FIRE – Financial Independence, Retire EARLIER in Portugal!
What if I told you that you could retire earlier than you ever thought, even if you ARE part of the FIRE movement (Financial Independence, Retire Early)?
What if I told you that you could live very comfortably, in a sunny climate that’s near perfect, even by the beach & ocean if you like. Eat healthy-fresh food, drink some of the best-most underrated wines, beers, ports and brandies in the world. All for less than €1000 euros per month?
And what if I also told you that you’d be living in a first world, European country with good roads, safe-drinkable tap water, wonderful, almost-free healthcare (better than the UK or USA) and that it was the fourth safest country in the world?
Would it be of interest to you if I told you, you could live in this country potentially TAX FREE for the first 10 years you lived there? So if you’re a FIRE Starter (what I call FIRE folk, like the song by The Prodigy), with passive income like Peer to Peer Lending or Dividends, then that €1000 per month number is before AND after tax, as there is no tax.
So if you have income similar to my Peer to Peer lending income. You all are set!
Would you believe me?
Well you would be wrong not to, because it’s all true!
You see, Portugal really does have all of the above to offer, plus a lot more. I retired here about 3 years ago and never looked back since. If I knew how inexpensive it was to live here, I could have retired ten to fifteen years before I did. So if you’re on your FIRE journey, it may not be as far away as you thought.
Remember the rule of thumb in FIRE is you need 25 times your annual expenses to become classed as “Financially Independent”? Well, do the math!
Cost of Living in Portugal
The cost of living in Portugal is one of the lowest in Europe. It has to be because you see, the average wage here is €925 per month (2019 figures), the minimum wage is €600 per month. So if you have €1000 per month to live on, you’re actually doing quite well!
To give you a few examples, my partner and I spend around €350 per month for both of us on wonderful, fresh food we eat at home. We are not frugal with that number, we eat anything we want, fresh fish, seafood, chicken, beef, pork, cheese, nuts, fresh vegetables and fruit which we buy from the local market which is open every day of the week.
There are so many wonderful restaurants in Portugal, and most are very reasonably priced. For example, we go out 3 or 4 times a week for either lunch or dinner. Lunch with a glass or two of wine each, we will come out with a bill of around 15 euros. For a nice dinner, 2 or 3 course, we will typically pay between 23-30 euros including food and drinks for both of us. To break that down a little, at our local restaurant, a pork steak with veggies or chips (fries for US folks) costs €7.00 per plate. Beer or Wine – €1.00 per glass or €3 for 1 liter of wine. Soup to start – €2.00. Dessert – €2.00. No tips are expected but I always tip one or two euros (because I lived in the USA for 23 years and I can’t “not” tip something, it’s an illness).
This was the bill from our dinner tonight. To explain, a “DOSE” here on the Silver Cost of Portugal is actually 2 meals, so 1/2 DOSE is 1 meal (I have no idea where that came from). We decided to forgo the the 3 course meal here and go for an extra serving of ribs (who wouldn’t?) The picture shows just 1 serving, there were 3 times this amount. The first 3 items on the bill are the salad, bread, olives and butter (yes, they charge for these items in most European countries, believe it or not). I don’t remember but I think maybe some of the wine got knocked over because 1.5 liters seems to be quite a lot for 2 people. 🙄
Renting or Purchasing a house in Portugal is relativity inexpensive, depending on where you live. The Algarve is more expensive but most areas north of there are not.
For example, last year my good friends Clyde and Terri (American Expats) got this nice 2 bedroom apartment for €350 per month, just up the road from my house.
And as far as purchasing costs. My 5 bedroom, 352 sq meter (approx 3,800 sq feet) house was just above €250k
The taxes on my house are €264 per YEAR. Even better, for the first 5 years there are no taxes at all, as the government gives new house buyers in Portugal the first 5 years for free to encourage buyers to buy.
Home insurance for my house covering €500,000 (double what I paid) rebuilding costs with zero deductible is €321 per year. That includes €30,000 of internal stuff like furniture and appliances. My electricity runs around €50 per month and water around €20.
Some of the things that ARE expensive in Portugal are cars. If you need a car to get around, it’s generally going to cost you 50% more than it would cost in say the UK, France, Germany or the USA. When I first saw the prices I freaked out! But now I realize that indeed they are expensive, and this is because for some strange reason, cars don’t depreciate as fast in Portugal. I really have no idea why, but one theory is because wages are so low here, financing and leasing companies offer much longer loan periods. For example, it’s possible to get a 12 year LEASE (not loan) on a car. Loans can be up to 20 years! Anyway, I worry less about it now. My car (Volvo Cross Country) is still worth almost what I paid for it 3 years ago! Try saying the same in the USA or UK 🙂
Something else is the toll roads. These are expensive too. You don’t have to use toll roads though. You can always get to where you need to be using non-toll roads. It just takes longer. I use the toll roads anyway because they are usually pretty empty and you can get where you’re going FAST! And although there are speed limits (120kmh – 75 mph), there are never any police on them, and if there are they don’t bother you. So everyone just goes at the speed they are comfortable with.
Car insurance is fairly cheap. I pay €421 per year for full coverage with €200 deductible on my 4 year old Volvo. Car tax is also not too bad and based on the emissions the car puts out as well as other things. I paid €126 in vehicle tax this year.
If you can do without a car, then public transport is very good and fairly inexpensive. Taxis are also not bad at all, even considering they are typically Mercedes or BMW.
According to the World Health Organization, Portugal ranks 12th in the world for healthcare. That’s above the UK in 18th place, and well above the expensive USA in 37th place.
If you become a resident of Portugal, you get access to the (almost free) public healthcare system which is very good and based solely on residency (NOT what you’ve paid in). Basically with this system, any doctor visit costs just €4.80 but most everything else is free.
We have private healthcare. Not because it’s any better really, although there is less waiting about to see a doctor in non-emergency situations. It’s because it’s so cheap and we can afford it. We don’t pay any taxes in Portugal, so we buy the private insurance to leave the public system for the Portuguese folks who do pay taxes.
However, my partner had the misfortune of needing to go to the emergency room in the middle of the night a few weeks ago (ER’s are part of the public health system here, not private). She was sat in front of a specialist (this is after the GP referral visit) inside 20 minutes. Better than many private doctors I’ve seen in some other countries.
Private Healthcare Cost
So, how much does private healthcare cost? I pay €48 euros per month for me, and the same for my partner. For that I get €1.2 million worth of coverage per year, and €15 doctor visit co-pays. My deductible is €500 for any hospitalization. I can go to doctors not only in Portugal, but in other European countries where my insurance company operates as well.
To give you an idea of private healthcare costs without insurance, a night in hospital in Portugal costs about €200. And a doctor (GP) or specialist visit without insurance is around €60. So with €1.2m in coverage, you’d have to be pretty darn sick to use that up in a year 🙂
Dentists are also fairly inexpensive here. As I was writing this post in fact, one of my Portuguese friends (Fernando) called me to tell me his wife had broken her tooth. She went to our local dentist here in town and she had to have an implant. The cost was €60. Yes, you read that correctly, sixty euros, For an implant! I had a friend who had an implant done in the USA and it cost almost $5000! To be fair though, the price of €60 is not the norm. I’ve heard of them costing a couple of hundred in the larger towns. Still not too bad though.
Portugal currently ranks as the 4th safest country in the world for 2019. That’s not to say there is no crime here. It happens, but it is usually opportunistic crime like grab and go where someone is not paying attention to their phone or camera and it gets swiped. Remember the average salary here is just €925 per month, so a juicy iPhone is a months wages!
Violent crime is very low though. I have no problems at all with my partner walking home on her own at night from the local restaurant & bar while I play darts or pool with the locals until late. I would not say the same in any of the other countries I have lived in.
Another thing Portugal is somewhat infamous for is in 2001 they decriminalized many drugs. Instead of putting people in jail for having drugs, they instead spent the money on rehabilitation. Would you believe it, the crime rate plummeted over the next few years?
Portuguese people are some of the friendliest, kindest people I have ever come across. They are used to having foreigners in their beautiful country, and are very welcoming to them. I’ve tried to figure out why that would be and I think it’s because of the laid-back lifestyle here in Portugal. The other thing is, since becoming a democracy very recently in 1974 (it was a dictatorship before), many of the young people left Portugal to find work as there was very little available in Portugal.
Even now with the low salaries, many of the young Portuguese leave for countries where they can earn more. It’s interesting though because many of them seem to return when they retire. My friend Fernando lived in Canada for 30 years but returned back to Portugal when he retired.
I think the Portuguese realize foreigners help to populate areas which have become abandoned or downtrodden. They also bring in fresh money to the country which helps keep the economy going.
Portuguese people are very family orientated. To most Portuguese, family is everything. You may be surprised to see in Portugal, many of the houses are HUGE! You would think the opposite for a country with such low salaries, but it’s because there can be 2 or 3 generations of family living in the same house. They love their families and enjoy the full-time interaction.
The government looks after families and children very well too as far as health services and schools. Pregnant ladies, people with young children, old people and disabled people get to go to the front of the lines in shops, government buildings and many other places.
In general, Portuguese children are very well behaved. You don’t see the “spoiled brat’ed’ness” you see in some other developed countries. The schools here are said to be excellent on a public level, and the education is very good. There are also many very good international private schools, and the price for them is fairly inexpensive.
Lisbon, Coimbra and Porto have some of the best collages and universities in Europe. The University of Coimbra tops the list I’m told.
Be aware the Portuguese people love their football (soccer). So if you’re in a restaurant or bar when a game is on, prepare yourself for some shouting and screaming.
And if their teams lose, well, don’t even think about it 🙁
Portuguese is a hard language to learn. So many foreigners come here with the “I’m going to learn Portuguese” motivation factor when they first arrive, but soon give it up when they find out it’s not that easy. It’s ok though because as in many European countries, the second language is English and many people speak it here. Especially in the larger more touristy areas.
It’s good to learn at least some of the main words, greetings etc. If you end up living in a small village though, you’ll need to learn the language or life will be difficult.
If you’re interested in retiring in a tax free environment, then Portugal could be the place for you! Portugal has been trying to attract retirees, or basically anyone who will move here and spend their money which is not earned in Portugal. They need people here because, as I mentioned earlier, many of the young people have left.
Foreigners help the economy and it’s best if they live here, even after all the tourists leave. Because of this, Portugal had the great idea of bringing out the Non Habitual Residency tax law. In basic form, in says most “passive” income (meaning from investments or pensions etc.) from outside of Portugal is not taxed for the first 10 years of residency. Any income which is taxable is taxed at a flat 20%. So, if based on your residency you don’t have to pay tax in the country your income comes from, Portugal won’t tax you either. Google it for more info, there is lots of it out there. I am not a tax adviser so please speak with one before making any decisions as it can be complicated.
There are many different climates in Portugal, from the hot Algarve to the Serra da Estrela mountains where you can ski with very nice powder for a good part of the year.
Inland Portugal can get very hot in summer. We almost moved to Tomar (where the Templar Knights lived if you ever saw the movie “The DaVinci Code”) until we saw the 42 degrees Celsius (108 Fahrenheit) in August. The north of Portugal gets colder and rainier than further south, but it is not as bad as say the U.K. or the U.S. Northeast cost.
Caldas da Rainha
We currently live in Caldas da Rainha (translates to “Hot Springs of the Queen”), which is a small town of about 55,000 people. Our house is 15 minutes drive from the beach, 45 minutes from the capital city of Lisbon and closest international airport, and 3 minutes drive from the center of town. We moved here because the weather is only a couple of degrees colder than the Algarve (where we lived for 2 years) in winter, but in summer it doesn’t get nearly as hot. The low here in winter is about 5 degrees C (41 F), and the high in summer is in the low 30s C (high 80’s F). The average from April to November is around 25 – 30 C (77 – 86 F). Overall it’s very mild and comfortable. On top of that my partner loves the town because it’s small enough to still be cute, but large enough to have some of the clothing and other shopping chains she likes 🙄
So, a country like Portugal MUST be difficult to get residency in, right?
If you’re an EU citizen, it’s obviously very easy. Takes just a couple of days after you register at the local Câmara Municipa (city offices) to get your residency certificate.
You don’t need to show income, criminal history or anything complicated.
Third Country Nationals
For third country nationals (that’s what they call anyone who is not an EU citizen), you have to be able to show you have an income of €600 per month or more (minimum wage). And you have no serious criminal convictions.
If you don’t have the €600 income, it is actually still possible to get residency here anyway. If you start your own business and pay your taxes, it is possible to get residency, you’ll need a lawyer though, cost is around €600 for the whole process. I know two young Ukrainian sisters who started their own hairdressing salon. They were able to receive residency, but it took them two years. I’m not suggesting anyone does this but they came here on a 90 day visitors visa, extended it a few times while they were running their business, and then just did it without a visa for the rest of the time. Because Portugal really needs people, SEF (the immigration service) overlook people who are here illegally providing they are paying their taxes, behaving, and working their way to legal residency.
It is also possible to receive residency by getting a job first, to come here legally, but it’s more difficult as you need to prove that the job was advertised and the employer couldn’t find a Portuguese person to fill the position. It happens all the time though. I have a friend from India who came here and did it that way. Also there are a bunch of younger Americans and Canadians living and working here who did the same thing.
Official Reasons for Getting a Residence Visa for 3rd Country Nationals
A Residence Visa is a Portuguese visa for a four-month period in order to request a residence permit after arrival. This is applied for at your local embassy and can be granted for any of the following reasons:
- employed work
- self-employment or entrepreneurial activities (starting your own business like the Ukrainian sisters did).
- scientific research or teaching
- study, student exchange, internship or voluntary service
- higher education mobility programmes (for students already residing in Portugal who want to further their studies)
- family reunion
- pensioners and people with income.
After you are issued a visa and you come to Portugal, you’ll then get a residency card.
What you need to become resident if you decide to retire earlier in Portugal
If you’re an EU citizen, all you really need to do is come to Portugal, get a NIF, this is a number that is used to track finances, you’ll need one for opening bank accounts etc. Find a place to live (you’ll need a long term rental contract or a property purchase agreement). Then register at the local Câmara Municipa. That’s it.
For 3rd country citizens, it’s a bit more complicated as mentioned earlier. You’ll need to contact the Portuguese embassy or consulate in your own country as they have to approve residency and issue a visa before you come to Portugal. I have many friends here from the USA and Canada though who have done it, and it’s said to be a LOT easier than just about anywhere else in Europe. Here is another website (Expatica) which can give you much more information on what is required.
The Not-So-Good Stuff about Portugal
Everywhere has it’s downsides, and Portugal is no exception. So, here are my gripes. They are just that though, gripes. The good outweighs the gripes by at least 1000:1.
Not Every One is Perfect
Of course not all Portuguese people are perfect. There is the “gringo” factor here in some places, where you can get higher pricing for certain things if you’re a foreigner. This happens pretty much everywhere in the world though. So you’ll need to pay attention when you’re buying things if you don’t have a local with you until you learn the ropes.
They just LOVE paperwork in Portugal! For anything and everything. Something which is simple in some countries can be a complete drama in Portugal. Let’s take changing your address when you move house as an example. In the UK or USA, you go on line, and change the address. The DVLA in the UK might charge you £10 or so to change the address on your driving license. The DMV in the USA might charge you $6 to change the address on your driving license there.
But in Portugal, fist you have to have proof that you have changed your address. Proof means a long term rental contract or purchase agreement. Or you have to get 2 Portuguese citizens to swear an affidavit that you live there. You take this proof to the local Câmara Municipa (city offices) and they will issue you an official document that confirms you actually do live at this new address.
Then you have to take this document and go around all of the offices, take a ticket, wait in line, and pay a fortune to do it.
To give you an example, this is one that I can remember, to change the address on the title for your car will set you back €30!
You’ll need to go to the Finance Offices to change your NIF number address. The Câmara Municipa to change your Residency Permit address (different office to the certification document). IMT to change your Driving License address. Register office to get the title changed on your car. EDP (Electric company) to get electricity switched on. The Câmara Municipa again (different section) to get your water turned on. I’m sure there are some others I’m forgetting, but you get the picture. You have to physically go to all of these places, take a number and wait in line. It takes DAYS!
Don’t get me started here! Indicators are optional extras in Portugal, and if they have them, the Portuguese don’t know how to use them, or don’t care to. Then they either drive too slow, like 20km per hour (12 mph), or too fast like racing drivers. Nothing in the middle. Then they sit 2″ from your back bumper. They don’t want to pass most of the time, it’s just the way some of them drive! Look at the yellow van in the picture below. If you decide to retire earlier in Portugal, don’t do that!
And if you want a fun day out, take a deck chair and set it by a roundabout, grab a beer and watch. That’s all I’ll say about that 🙂
Yes, that’s a word in Portugal. On one side I love the relaxed way the Portuguese people look at life. Everything can wait, they never seem to be in a rush for anything. It’s wonderful. UNTIL you want to get something done!
For example, I’ve been getting quotes on upgrading the heating system in my house (for the 3 months a year we actually need it). It’s probably going to be about €10,000 worth of work by the time everything is done.
I’ve had 4 different companies come out to quote me. So far I have received 1 quote back. Not a peep from the other 3 companies. Just be patient you might say? Well this was about 5 weeks ago! I called one of them last week to ask about the quote. He said “please call me back in a couple more weeks and remind me, I’m busy now”! He wants ME to remind HIM to quote me on business! 😮
As mentioned previously, overall, the the good outweighs the gripes by at least 1000:1 in Portugal. It takes a while to get into the lifestyle once you get here. But when you do, you’ll never want to leave. I go back to the UK quite a bit, I just got back from there last week actually. It seems just too busy now. Everybody rushing about. It’s still my home as I grew up there and I love it, but I couldn’t live there again full time after spending time in Portugal. Everything seems SO expensive there now too.
One thing you’ll notice in Portugal is you don’t see the “keeping up with the Jones’s” like you do in many other countries. It doesn’t matter how big your house is, or what car you drive here. Honestly, no one cares, they really don’t. So if you’re looking for a frugal or non-materialistic lifestyle, you’ll fit right in here. If you want to come here and buy the most expensive car and house, you’ll impress no one but yourself. It’s your choice though of course.
If you’re interested in early retirement, please feel free check out my investment ideas to help you on your way. I also publish my actual Peer to Peer investment and Growth Portfolio returns monthly.
I hope you found this post interesting. Thank you for reading. Please feel free to comment if you have questions or suggestions or email me if you prefer. I love feedback!!
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