I’m constantly seeing news articles about how little money the average person has saved for retirement or an immediate need. According to these outlets, a $500 expense is enough to send most people into a debt spiral. Valuist covered how to best prioritize your savings and created this helpful infographic. However, on the other end of the spectrum, the so-called F.I.R.E (Financial Independence Retire Early) movement, has been building momentum for years.
F.I.R.E folks are focused on maximizing earnings, savings and investments so that they can retire as early as possible, while being flush with cash. You can usually spot them on social media by their inventive handles like, @F.I.R.E Breather or @Pants on F.I.R.E, both of which I made-up but likely exist. For the adventurous one of the best ways to attain F.I.R.E is to retire abroad, at least part time. Depending on where you prefer to reside, a significant change in expenses can translate to a much higher standard of living than you might otherwise be able to afford.
Or, perhaps you can quit your job much earlier than you thought possible. When you consider a life that you dedicate to your passions, while enjoying tropical beaches and new adventures, the thought of leaving your homeland is a bit less daunting. The idea certainly intrigues me. In fact, I just read a book about it, which in part, inspired me to write this article. So, lets look at:
The obstacles, potential savings and what you need to do now, in order to make retiring overseas a reality.
#1. Choose where to retire. The pros and cons of various options
If your goal is early retirement, it probably doesn’t make sense to retire to a country that has higher living expenses. You also don’t want live anywhere that falls below your standard of living – whether that relates to medical care, safety or anything else you prioritize. So here, I have provided some broad categories of places to retire to. Though you can’t easily generalize about peoples from multiple countries, on separate continents, the groupings below at least reflect some cultural, economic and cost of living similarities. This list is clearly not inclusive of all options:
- Canada / Europe / America
The appeal of being financially independent in Canada, Europe (I know Europe isn’t a country, but for the sake of comparison, it’s easier) or the United States, cannot be understated. Canada is appealing for its rugged beauty and Europe for its deep historical roots and easy access to other countries. These countries also offer an easier transition for anyone from another “western” country. It’s a mistake to assume that early retirement to these places is unaffordable. In the United States alone there is a huge variety of factors that contribute to cost of living, not to mention an incredible amount of space to explore. There are many gems to be discovered in states you might not think to look.
You are, perhaps, less likely to experience a luxurious lifestyle by retiring early to one of these countries, however, the culture shock is certainly less pronounced. You’re also more likely to have access to the financial and medical services and amenities you’ve become accustomed to.
Best Reasons to choose Canada, Europe or America for early retirement
– Access to the best medical care and financial services
– You (probably) won’t need to learn another language
– The culture shock is not as significant
Reasons not to choose Canada, Europe or America for early retirement
– Living expenses in these countries may be equal to or higher than your current expenses
– There is typically a higher barrier-of-entry in moving to one of these countries. Some countries have financial, familial or language requirements and applying for residency may be more complicated. - Mexico / Central America/ South America
Latin America is just as varied as North America and Europe. Spanning dozens of countries, across two continents and with terrain that includes deserts, snowy mountains, beaches, tropical forests and islands, it’s difficult not to be intrigued. Further, the cost of living across much of Latin America, and relative ease of entry makes the prospect of living there all the more attractive. Another huge benefit to choosing a Latin American country to call home is the people, who have the well-deserved reputation of being welcoming, friendly and warm.
Once you exclude some obviously difficult places for expats to live, it’s not hard to see the incredible value of moving to one of these countries. The cultures and languages are beautiful, the food is incomparable and the adventure, endless. And, if you don’t want to learn a new language, there are many places where you can get by on English alone. San Miguel De Allende, Mexico, for instance, is a town with beautiful architecture, a temperate climate year-round, excellent cost of living and a lot of expats from the US and Canada, who are living there either part time or year-round. Similarly, Costa Rica has long been a meeting place for western expats, and also includes a great deal of diversity for those that want to branch out.
Best Reasons to choose Latin America for early retirement
– There are endless adventures to be had and cultures to explore
– Expenses for food, transportation and housing are generally much more affordable
– Closer to home (for Americans) if you choose to be a part-time expat
Reasons not to choose Latin America for early retirement
– Medical care and financial services may be inconsistent
– Safety/security may vary wildly from place to place. As with any country, expats be cautious
- Asia
Living in an Asian country represents perhaps the most significant adjustment for most North American expats. The languages, styles of food and traffic alone can seem so alien that it can leave first timers breathing into a paper bag. And I say that as a half-Asian-American. Many Asian countries are just as modern, if not much more so than western countries, so it’s similarly a mistake to think you can find a great value just anywhere. I’ve travelled extensively through India and Nepal and seen everything from shanty towns to resorts so extravagant that even English Royalty visits.
The benefits of living in Asia are numerous, from the rock-bottom food costs and unbelievably hospitable people, to beautiful landscapes and a chance to make a radical change. For the especially adventurous, it’s hard to imagine a more exciting adventure.
Best Reasons to choose Asia to F.I.R.E (Is that a verb?)
– Greater access to world-class health care and amenities
– Expenses for food, are generally much more affordable
– Travelling between and within Asian countries is easy and inexpensive
Reasons not to choose Asia
– The cultural difference and distance may be too isolating
– It’s much harder for westerners to learn Asian languages than romance languages
– Some Asian cities are very expensive and living outside of them may not be practical
#2. Check your expectations
The idea of moving somewhere and actually committing to it, often involve very different reasoning. When you’re fantasizing about days spent on the beach it’s hard to remember that you will actually have to find housing, pay bills and acquaint yourself with an entirely new culture. If you’ve never spent significant time in another country, you may even be overestimating your ability to adapt.
- Visit the place you’d like to live in: Go at different times of the year and visit multiple different cities. Speak with locals and get a feel for the country. If you’re serious about moving you should have deep awareness of what you’re getting into
- Complete broad research: Determine the number of expats living in your desired location, how commonly English is spoken, find out about the medical system and the best way to keep funds in the country.
#3. Preparing a budget. How to model various scenarios
Do a cost of living analysis using the Valuist free budget tool to determine your spending rate, savings rate, and net worth. Then, using cost of living comparisons that you can find with a Google search, you can project how your expenses will change.
Once you have an understanding of how your spending will change, using your net-worth information you can more easily determine how far your nest egg will take you in various scenarios.
- Conservative Estimate: This estimate should include expenses that meet your minimum standard of living. It’s a mistake to assume that you would be comfortable long-term living with less. Though the idea of living with less is appealing, in a foreign country it’s sometimes a slippery slope between being a minimalist and being impoverished.
- Mid-Range Estimate: This is the value estimate, the golden mean between the extremes.
- High-End Estimate: This estimate should include all things you really want in retirement and how many years of spending you could manage given your current and future projected returns. Let’s be honest, you don’t go into retirement, even early retirement, with hopes of living below your means, if you have saved and invested diligently, now you want to enjoy the fruits of your labor.
#4. Checking your expectations (again)
Even after visiting your prospective new home, doing research and preparing budget projections, you still may want to do a trial run before going all in with real estate. Buying real estate in another country may be complicated and require someone with a firm understanding of that country’s real estate market and the laws that govern property ownership. I am still haunted by the show I watched about a couple who built their dream home in Italy only to discover soon afterwards, that it had an illegal addition. In some countries your ability to own real estate is going to be limited by a variety of factors, including length of residence, citizenship, owning a business etc. So, it’s may be wise to start off with a month-to-month rental, learn what you need to know and make your most financially impactful decisions afterwards.
#5. Learn the language
If you’ve considered everything else, and you think you are flexible enough to make the leap, there’s still one last step, the thousands of hours you will want to spend learning the language. Sure, you could probably get by with English in certain parts of larger cities in most countries, but you will always feel like an outsider until you have at least basic conversational proficiency in another language. Besides the ability to connect with another culture, learning a language is valuable in other ways too, such as with negotiations. Knowing another language also indicates to locals that you are interested in their culture and not just taking advantage of their lower cost of living.
Personally, I have spent several years learning French (followed by the 6th months it took to forget it) and more recently, I’ve been dedicating several hours a week to learn Spanish. My hope is to one day live part time in either Mexico, Central America or South America. Where exactly, I’m not sure and probably won’t be for a very long time.
Very insightful article.