‘We cut our expenses by 50%’
In 2011, at 41-years-old, I retired early from my six-figure career in law. Four years after she quit her job as nurse, my wife also joined me in retirement.
When she retired in 2015, the dividends from our high-yielding mutual funds and stocks had reached $130,000 per annum, covering most of our daily living costs in Washington, D.C.
We took our family on a vacation to Lisbon in Portugal that year with our 16-year old daughter. The city was a place we fell in love immediately.
It hit us that we should leave America and live in Lisbon for our retirement.
Without wasting any time, our family of three packed up our belongings and booked one-way tickets to Portugal. The plan was to rent out our house in the U.S., cut our living expenses while living in Lisbon, then reinvest those savings into more dividend-paying stocks to compound our passive income.
Since 2006, we have lived here almost six years and are not ready to move. Here’s how much we spend per month — and why we love living in Portugal:
Portugal is one of the most important countries in Europe. cheapest countriesLiving in Western Europe.
Our expenses have been cut by half compared with the U.S. average. We’re fortunate to own our two-bedroom, one-bathroom, 1,300-square-foot apartment, which we purchased in 2015 for a little over €500,000 with no mortgage.
Multipacks of fresh fruit and vegetables are our favorite Portuguese bargain. A warm loaf of bread from Gleba Bakery — made with its very own homegrown heirloom wheat — costs only $4, and is worth every penny.
Dining out in restaurants is one of the biggest expenses we make monthly. For $16 per head, a typical meal at the Mercado de Campo de Ourique (a gourmet food market) can cost. Additional $4 costs for a glass wine
Here’s a breakdown of our monthly expenses:
- Insurance for the whole family: $258
- Groceries: $407
- You need basic household necessities: $250
- Transportation: $250
- Housing (property taxes and insurance, maintenance) $430
- Water and electricity $175
- Telephone and Internet: $80
- Restaurant dining (10-12 meals per month). $600
European taxes are often very expensive, however, unlike France and Italy which impose high taxes on wealth, inheritance, or estates, Portugal does not impose any stamp duty (although there is an additional 10% Stamp Duty on assets that are inherited, gifted, or disposed of outside the immediate family).
As an expat, you are considered a Portuguese taxpayer if you reside more than 183 days in a single calendar year in Portugal or, subject to certain conditions, if you have a permanent residence available for your personal use in Portugal.
And thanks to the non-habitual resident tax regime, foreigners can benefit from a tax exemption (or a reduced tax rate) on most foreign source income for 10 years.
We are Americans and therefore have to pay income tax in the United States. However, income taxes paid by citizens of other countries can be reduced. Our property taxes in Portugal are only a fraction of the amount we pay in the U.S.
In addition to Portugal’s national health services coverage, which offers subsidized or free health services to all legal residents of Portugal, my family’s private health insurance through Multicare is comprehensive and affordable.
While our monthly premium is $258, we have a $16 deductible and $16 copays to cover doctor visits in a private facility. I once had an overnight emergency room visit that involved multiple tests and consultations; the entire cost was covered by our insurance, and I paid nothing other than my co-pay.
Prescription drug prices also tend to be dramatically lower in Portugal than in the U.S. One generic prescription that would typically cost me $600 a month back home is only $21 in Portugal — for the brand name medication.
According to the The Fourth Safest Country Report, Portugal is fourth. 2021 Global Peace IndexThe, which, among others, considers terroristic violence and political instability in its methodology.
Portugal News reports that the year 2020 has the lowest crime ratesPortugal began reporting data on crime in 1989.
Beyond these statistics, I and my family feel safe everywhere in Lisbon. Some locals go so far as to claim tables at Mercado, leaving their wallets on a table while they shop for food.
When we first moved here, my wife noticed there is no “cat calling,” and she has never felt harassed walking down the street. Portuguese are known for their good manners. “Bem educado” means “polite” in Portuguese, which comes as very high praise.
However, pickpocketing poses a serious threat to tourists in tourist areas. Therefore, we always keep an eye on our trams.
Temperatures in Lisbon range from an average high of 82 degrees Fahrenheit in July to an average low of 47 degrees Fahrenheit in January, which compares favorably to the sweltering heat and piles of snow typical in Washington, D.C.
In Lisbon, we rarely use an air conditioner in the summer. It is possible to maintain a moderate indoor temperature due to the thick walls of our apartments. And we never bother with hats or gloves in the winter.
Our outlook on life and our priorities have changed dramatically since we moved abroad. When we relocated to Portugal, our possessions were significantly reduced. Now, we are much more focused on what time and how well it is spent.
My goal is to make the most of my time and enjoy nature as much as possible. Walking along Guincho Beach’s shoreline or through the eucalyptus forest in Sintra or Colares are my most joyful moments.
Also, I take advantage of every chance to travel with my family. Our daughter loves backpacking in Europe. Every moment is precious to her, no matter if she’s driving with the family to Seville or attending a Math competition in Geneva.
Alex Trias is a retired attorney. Since 2015, he and his daughter and wife have lived in Portugal. His “Investment Pancakes” series is his. SeekingAlpha.comHe has written nearly 500 articles on topics such as tax planning and investing.