If you’re a retiree in Mexico from the U.S. or Canada, chances are pretty good that your retirement income comes from your home country. It might be in the form of social security, annuity, savings, or perhaps a good old-fashioned pension. In any case, you have to find a way to access your money when you’re south of the border.
The first thing you need to do to maximize your money is to open a Mexican bank account. If you would like to learn more about doing that, check out Opening a Bank Account in Mexico: Benefits and Requirements.
If you’re strictly relying on ATM machines to access your bank accounts back home, you’re really missing out on an opportunity to maximize your money. On the flip side, if you have a Mexican bank account but your retirement income is automatically deposited in that account each month, you’re still missing out.
The best option financially is to have your money deposited in your bank account back home and then choose the right time to transfer money based on the current exchange rate.
Monitor Exchange Rates
It’s not difficult to monitor exchange rates. In fact, the current exchange rates are updated hourly on this site.
A quick and dramatic change in the rate will usually be prompted by significant news events. For example, when a news story comes out that could negatively affect the Mexican economy (e.g. NAFTA), the value of the peso generally drops shortly thereafter and the dollar will be worth more — at least temporarily. That’s why it pays to keep up with current events.
Timing is Everything
You can either gain or lose money based on when you choose to transfer. For example, on April 17th, the dollar dropped to 17.95 MXN; however, only seven days later, it jumped back up to 18.95 MXN.
If you had transferred $5,000 to your Mexican bank account on either of those dates, the final amount you received would be quite different:
Of course these numbers don’t factor in transfer fees or the actual exchange rate offered by the bank or transfer service. We’ll be talking about those things soon enough. For the moment at least, let’s keep it simple.
So, in our example, we earned an extra $5,000 pesos on the transfer, but what does that mean in real spending power here in Mexico? Well, in our household, those extra pesos would have covered several of our monthly expenses. Take a look:
If you want to see a breakdown of all our expenses, check out: Retired in Mexico: A Detailed Look at Our Expenses.
Remember, this illustrates the difference a single week can make. To really maximize your money, you should take advantage of unusually high peaks to transfer larger amounts.
For example, back in January of this year, the rate was 19.86. If you had transferred the same $5,000 USD back then, you have earned $9,550 pesos more than you would transferring the same amount on April 17th. Do you see how this works now?
Choosing the Right Transfer Service
Monitoring the exchange rate is only one part of maximizing your money. The next step is choosing the correct transfer method to ensure you’re getting the most money possible.
There are exceptions, but in most cases this is the worst option available. International wire transfers are a huge revenue source for large banks and they make their money through high fees and/or poor exchange rates.
Even if your bank says that international wire transfers are free, I guarantee that you’re losing money on the exchange rate. It pays to compare your bank’s rates and fees to those offered by third-party services.
These are companies who will handle the bank to bank transfer for you. For most people, this is the best option and will result in more of your hard-earned money ending up in your pocket on the Mexico side.
We’ve used several different services over the last three years, but the best one that we have found is Transferwise. They offer the actual bank to bank exchange rate and their fees are very low. This is the service that most of our neighbors also use.
Let’s Wrap This Up
This post went WAY longer than I like — sorry about that. I tried to edit it down as much as I could without losing any of the information.
I’ll tell you what, I’ll make up for it but foregoing a long Let’s Wrap It Up section. You can go back to doing whatever you were doing prior to clicking on the article and Linda and I will head to the beach.