Thinking about where to retire early is an important part of planning for financial independence.
Of course everyone has an “ideal location” in mind for their retirement and – despite differences – some criteria are likely to be common to many of those places.
So, when you are trying to settle on a place to retire, try to stay open-minded. Remember what is most important to you and what you can compromise on. Below is our personal reflection on this matter.
Remember to change your perspective as you will be free from work, so you may not need to be as close to all the amenities as you are now.
Low Cost of Living
A good financial independence plan needs to take into account the future cost of living.
You will live off passive income; the amount of income is proportional to the amount of capital you are able to invest. Thus, the more capital you need, the more time you will have to work and save.
So most early retirees will look to balance cost of living with quality of living. Generally speaking, this means that a place with a low-cost of living is a better retirement choice. The lower the cost of living, the earlier you can retire! In this context, “low” is subjective and assessed on the basis of one’s lifestyle demands.
While one family might find that they can live off $10,000 per year, another could struggle with $20,000 a year. Similarly, the level of income before retirement will contribute to the amount of capital amassed and the perceived lifestyle need.
Consequently, assuming equal job tenure and retirement duration, a higher earner will be able to afford a more expensive post-retirement lifestyle.
The good news is that by not having the constraint to live close to work or any large business centre, an early retiree can avoid expensive towns and neighbourhoods.
Some people even take retirement as an opportunity to move abroad and live in countries with a significantly lower cost of living in order to retire earlier or live more comfortably. For instance, many “grey expats” live in Thailand, Malaysia, Costa Rica, Panama or Uruguay on a fraction of what they would pay at home.
But if this is too drastic a change for you, don’t worry! Even just moving further out of the city tends to yield a lower cost of living and increase your spending power. Property tends to decrease in price as distance from the “commuter belt” increases.
Of course there is a middle ground to be found: You probably don’t want to drive long distances to buy basic food. Besides, the cost of car and fuel is likely to offset any potential savings.
High Quality of Life
Everyone seeks the highest quality of life that they can afford to maintain – Even in retirement! Basic criteria for good quality of life includes safety, healthcare and education in the area you plan to resettle. Other factors include language, culture, customs, weather, proximity to amenities, etc…
Of course, the more of these factors are met, the more appealing a place will be, and the more people will be attracted to those locations. This increases demand and with a limited supply (especially housing!), desirability will push the cost of living upwards.
That means that if you want a low-cost of living, then you are likely to have to make some compromises. Which compromises you are able and willing to make depends entirely on you.
Additional factors you may want to consider include recreational or volunteer opportunities. This is particularly important as you will be without employment and will thus have a significant amount of time available to dedicate to your hobbies or interests.
Given that your length of retirement is likely to be much longer than the average retirement, access to physical and intellectual activities will be particularly important.
You will want to be in an active social environment. As mentioned previously, the goal of an early retiree should not be to sit at home watching television but rather to engage in projects that are close to their heart and give their life meaning. As such, choosing an environment where one can fulfill these types of objectives is critical.
Our Current Choice: Tasmania
Choosing a good place to retire is a tough decision for everyone – including us. There is no one best place to retire. Where you choose to lay down your roots depends on your relationship ties, interests and personality.
We have family living all over the world and EU passports. Consequently, Europe could be a good destination for us. For instance, the countryside in the South of France offers relatively low-cost living, free healthcare and education, good weather, and world-class gastronomy. Indeed, France is frequently ranked the best country in the world to live in.
Still, home is where the heart is and that is in Australia. With Australia competing for the same title on a regular basis, we don’t see a reason to go further afield!
We considered a lot of other options in the process. For example, we’ve looked at emerging countries in Asia and South America, which have a lower cost of living than most developed countries, but they often face safety issues and lack the education system we want for our children.
For us, Australia is the right option. This is particularly true because we are looking for a quiet life. Ideally, we would like to have a small acreage in order to grow some of our food. We want to be as self-sufficient as we can, better control what we eat, and – of course – save money.
Further, we love being outdoors, going hiking and being in contact with nature. A temperate climate is also important to us: not too hot, not too cold, not too humid, not too dry. But, as parents, safety, healthcare, and education matter to us above everything else.
Tasmania meets all these criteria. What we also love about Tassie is that its real estate prices are approximately half of what people pay in Sydney. Sure, food prices are slightly higher (there is no Aldi unfortunately!), but we plan to compensate this with our home-grown food. And we would also enjoy having four distinct seasons! To be continued…