The Road to Retirement
in Costa Rica

by Ed Underwood, President
Central American Consulting Services, Inc.

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By now, most people throughout the world are familiar with Costa Rica as a tourist destination. Ecologically sensitive, democratically stable, peaceful, Costa Rica enjoys the reputation as an almost ideal location to spend a few days, weeks, or months basking in a tropical paradise. Recently, Costa Rica has been "discovered" internationally as an attractive retirement destination as well.

Costa Rica is the only Central American country to enjoy complete democratization since 1948. Being incredibly far-sighted, the leadership at that time demilitarized the country, rejecting a standing army in favor of providing for its people the fundamentals of equality, justice, liberty and freedom. Even before the installation of a democratic constitution and the rejection of a standing military, Costa Rica's leaders historically provided for the health and welfare of the people. Universal health care, agricultural reforms and housing programs were all in effect before the turn of the century, reflecting the country's true heart and serving as a blueprint for other Latin American countries to follow.

As an affordable retirement destination, Costa Rica offers a variety of means to acquire legal residency. As a legal resident, the retiree enjoys the freedoms and most of the important rights of native Costa Ricans--health care, insurance, et cetera. While the Costa Rican government has recently passed several new tax laws, few will impact on the retiree. On a sour note, many of the "perks" which were associated with foreign retirees living in Costa Rica were repealed three years ago. These included duty-free importation of household goods and a duty-free car every five years. However, to off-set this, the duties on most of these items have decreased and will continue to decrease for the next several years.

Regulations concerning retirees and residency are covered under Costa Rican Law Number 4812, passed in July, 1971. The "Resident Annuitants and Resident Pensioners Law" allows for people with guaranteed incomes to become legal residents. The law's two parts, the "Rentista" and the "Pensionado," differ only in the amount of money required.

For the "Rentista" (someone living in Costa Rica but not "retired"), the dollar amount which must be available for conversion to colones each month is US$1,000.00 guaranteed, in a stable and permanent way, by a first rate bank and for a minimum period of five years. Any person over the age of 18 may apply for the status of "Rentista." The "Pensionado" (someone actually retired), must have a guaranteed US$600.00 monthly generated through a verifiable pension fund such as Social Security, private company retirement plan, IRA, or other retirement fund, and available to the retiree for life.

Application for residency under this law requires a number of ancillary documents--ancillary, that is, to primary documentation of funds available from the appropriate source. These are:

1. Birth certificate of the applicant, spouse, and any children who may be migrating as part of the family.
2. Marriage certificate, if applicable.
3. Certification from a law enforcement agency (with associated finger print cards) verifying no police record.
4. Certified photocopies of all pages of the applicant's passport (and the passports of all family members involved in the migration).
5. Twelve passport-size photos (six front and six profile) of each person involved.

All documents should be originals, except where noted, and must be authenticated with the appropriate documentation stamps, by the closest Costa Rican Consul or Embassy. Cost for this authentication varies but will run around US$40 to US$50 per page as of this writing.

Residency applications under this law are processed by the Costa Rican Tourist Board and usually take no more than six months. Neither Rentistas nor Pensionados can work as paid employees. However, work is permitted if the resident is a share-holder in a Costa Rican company and/or is a company's legal representative. Also, a Rentista or Pensionado should plan on living in Costa Rica a minimum of four months a year although this provision may be waived under special circumstances.

Other than residency, there are many questions a person may have about retiring here--concerning transportation to and within the country, health care, banking and postal services, taxes--let's consider a few of the most common.

Granted, Costa Rica is small and somewhat isolated (compared to, say, St. Louis, MO). This should not be problematic for the retiree. Every Latin American air carrier flies into San José almost daily from many destinations. The two Costa Rican Airlines, LACSA and Aero Costa Rica, connect with many points in the States and cooperate with several US carriers--US Air, Delta, Northwest, and TWA. American and Continental have daily flights to and from San José. Iberia, KLM and LTU offer direct connecting flights with Europe, and other major international carriers offer connecting flights through Miami, Atlanta, New York, Dallas, Houston, and Mexico City. Fares vary, but many local travel agents are masters at finding the lowest fare and the quickest departures and arrivals.

Transportation within the country is hampered only by poor roads and wildly enthusiastic drivers. Rental cars are plentiful and new and used cars are available for purchase--at a premium. Buses and taxis run throughout the country and are an affordable, and scenic, way to travel on a budget.

For the retiree, health care is critical. Costa Rica has one of the finest health care systems in the world and it is available to all at affordable costs. Health insurance can be purchased through the national insurance company and premiums are roughly one fifth those of equal coverage in the States. Residents may join the national social security system (Caja Costarricense de Seguro Social--CCSS) for a minimal monthly cost and enjoy the universal health care Costa Rican citizens enjoy. Most doctors in Costa Rica have received training in the United States or Europe and are highly qualified. Firsts for many major operations in Latin America have been performed here. Costa Rica has both private and public health care systems. Both are manned by the same doctors and the overall quality is almost equal--a patient in a private clinic or hospital will receive more attention than one in a public hospital.

Banking is always a question. Costa Rica has a central bank, The Central Bank of Costa Rica, plus four other national banks--The Bank of Costa Rica, The National Bank of Costa Rica, The Agricultural Credit Bank of Cartago, and The Popular Bank. The failure last year of one of the national banks (Anglo Bank of Costa Rica) has resulted in numerous banking changes. By August or September, 1996, private banks will be able to offer many of the services that have been historically monopolized by State banks. New private banking services will provide the competition necessary for many public service changes. Until this competition kicks in, however, the services available in State banks may seem third-worldly to most foreigners. Patience!

Costa Rica's mail service does not have a good reputation. Theft of valuables is rampant, undelivered mail is common, and service to the public is spotty, at best. Efforts are being made to improve the system, but so far little improvement is evident. Many private mail services exist and are serviceable. Connecting Costa Rica with the US Postal Service, these private carriers provide a relatively safe alternative to the Costa Rican Correo.

Death and Taxes are inevitable. However, retirees in Costa Rica are spared from the "taxes" part. Neither Rentistas nor Pensionados are taxed except for municipal services and real property, both at a very affordable level. Sales taxes have risen during the past year to the current 15% on most consumer goods. There is a canasta básica (basic basket) which contains more than 700 items exempt from sales tax, tremendously benefiting those on fixed incomes. Overall, the tax burden for those living in Costa Rica is small.

Housing options are many in Costa Rica from mansions of several thousand square feet to small, unassuming cottages. Prices are generally lower than those in the States or Europe, though in many highly desirable areas housing costs are way above the norms. Several retirement projects are in the works for Costa Rica and will fill a niche in the affordable housing market here. There are reliable real estate brokers who can help find the perfect retirement home.

If you're getting near "that age" and looking for a perfect place to enjoy the life you've worked so hard to provide for, the tranquil green mountains and warm tropical beaches of Costa Rica may just be where you're looking for.

For more detailed information and/or assistance in becoming a Rentista or Pensionado in Costa Rica, contact the author at hlthtour@yahoo.com or attorney and residency specialist, Licenciado Juan Edgar Picado, Jr. at jepicado@yahoo.com.

Other related articles on Cocori:
"Living Legally in Costa Rica" and
"Working Your Way Through Paradise"

Copyright © 1995 by Ed Underwood. All rights reserved.

Updated on June 15, 1996 by M.L. Smith