What the heck is geographical arbitrage? Well, in simple terms it is taking advantage of the fact that there are places in the world that are incredibly inexpensive to live in, in comparison to most of the world. In many cases you can live in these beautiful countries often times for half the cost of living of your current location!
I’ll share with you my top 3 countries that are ideal for retirees as well as some price comparisons of what a typical lifestyle may cost you below.
1- Panama:
While it’s most famous for the Panama Canal, Panama is often overlooked as one of the most beautiful countries in the world and is also one of the most Ex-Pat friendly countries. What makes Panama such a great fit for international retirees? Well lets start with the obvious things: English is common in the major cities, the main currency is the US dollar and how about this wicked plan their government has in place called the “Pensionado Visa”! What is this Visa? Well I’m glad you asked, here’s the top 5 benefits to this program:
-50% off entertainment (sports, movies etc.)
-30% off transportation fares (buses, trains, other public transport)
-25% off of your utility bills
-25% off domestic and international flights
-20% off doctors visits
There are more benefits for restaurants, hotel stays, home closing costs etc. but we won’t get into all of that here, needless to say its a great deal for expats.
But wait! this sounds too good to be true, there must be a catch? You’re right there is one: You must provide a pension income of at least $1,000USD per month divided by a married couple, or $750USD per month with the purchase of $100,000 in property- If you ask me, that’s not that bad.
Now for a visual, I’ll compare what the cost of a common expat destination in David, Panama would cost in comparison to my nearest large city in Canada (Edmonton, Alberta):
Note that you’re looking at a 50% discount on your living costs and the views?
2- Portugal:
Portugal’s government has made changes that allow for US and E.U. citizens to get residency rather easily. In the case of US residents all that is needed is to apply for a temporary residence permit which lasts you 5 years before applying for permanent residency once the temporary expires.
A main perk for the expats is the taxation situation in Portugal. This is called Non-habitual Residence status, where if you’ve not been a tax paying resident in the previous 5 years your income will be exempt for 10 years (if you qualify). This NHR status will exempt work, investment, capital gains, pension and rental incomes!
Again we’ll have a look at the cost of a popular expat destination in comparison to my nearest city of Edmonton, Alberta, Canada:
Again, you’re looking at a beautiful coastal retirement for only about 2/3 the price you’d pay to live in Alberta, Canada. Feel free to use Numbeo to get closer comparisons to your exact city. And again, I think there’s a misconception especially amongst people who don’t really travel all that often that these places must be rough areas or extremely volatile but from the reading I’ve done coupled with my own experience of travelling abroad this couldn’t be further from the truth.
3-Spain:
I couldn’t possibly make a top 3 without including Spain. Spain is one of the most beautiful countries in the world and has something for everyone. If you’re looking to retire in Spain you’ll want a long-stay visa. This long-stay visa will allow you to work or retire in Spain for an indefinite amount of time. There is a catch and that is that you must live in Spain for at least half of the year to be able to maintain the Visa and it must also be renewed yearly.
If you don’t intend on working you may also apply for a residence visa where you must prove a monthly income of $2500USD/month.
One popular destination for expats that is reasonably priced is the port city of Malaga. While it’s not the cheapest on the list, the views may certainly be worth it.
From where I’m sitting we’re looking at a 27% reduction in expenses. While that may not sound like an earth shattering amount it would surely be enough to add up over time. And again… have I mentioned the views?
So there you have our top 3 picks. While these aren’t necessarily the cheapest locations worldwide they are places that offer great views, perks to expats and an all around enjoyable lifestyle where you can stretch your hard earned dollars further without compromising your quality of life.
We feel its important to add that we don’t advocate for people racing to get to the bare minimum funds saved and then relocating in search of the cheapest possible retirement as this will surely limit you in the enjoyment of these new destinations and will leave you vulnerable if the agreements between these countries ever were to change. We’re merely pointing out these beautiful destination for those who are maybe at retirement now and looking for a change of scenery or for those who haven’t given much thought to leaving the over priced location they’re currently budgeting their retirement savings off of. I know for our current location in Northern Alberta if we were to retire here as opposed to a cheaper region of Canada or one of the above locations we’d probably be looking at working an extra 10 years which just doesn’t seem like a path either of us are interested in.
Thanks for stopping by, we hope you join us again.