Affordable Places to Retire Abroad: Spotlight on Portugal

algarve portugal retirement

More and more aging adults are looking for international destinations in which to retire. Not only can overseas locations infuse your next chapter with adventure and growth, some places actually allow you to live large on a small budget. Depending where in the world you go, you could enjoy big savings on housing, medical bills, dining out, household help and other expenses. With the rising costs of senior life back home, you may be able to have a lower cost of living and better quality of life elsewhere. It’s a retirement strategy worth investigating.

This post will focus on Portugal, which for 2020 International Living Magazine rates as the number one country to retire abroad. Examining a wide range of criteria, this warm, peaceful European nation earns high marks for a reasonable cost of living, quality health care and ease of fitting into local life there. While it’s not an official English speaking country, many locals do speak English and are generally friendly and welcoming to foreign residents. The publication estimates that a couple could live a comfortable life on just $2,200 per month.

For retirees with wanderlust, Portugal is in an ideal location for easy weekend jaunts across Europe and northern Africa. For example, Paris can be reached in a two-and-a-half-hour flight and Casablanca is about an hour’s flight away. Lots of discount airlines fly out of Lisbon, and train travel around Europe is comfortable and convenient.

We advise spending considerable time in Portugal, renting in several different locations around the country before settling in and perhaps investing in a property. A quick two week holiday isn’t enough to evaluate a place in terms of actually living there. Moving abroad is a big decision, and you want to be sure you will enjoy this kind of lifestyle before committing.

Where to Retire in Portugal

Located on the Iberian peninsula west of Spain, Portugal has offers stunning scenery, a pleasant Mediterranean climate, excellent infrastructure and reasonably priced properties. You can base yourself in a cosmopolitan urban center like Lisbon, the lively northern university town of Coimbra, one of many quaint villages along the coast or the expat-favorite Lagos in the Algarve region. The Algarve has a sizable foreign population, lots of retirement-friendly communities (some boasting golf courses) and numerous English speaking services to make for an easy adjustment. There is plenty of choice depending on your budget and wish list.

Budget Guidelines

On average, the cost of living in Portugal is almost thirty percent lower than in the US. You can live frugally in a more rural town even if you only have a $1,400 monthly Social Security benefit, but having over $2000 will allow you cushion for a few more luxuries. The more you live and shop like a local, the more money you’ll save.

Residence Permits, Visas and Taxes

In recent years the Portuguese government has eased residency requirements and taxes to appeal more to expatriates. In order for a retiree to move to Portugal, you need to get a residence permit. If you’re a citizen of the European Union, the bureaucracy is straightforward. But even if you are an American citizen, getting residency in Portugal is quite easy, more so than most other European countries. Just visit a nearby consulate, complete an application and provide documentation such as a valid passport, proof of income and evidence of health insurance. You’ll also need to have a criminal background check. After completing the application process, you will get a temporary residence permit that lasts five years. You can then apply for a permanent resident permit when your temporary one expires.

Portugal typically taxes all income, including pension income and other income from international sources. However, the Portuguese government has taken steps to entice expatriates to its shores through something called Non-habitual Residence status (NHR). This applies to those who have not been tax-paying residents of the country in the five years prior. If you qualify, you can be tax exempt from Portuguese income tax for ten years, including income from work, pensions, investments, capital gains and rental income. This NHR scheme can really help stretch your nest egg.

Portugal also has a Golden Visa program whereby non-EU citizens who make an investment of €500,000 (or €350,000 reduced option) in real estate can obtain a residency permit for their family, including dependent children. As long as you spend at least two weeks in the country biannually, this visa is renewable. After five years, you can apply for permanent residency and citizenship, which gives you access to the European Union.

Healthcare in Portugal

Healthcare is often a primary concern when deciding whether to retire abroad. Rest assured, Portugal has some of the finest doctors and medical training available anywhere. In fact, the World Health Organization rates it higher than the UK, Ireland, Switzerland, Canada and the US. Most medical professionals have a good level of fluency in English.

While the National Health Service in Portugal (Serviço Nacional de Saude) provides free healthcare to Portuguese and EU citizens, Americans aren’t eligible for this until they’ve resided in the the country for five years and have become permanent residents. So initially, Americans will have to secure their own health insurance (you need proof of this to apply for residency). Once you move to Portugal, you can switch to a Portuguese private health plan which are often considerably more affordable than US insurance. Policy prices depend on your age and health. Look into Fidelidade/Multicare, Tranquilidade and Millennium Bank/Médis which offer plans to those aged 55 to 75.

So would you consider retiring to Portugal?

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