I answered the easy ones there, and will work on the other ones here.
1. Why Merida? Did you guys visit there and fall in love with the city and the people?
Yes and no. We first visited the Yucatan Peninsula in 2003. We did not get to Merida until our 5th trip to Mexico, in 2006, having been back to the Caribbean side several times and to Guadalajara, San Miguel de Allende, Guanajuato and the Lake Chapala area before arriving in Merida.
First is why the Yucatan Peninsula. Simply put, we like it. The Caribbean side is our favorite vacation spot. Merida, however, is a major city with a symphony orchestra, theatre, dance, museums, art exhibits and galleries, a wide variety of ethnic restaurants, major medical centers and the University of the Yucatan, along with many other post-secondary educational institutions. Those things, combined with a social network, a 45 minute drive to the Gulf of Mexico and a 4 hour drive to the Caribbean seal the deal for us. There are also free, public cultural events almost every night of the week in Merida.
2. Obviously the cost of living down there is cheaper right? Is that true, and Percentage wise, how much cheaper is it than the US?
The cost of living is pretty directly related to lifestyle. It can be quite a bit less. We know people who own their home and get by on about $1,000 a month and that includes a part-time maid (they do have a healthy nest-egg for expenses that are not regular, monthly expenses). We know of folks who spend 4 times that much. In the past I have done comparisons of food prices based on purchases made by expats in Merida, but I cannot locate those files now, and they are terribly out of date in any event.
Here is a fairly comprehensive article on the cost of living in Merida. It is from the Yucatan Living website. The Mexican government has income minimums for holding the two types of visas that most expat retirees use. For one, generally referred as a non-immigrant visa, the current minimum for a couple at the current exchange rate is about $1760 USD a month. For one that can lead to immigrant status after 5 years, the minimum for a couple works out to about $2,830 a month. The required income amounts are based on a multiple of the daily minimum wage in Mexico City, and that changes every year. Some local immigration offices apply some leeway for people who have substantial assets but may not have pensions, etc. that meet those income standards.
3. Health care – how will you manage it in Mexico? Will it be expensive?
Some of the information for this answer are in the link provided in the previous reply. Here is another link to a lot of information about health care choices in Mexico. We will have US-based health insurance paid by my employer until I reach the age of 65. It will only cover emergency care in Mexico, but will cover both of us for pre-existing conditions. New insurance in Mexico will probably not cover us for those conditions, and we both have some. We plan to buy major medical insurance in Mexico – either via a private company or via IMSS, the Instituto Mexicano de Seguro Social. There is information in the linked articles about both of those.
For routine, outpatient care and medications we plan to self-insure. Medical care is far less expensive in Merida, and there are a range of options from modern medical centers with many doctors who speak English to doctors in solo practice who do may or may not speak English.
Finally, I note that Dennis also lives in Portland. I work downtown and am wondering if we might get together for lunch some day.