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This appears to be one of the most frequently asked questions by people who are considering retiring to Mexico, and it’s a surprisingly simple question. Yet the answer can be quite complex.  Imagine reversing  the question.  “How much does it cost to live in the USA?” Immediately you’d think to yourself, “Well, that depends…” And you can get an answer that’s as varied as the people whom you ask. Ask a Manhattan investment banker that question, and you’ll get a very different answer than if you ask a mechanic in Topeka, or a housewife in Sacramento.  As you’d imagine, the answer depends heavily on where you live, and your lifestyle.

But the short answer is “less,” probably close to half of what it would cost to live in the USA. For the longer answer, we’ll provide a bit of a framework below. But this won’t consist of a list of prices, or housing costs, or any of that, though by the end of this post you’ll be able to find some good resources on all of that.

First, consider the broader outlines. As in the USA, it will cost more to live in big cities than small cities or towns. And it’ll cost more to live in richer vs. poorer areas. Very broadly speaking, the north of Mexico is richer than the south, while Monterrey and Mexico City will be the most expensive places overall. While I don’t have much experience with Monterrey, from years of fantasy real estate shopping in Mexico City, I can tell you that you could easily spend as much on a house there as you could in some place like Boston or San Francisco. But unlike Boston or San Francisco, there are also much cheaper options even in Mexico City. But for our purposes, let’s assume that Mexico City and Monterrey are the most expensive cities in Mexico, and let’s look at costs there. We can safely assume that costs elsewhere will be lower, and probably much lower than in either of those two cities.

Fortunately for us, UBS Private Wealth Management has done some pretty exhaustive work to answer this question.  Every two to three years, UBS staffers in various major cities around the world gather data on the cost of living in their cities, and then this is compiled into a publication which then indexes the cost of living of various cities around the world. It also has some handy info if you’re looking to start a business and hire some locals.  From the UBS website:

Every three years, UBS CIO WM Research publishes an extensive study on prices and earnings, which is updated in the years between editions. Since 1970 the UBS publication has compared purchasing power in various cities around the globe, and contains interesting analyses and evaluations of changes in exchange rates and inflation. The latest edition of Prices and Earnings  covers 72 cities in 58 countries.

The full document can be downloaded here:

In this publication, UBS tries to answer the following question: How much would it cost a Northern European expat couple with two children to replicate their lifestyle around the world? They index the various cities to New York City, which is given a value of 100. The values are given with rent and without rent.  How does Mexico City stack up? Without rent, Mexico City indexes at 51.2, while including rent, the index falls to 45.7.  What this says is that if you can maintain your lifestyle in New York City on $100,000 a year, and you rent, that same lifestyle will cost you $45,700 per year in Mexico City. If you own in both places, then your lifestyle will cost $51,200 per year in Mexico City. Now there’s a lot more detail to it than that. We’d highly recommend downloading the full report, which has some breakdowns by category. But that’s it. Mexico is half-price or less.

Most Things Cheaper; Some More Expensive

Mexico has a national sales tax or value-added tax called the IVA (impuesto al valor agregado). IVA is applied to virtually everything except for books, food, and medicines, medical care, and a few other items. It’s not clear whether this tax is effectively applied in the outdoor markets or tianguis. My guess is probably not.  In the border area, the value added tax is applied at 11%; everywhere else in the country it is applied at 16%.

This tax has the effect of making many internationally-traded goods such as consumer electronics, cars, tires, etc., more expensive in Mexico than in the USA. And unlike sales taxes in the USA, the IVA is built into the price, not added separately at the register.  As such, many expats prefer to buy consumer electronics, cameras, etc in the USA and bring them back to Mexico.  The UBS Report bears this out, showing consumer electronics and appliance costs in Mexico City approximately 16% higher than in New York City.

We would also note that Mexico’s formal retail sector is much less competitive than in the USA. As such, those retailers charge higher prices than you’d pay in the USA, regardless of the impact of the IVA. How do we know this? In our past life, we analyzed retailers for a living. Without exception, the Mexican operations of US retailers were always more profitable than their domestic operations. So think Office Depot, Costco, Wal*Mart, AutoZone, and the like. It’s brutal being a retailer in the USA, but we customers really benefit from this.  We’ve noted that prices for nice clothing in department stores in Mexico City is much higher than in the USA. Also, if you’re big or tall, you’re probably not going to find anything that fits anyway.  Another thing which is notably more expensive is books in Spanish. If you read Spanish, expect to pay about 50% more for a book of comparable size and cover (hard/paperback) in Mexico than in the USA.

Health Care Costs — Way Cheaper

It’s pretty much common knowledge these days that the USA has the most extortionate costs for healthcare in the world. In Mexico many expats self-insure, i.e., they pay their costs out of pocket.  While we don’t have any specific numbers for comparison, we have read literally dozens of blog posts over the years detailing stories of doctor visits and hospital stays that cost a pittance compared to USA rates. You can also buy reasonably-priced private health insurance far more cheaply than in the USA, and if you are retired, may be eligible for IMSS (Instituto Mexican de Seguro Social) coverage, which is bare-bones (REALLY REALLY bare bones), but runs something like $300USD per year.

So, summing up, you can live in Mexico City for between 46% and 51% of what it’d cost you in New York City, and for well less in other parts of Mexico.  And unlike in New York, you’ll NEVER have to shovel snow in Mexico.

¡Viva México!

Additional Info (a site I highly recommend) has done a fairly extensive article on cost of living in Mérida, Yucatán.  It can be found here: