The phrase, “location, location, location” usually refers to real estate transactions. It can also be used to explain the main budgeting consideration when developing a sustainable retirement plan.
The cost of retiring increases incrementally every year. Relative cost of living expenses and inflation must be considered when calculating a retirment budget.
And for many retirees, the cost of retirement in a U.S. city is just too much. Take for example the old and general rule of thumb that $1 million dollars is needed to fund a comfortable retirement.
That means the average retiree must spend more than $40,000 on their cost of living expenses in most modern cities. That might last about 20 years.
A 67-year-old retiree who lives to be 88 would be in serious trouble in such a scenario. A retiree living in Hawaii would only have a 12-year retirement with a $1 million retirement at the current cost of living.
Because of the high standard of living in large American cities, some experts say that $3 million is the new rule of thumb for a retirement fund, not $1 million.
As a result of the harsh economic realities associated with retiring in America, some retirees are choosing to live abroad instead.
The Social Security Administration says that more than 500,000
Social Security payments were sent abroad in 2017, which is the best estimate of how many retirees are living abroad.
Retirees making such considerations may want to think about Portugal, which was recently named the number one retiree destination by International Living Magazine.
Low cost, high quality
According to International Living, Portugal has a quality health care system and an attractive cost of living standard when dollars are converted into euros.
The average retiree can live in Portugal on just $2,200 monthly, or $26,400 annually, if they watch their expenses.
A retiree with a $1 million retirement budget could live in Portugal for 38 years. Panama is number two on this list followed by Costa Rica, Mexico, and Columbia.
While saving money is an important consideration when calculating retirement needs, it can’t be the sole consideration for any retiree looking to retire abroad.
Retirees should also consider culture shock, needing to learn another language, weather, and local political instability when making such considerations.