Having access to pension or retirement funds from abroad is only one issue to consider.Ā There are many more (which one should be concerned about regardless if you are retired in Arizona, Thailand, The Dominican Republic, etc.)Ā Namely inflation or the ability of the currency your retirement funds are dominated in to still afford a standard of living that you want. So with that said what is the correct mix of interest income generating investments in USD versus Dominican Pesos? Many upper & middle class Dominicans of course keep funds in USD or Euros to hedge against currency devaluation (read inflation) of the Dominican Peso but is the real rate of currency devaluation in purchasing power of the peso worse, better or about the same as the USD?Ā We already know that food prices in the US have gone up 200% or more (some statistics report a 400% increase) from the period 2020 to 2024 in the US reflecting the loss of purchasing power of the USD if you were still living in the US.
One major advantage of retirement in the Dominican Republic is of course cost of living which is a fraction of what it is or could be in many US locations (obviously living in places like NYC or LA much more expensive than say a small town in the Midwest).Ā Likewise, Santo Domingo & Santiago more expensive than say San Francisco de MacorĆs or Mao.Ā Punta Cana of course is a tourist destination and aesthetics of living there aside you are paying ātouristā prices for both food & accommodation so choosing where to live equally important as well.
So, how do you hedge to make sure you have the best mix of both income AND possible purchasing power protection going forward? The first step is to educate yourself on the REAL rate of currency debasement or inflation.Ā Many people call the US Bureau of Labor & Statistics (BLS for short) the Bureau of Lying Statistics for good reason. Likewise the Dominican Central Bank may not always put out the whole truth and nothing but the truth either (as can be the case with most central banks). And so you are going to have to commit yourself to read.
Dominican Banks currently are paying about 5% in interest for USD certificates of deposit (plaza fijo) and about 9% for certificates of deposit in Pesos. But if you hold any USD based investments either in the US or the Dominican Republic AND you live in the Dominican Republic are you hedging against US cost of living or Dominican cost of living? Is 5% compensating for any real decline in the purchasing power of the US Dollar? And what about currency exchange rates between the USD & the Peso?Ā As of June 2025 the claim is the rate of inflation in the Dominican Republic is about 3.5% BUT the historical long term average over the past few decades has been about 5% or so. However, if you are earning the average 9% interest rate in Pesos then you are staying above both the current inflation rate and the longer term average.
Should you keep ALL of your money in Dominican Peso denominated investments? NO. Should you keep ALL of your money in USD denominated investments? Also NO. Rather, the mix should be a function of how much retirement income you might want or need from your investments AND with an eye towards hedging against any future debasement (read devaluation, inflation) of both currencies. Also be aware of debt because it does matter when it comes to a number of things including the value of a nationās currency. In 2025 the national US Debt to GDP ratio is 124%, in the Dominican Republic itās 46% (as of August 2025).Ā Just something to think about.Ā Ā
