it displays the need for expats to be more sensitive to the language situation. Everyone I speak to is happy with the increasing numbers of Americans and Europeans here because the city as a whole benefits.  I just think that people wish the Americans would be more social with Ecuadorians.

Americans complain about people not learning English and not integrating with the larger community when they live in our country. Then we move to their countries, refuse to speak their language and we stay in our own communities. Ironic, isn’t it.

Ecuador has Amazing CD Rates

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[PLEASE NOTE THAT THE POST BELOW NOW HAS ITS OWN PAGE TO FACILITATE THE VIEWING OF CD RATES BY BANK. THE INFORMATION FOR INDIVIDUAL BANKS IS POSTED ON THE BANK SPECIFIC PAGE IN THE DROP DOWN MENU ABOVE (SEE ECUADOR INVESTMENTS)]

We are all concerned about extending what we have financially into the future.  If you are starting late or just looking for a higher rate of return, why not consider investing in Ecuador?  This post is inspired by a comment I saw on a blog asking about CD (certificate of deposit) rates in Ecuador.  The response was a bit vague, so I have decided to make it my mission to go into the banks here and get the real deal.

Over the next few days, this post will be updated as I get more information; however, it is all accurate as of the dates given.  All information posted was received first hand  based on me going to the banks and speaking directly to the investment representatives. Next to the posted rates, I am listing the current rates at Chase bank (in the USA) as of the same date (min. deposit is $1,000).  For those that do not understand the numbers, at the end of each bank entry I provide a line that shows what happens if you invest $5,000 over 10 years and $10,000 over 10 years based on the 366 day/1 year rates (assuming the given interest rates are constant).

Please note that as of the date of this post, you are able to open an account in any Ecuadorian bank, as long as your passport and entry stamp are current. In addition, all accounts are held in US dollars. CDs will be found under Inversiones (investments) and the word for interest rates is Tasas.

Cuenca Day 1 – In the land of English

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The “In the Land of English” postings primarily deal with the expats and other visitors that we meet here in Cuenca.  The primary reason for this is that, generally speaking, Ecuadorians do not speak English.

My initial observations are:

  1. Yes, there is a large English speaking community here, primarily made up of retires from the United States and Canada.  Because the general population here is Spanish speaking, the English population can be a bit insular.  This is great if you do not want to attempt to learn a new language or essentially want to live an “American” life in Cuenca with North American friends. But, real interaction with the larger community requires some Spanish knowledge.
  2. Most of the Americans (even Ecuadorians call us “Americans”, and that lumps in the Canadians as well) that live and visit here, because they tend to be retired, are over 60. As an under 40 in the English community, I am definitely a “young-un” here. That said, everyone is welcome.

We are staying at the Hotel Apartamentos Otorongo, which is an apartment complex of 15 units, that primarily caters to expats (and its perfect for families). Click here to see my post on Hotel Otorongo. 

Why are so many American people here? 

On the one hand, it is to seek a new lifestyle in a fascinating and “exotic” place, with others who are culturally similar and like-minded. The weather here is temperate, ranging from warm in the day to chilly in the evenings and early mornings (think late May, early October in the upper Midwest US), the cost of living is very very inexpensive, and Ecuadorians are generally very nice, calm, friendly people. In addition, for families in particular, this is a wonderful place to raise children.  So, in essence, foreigners come here because it  has an attractive pull.

On the other hand, others come here to escape the life and lifestyle they are living back home.  They are running away from reduced buying power due to lower pensions and retirement checks, they are running from politics they do not agree with, and they are running from the fear of what will become of them in their old age. In search of a community to be a part of, especially if one is alone or not especially close to family, this desire creates its own push for Americans to look outside of North America (ex Mexico) for a new home.

One irony is that there are some, possibly many, who come to Ecuador because of significantly lower healthcare and prescription costs, yet, disparage “Obamacare” and the “rise” of socialism in the US.  That view is completely contradictory, because one of the primary reasons pensioners look to Cuenca, in particular, is because the medical costs at home are exorbitant.

In the land of English there is a lot of camaraderie.  At our apartment, neighbors visit with each other constantly and plan many activities together. They also look after each other in a way that is missing at home….kind of a Little House on the Prairie, my neighbor is my friend way. This is excellent.

Some of my Canadian neighbors commented that it seemed like “the Americans come to Cuenca to die”…..I thought that was so depressing.  But after thinking about it for two days, I think that is a positive fact.  Americans choose Cuenca because, for many, it represents an ideal existence and they would not want to return to the US.  If I found a city/town that I felt was a perfect fit for me and I never wanted to leave…then essentially I am saying this is the place I would want to spend my life and die in.  So essentially, what was initially a very depressing comment…held a truism that was absolutely positive.

So on this first day, my time in English language was spent saying hello to the neighbors and having deep discussions with Canadians about the negatives of the US and Canada.  Interesting!