Retiring in Paradise: How to Achieve Financial Freedom by Moving Abroad
Retiring early and living a comfortable life is a dream for many people. The thought of needing to save a million dollars or more to make it a reality can be daunting. Fortunately, there's a solution: retiring in a cheaper cost of living country. In this article, we'll explore how you can retire early in a cheaper country, explain the 4% rule, and provide examples of people who have done it.
Why retire in a cheaper country?
Retiring in a cheaper cost of living country has many benefits. Firstly, it allows you to stretch your retirement savings further. The cost of living in these countries is often significantly lower than in developed countries like the United States, meaning you can live comfortably on a smaller budget and may not need as much in savings to achieve financial independence.
In addition to the financial benefits, retiring in a cheaper country can also allow you to enjoy a higher quality of life. Many of these countries have beautiful natural surroundings, a welcoming local culture, and a relaxed lifestyle that can be hard to find in more developed countries.
The 4% rule
Before we get into the examples, it's important to understand the 4% rule. This rule of thumb suggests that you can withdraw 4% of your portfolio each year in retirement without running out of money. For example, if you have a portfolio of $500,000, you can withdraw $20,000 per year (4% of $500,000) and have a high likelihood of not running out of money in retirement.
Choosing a country
If you're considering retiring in a cheaper cost of living country, the first step is to choose a country that fits your needs and preferences. Popular options for American retirees include Mexico, Costa Rica, Panama, and Ecuador, all of which offer a low cost of living, a welcoming expat community, and beautiful natural surroundings.
When choosing a country, consider several factors, such as the cost of living, healthcare, safety, and local culture. You should also think about whether you'll be able to adapt to the local language and customs, as this can be a significant factor in your ability to enjoy your retirement in a new country.
Once you have a shortlist of potential countries, research visa requirements, healthcare options, language barriers, and the potential for culture shock. Make a budget to see how much you'll need to save in order to retire comfortably in your chosen country.
Examples of people who retired early in a cheaper country
John and Sarah are an example of a couple who were able to retire early by moving to a cheaper cost of living country. They retired in their early 50s after saving aggressively for over a decade. They decided to move to San Miguel de Allende, Mexico, where they were able to live comfortably on $2,000 per month. Using the 4% rule, this means they would need a portfolio of $600,000 ($2,000 x 12 months ÷ 0.04) to retire in San Miguel de Allende.
Another example is Mark, who retired in his mid-40s after working in tech for many years. He decided to move to Cuenca, Ecuador, where he was able to live comfortably on $1,500 per month. Using the 4% rule, this means he would need a portfolio of $450,000 ($1,500 x 12 months ÷ 0.04) to retire in Cuenca.
In conclusion, retiring early in a cheaper cost of living country is an excellent way to stretch your retirement savings further and enjoy a high quality of life.
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