Author Topic: FIRE via Geo-Arbitrage  (Read 5314 times)

LPG

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FIRE via Geo-Arbitrage
« on: December 28, 2018, 12:19:56 PM »
I keep finding articles online talking about placing you can retire with $200k. And these articles often make the places look quite appealing - Coastal Belize or Costa Rica, beautiful cities in Croatia or Slovenia, etc. These articles always REALLY get me thinking. I'm in NorCal right now because of the career opportunities it provides to me (With interests in building energy efficiency, artificial intelligence, and automation it's hard to find a market comparable to this one), but have plans to go independent in the next 3-5 years. Since I have strong connections in CA, CO, MN, Italy, Germany, the UK, Portugal and Singapore I don't think it would be too hard for me to build a business with international clients from wherever I choose to be. I'm currently over the $200k threshold that those articles recommend for those places. This all has me very much contemplating the notion of moving to one of those places, taking advantage of the low cost of living to declare myself FI, use my FI status to build my own consulting business based explicitly on doing what I like with people that I like, rather than making sacrifices for the paycheck.

To be clear, even though I have the money this would be a few years away. I'd want to continue reaching out to people to build professional connections, as having those work connections is very important to me. I'd also need a few years of using PTO to check out some of these places, see which ones appeal to me most, and deciding where to base this plan. And I assume that the $200k threshold the article talks about is assuming a much more standard lifestyle & retirement than jumping out of the rat race in my early 30s, so I'd want to use the time to grow my stache and investigate the numbers to come up with a plan that excites me. I don't know how possible it is to do this using only PTO, but I'd even hope to meet people in the area and grow a sense of community before taking the plunge.

Have any of you tried to do something like this? Have you moved to a new place to make FIRE easier, specifically because relocating there meant you could FIRE earlier than in the city where your career was located? If how, how well did it go? What were the best parts? What were the worst parts? How did you investigate beforehand, or overcome the obstacles that arose along the way?

Thanks in advance!

jim555

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Re: FIRE via Geo-Arbitrage
« Reply #1 on: December 28, 2018, 07:05:14 PM »
I haven't done it, but have looked into it.  Some things you need to consider.  Taxes, USA wants tax from its citizens no matter where they reside.  So moving you need to do 2 tax returns and know tax treaty laws or hire an expert.  Also visas and right to reside are another big item.  Some countries have retirement / investment visas or if you are really rich you can buy your way in.  $200k is a pipe dream, you will need more than that for a good life.

ysette9

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Re: FIRE via Geo-Arbitrage
« Reply #2 on: December 28, 2018, 08:22:45 PM »
Have you read the GoCurryCracker blog? That is a good one for talking about geoarbitrage and traveling the world. The thing to keep in mind is that unless you continue earning first-world income and saving, moving to a lower cost of living country can become a one-way street where you are priced out of “home”. I personally don’t like closing doors when I am not totally sure of what I want in the future, so keep in mind some escape routes should you decide Slovenia or Costa Rica isn’t for you in the end.

cap396

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Re: FIRE via Geo-Arbitrage
« Reply #3 on: December 29, 2018, 07:16:37 AM »
We knew that we could retire earlier by leaving the US, so that is what we did.  We left last summer and have been traveling around South America, spending about $1500-$1800 per month.  No regrets.  But we were seasoned travelers and pretty much knew what we were get into; you do have to make some sacrifices to leave the US.  I would suggest visiting some of the places on your list over the next few years to make sure you would be comfortable living in those places.

ROF Expat

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Re: FIRE via Geo-Arbitrage
« Reply #4 on: December 29, 2018, 04:22:53 PM »
LPG,

I've spent most of my adult life living and working around the world. 

In theory, there are countries where you could retire and live on a nest egg of $200,000.  But if you follow the MMM standard of a 4% withdrawal rate, that means living on $8,000 per year.  I'm not aware of anywhere you can live anything approaching a developed world standard of living for $8,000 per year.  And very few countries will be interested in providing legal residence to someone with only $200k to his or her name. 

A $200k nest egg and Social Security would be doable in some places, but you still wouldn't be living in luxury.  If your plan is to continue to work and generate a good income then your plan becomes a lot more reasonable.  If you're going to require ongoing income, you might find it difficult to convince immigration officials that you're only going to work offshore. 

FWIW, my own experience is that cost of living in the US isn't unreasonable if you are willing to live frugally in a LCOL area.  In most cases, living overseas on substantially less is likely to involve significant compromises in your standard of living and other areas. 

I love living abroad, but I only recommend it if you want to do it for its own sake.  If you think moving to Slovenia would be a great adventure, go for it.  If you're really excited about being able to spend more time scuba diving in Belize, go for it.  If you really want to learn Serbo-Croatian, go for it.  If you think the fun parts of living somewhere else will outweigh the negatives (leaving behind old friends, missing holidays with family, being the weird relative that nephews/nieces/young cousins barely know), go for it. 

If your primary interest is in accelerating FIRE, you'd probably be setting yourself up for disappointment. 

JoJo

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Re: FIRE via Geo-Arbitrage
« Reply #5 on: December 29, 2018, 08:09:41 PM »
How old is this info?  Croatia and Costa Rica are getting expensive.  I was shocked by the prices in Croatia last fall - granted, I visited touristy places but even trying to get away from these places still had highish prices.  All it takes is becoming an increasing tourist destination to really bring the costs up.  So even if you picked a place that was reasonable, in 5-10 years you could be looking at American prices. 

frugal_c

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Re: FIRE via Geo-Arbitrage
« Reply #6 on: December 30, 2018, 08:21:56 AM »
I am not retired and I don't geo arbitrage but I am interested in it as well.  From the few blog posts I have seen, there is a bit of misinformation.  The expenses they generally list for living on 600-700 per month are just rent/food/basic utilities and maybe a touch for entertainment.  They generally don't have any budget for clothes/electronics/travel/health care within the country/etc.  I would speculate you need a minimum of $1k per month or $300k nest egg in US dollars as an absolute minimum but hey, that's me.

Others have pointed out that you can get stuck where it is difficult to move back to the US.  That would concern me.  If I was cutting it close I would want to be in a situation where my withdrawal rate was very low so my funds are likely to grow over time.   Assuming you can make it on $1k a month, maybe $450k+.

However, you are not in a standard ERE situation.  If your plan is to continue to work and you are making anything close to california wages, (or even half of california wages!) you probably don't really need the huge nest egg and could probably do fine with a couple years of saving.  I have known people who have quit, done the slow travel south east asia thing with $5-10k and came home when the money ran out.  So from their perspective, I guess you would appear quite conservative with your huge nest egg.  So many ways to thing about it, much just comes down to risk tolerance.
« Last Edit: December 30, 2018, 08:24:07 AM by frugal_c »

2Birds1Stone

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Re: FIRE via Geo-Arbitrage
« Reply #7 on: December 30, 2018, 09:00:29 AM »
I will be doing this in late 2019 to mid 2020.

I have family in Poland, one of the cheapest countries to live in the EU, and read/speak the language very well. In the winters we plan to snowbird to SE Asia or Central/South America.

I'll be pulling the plug with somewhere $450-500k in paper assets, and no pension or RE investments to speak of.


Financial.Velociraptor

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Re: FIRE via Geo-Arbitrage
« Reply #8 on: December 30, 2018, 09:16:27 AM »
Check out https://www.mrfreeat33.com/.  Jason Fieber is living the good life in Chaing Mai Thailand on just the dividends from a 382k portfolio.  He was previously doing that in Sarasota Florida and found a huge lifestyle upgrade by relocating.

FIKristen

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Re: FIRE via Geo-Arbitrage
« Reply #9 on: January 09, 2019, 10:09:39 PM »
Ecuador.   Beautiful, relatively safe, easy to get around on public transportation, amazing surfing, amazing mountains, incredibly affordable, plus they use the US dollar.   High CD rates offered too, which also pay in USD, although they are only insured up to $10 or 20 grand.   Lots of US expats there.   If you go, learn Spanish and respect the locals.

StetsTerhune

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Re: FIRE via Geo-Arbitrage
« Reply #10 on: January 10, 2019, 02:50:21 PM »
LPG,

I've spent most of my adult life living and working around the world. 

In theory, there are countries where you could retire and live on a nest egg of $200,000.  But if you follow the MMM standard of a 4% withdrawal rate, that means living on $8,000 per year.  I'm not aware of anywhere you can live anything approaching a developed world standard of living for $8,000 per year.  And very few countries will be interested in providing legal residence to someone with only $200k to his or her name. 

A $200k nest egg and Social Security would be doable in some places, but you still wouldn't be living in luxury.  If your plan is to continue to work and generate a good income then your plan becomes a lot more reasonable.  If you're going to require ongoing income, you might find it difficult to convince immigration officials that you're only going to work offshore. 

FWIW, my own experience is that cost of living in the US isn't unreasonable if you are willing to live frugally in a LCOL area.  In most cases, living overseas on substantially less is likely to involve significant compromises in your standard of living and other areas. 

I love living abroad, but I only recommend it if you want to do it for its own sake.  If you think moving to Slovenia would be a great adventure, go for it.  If you're really excited about being able to spend more time scuba diving in Belize, go for it.  If you really want to learn Serbo-Croatian, go for it.  If you think the fun parts of living somewhere else will outweigh the negatives (leaving behind old friends, missing holidays with family, being the weird relative that nephews/nieces/young cousins barely know), go for it. 

If your primary interest is in accelerating FIRE, you'd probably be setting yourself up for disappointment.

This is the single most accurate and sensible thing I have ever read on this subject.

Eric

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Re: FIRE via Geo-Arbitrage
« Reply #11 on: January 10, 2019, 03:46:45 PM »
Definitely double check your cost of living estimates before deciding to do this.  Because there's NO WAY that you can live in Costa Rica for less than $1k/mo unless your idea of shelter is a tent.  If whatever article you read was written by International Living, the costs shown are almost certainly incomplete, sometimes comically so.  They are simply shills for the tourist boards of those countries trying to drum up business, even if it's from people visiting to see if they want to live there.

Try www.TheEarthAwaits.com or www.expatistan.com for better estimates. 

2Birds1Stone

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Re: FIRE via Geo-Arbitrage
« Reply #12 on: January 10, 2019, 07:35:43 PM »
If I can live a luxuriously middle class life in HCOL NY for <$1,500/month, why not Costa Rica for <$1,000?


Classical_Liberal

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Re: FIRE via Geo-Arbitrage
« Reply #13 on: January 11, 2019, 01:21:03 AM »
If I can live a luxuriously middle class life in HCOL NY for <$1,500/month, why not Costa Rica for <$1,000?

How do I keep finding your posts in every random, somewhat interesting topic I see on here!?   :)

For god sakes YES!  This used to be a frugality forum, remember that folks? The median us household income is $61,372 for 2.5 people in median household.  Do the math, a full half of the US lives on about 2K a month per person.  So, if someone spends more than that,  they are in no position to provide advice on what type of frugal living can be done in other countries. 

Hirondelle

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Re: FIRE via Geo-Arbitrage
« Reply #14 on: January 11, 2019, 07:52:57 AM »
If I can live a luxuriously middle class life in HCOL NY for <$1,500/month, why not Costa Rica for <$1,000?

Yes, this! I really wonder what some people mean with "a developed world standard of living". I currently live of Ä950/month in Western Europe and about Ä200/month of that goes to travel. That makes a budget of Ä11.5k/year, but if I wouldn't do intercontinental vacations it comes closer to 9k/year. I HCOL Boston, MA I spent $1200 for a similar lifestyle. I always lived in good locations, comfortable appartments and ate whatever I wanted (home cooked mostly). I just can't fanthom people saying that for a single person (note; if there's kids the situation gets vastly different ofcourse) there's no places where you can live off $8k/year or less. My most luxurious life ever was lived in HCMC, Vietnam. I lived in the city center, owned my own motorbike to get around, ate out 3x a day (mix of street food and nicer restaurants) and dranks loads of coffees and beers. The price for all that? A whopping $400/month.

OP, yes it is totally possible to retire on $200k in several LCOL areas. I do agree that it's important to realize that your retirement may be too limited for you if you get tired of the area, so I do agree with ROF Expat that you shouldn't do it for the sake of retirement, but for the sake of desire to move to a new place anyway.

ROF Expat

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Re: FIRE via Geo-Arbitrage
« Reply #15 on: January 11, 2019, 08:13:42 AM »
If I can live a luxuriously middle class life in HCOL NY for <$1,500/month, why not Costa Rica for <$1,000?

Because a lot of the things we consider part of a "luxuriously middle class life" are cheaper in the US (even in NYC) than most other places in the world.  Electricity in most of the US is probably around 13 cents per kilowatt hour.  In NYC it might be around 20 cents.  In Costa Rica, it is almost 30 cents.  Gasoline that might cost $2.50 per gallon in most of the US is probably twice that in Costa Rica.  Consumer goods like cars, clothes, electronics, and appliances are all likely to be much more expensive in a place like Costa Rica than they are in the US.  Some things, like food, will be cheaper if they are locally produced, but imported food will likely cost at least as much as in the US. 

The fact that the average income in the developing world is much lower than in the US doesn't necessarily translate into being able to replicate something approximating a US lifestyle for much less.  If you don't want to replicate a US lifestyle, that's a different matter.  But keep in mind that you'll also likely be giving up on things in the US that we take for granted.  The home you live in in NYC was probably built to some kind of electrical and construction code.  If your wiring does burst into flame and you call the fire department, a fire truck and professional firefighters will show up in minutes.  If you have a car accident, an Ambulance and EMTs will show up with the jaws of life and they can call in a helicopter for medevac.  If someone breaks into your house and you call 911, the police will answer the phone and come to help.  You can't necessarily count on these things in less developed countries.   

Outside of a few things like the cost of health care and maybe a University education, the U.S. is really a very low cost of living country, especially if you can ignore the pressure to consume and are willing to make modest efforts to life a frugal lifestyle.  It seems like you're a great example of this. 

I think a lot of places in the developing world, like Costa Rica might be less expensive than the US if you are already spending a lot of money and want to recreate a more luxurious lifestyle for less.  If you're living in a million dollar condo in NYC, drive an expensive car, spend thousands of dollars to have a housekeeper come in a few times a week, eat out at expensive restaurants all the time, and spend thousands of dollars a year on beach vacations, you might be able to buy a house or condo on the beach in Costa Rica and hire a household staff and live on less than you do now.  And if you're willing to spend money flying to the US once or twice a year to bring back your new laptop or iPhone, your local costs would be lower.   But I don't think that's what we're talking about here. 

I am a big supporter of living overseas, I just don't think it is usually a lot cheaper than living in the US unless you're willing to make some substantial compromises that people often ignore. 

Eric

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Re: FIRE via Geo-Arbitrage
« Reply #16 on: January 11, 2019, 10:39:52 AM »
If I can live a luxuriously middle class life in HCOL NY for <$1,500/month, why not Costa Rica for <$1,000?

Because Costa Rica is not cheap anymore.  At all.   I'm sure you could pull it off in nearly every other central American country, but it would be much harder there.  Want me to walk back my "NO WAY"?  Fine.  It's only highly unlikely.  :)

Hirondelle

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Re: FIRE via Geo-Arbitrage
« Reply #17 on: January 11, 2019, 10:50:42 AM »
@ROF Expat thanks for your extra explanation (although it wasn't directed at me specifically). I think your points do make a lot of sense and I agree with you that many people don't consider those things (enough) when moving abroad. I think the degree to which one wants to replicate a US (or other homecountry) lifestyle is a very important factor in the COL elsewhere.

I also met expats that spent tons of money because they tried to replicate their lives at home. Cheese is my favorite example because as a European, I don't consider American cheese edible and EU-cheeses are crazy expensive and in Asia finding ANY decent cheese was a pain. So if I wanted to export my EU-lifestyle, the cheese part of it would probably double my food expenses :p. Instead, I just chose to cut cheese out of my diet.

ROF Expat

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Re: FIRE via Geo-Arbitrage
« Reply #18 on: January 14, 2019, 07:19:24 AM »
@ROF Expat thanks for your extra explanation (although it wasn't directed at me specifically). I think your points do make a lot of sense and I agree with you that many people don't consider those things (enough) when moving abroad. I think the degree to which one wants to replicate a US (or other homecountry) lifestyle is a very important factor in the COL elsewhere.

I also met expats that spent tons of money because they tried to replicate their lives at home. Cheese is my favorite example because as a European, I don't consider American cheese edible and EU-cheeses are crazy expensive and in Asia finding ANY decent cheese was a pain. So if I wanted to export my EU-lifestyle, the cheese part of it would probably double my food expenses :p. Instead, I just chose to cut cheese out of my diet.

Hirondelle,

I think we're pretty close on our perceptions. 

I definitely believe people can lead a great life in a lot of countries for less than they spend in the US.  I just think it is likely to be a very different life.  If you can get excited about eating Banh mi but giving up cheese, you probably have the attitude that will let you have a great time in Vietnam at a reasonable cost.  If someone thinks he or she is going to more or less replicate their North American or European middle class life in Vietnam, but do it at a lower cost, I think they're likely to be very disappointed.  And as you and others have pointed out, one can live a very satisfying life in the US and Europe for surprisingly little money with some thought and care.  I also think too many people don't think about the little stuff of every day life, like becoming fluent in foreign languages, explaining issues to a dentist who doesn't speak English or convincing the person in the market that you aren't going to pay ridiculous "tourist rates" for your fruits and vegetables even though you look a lot like the tourists who do.  If you are the kind of person who can convince yourself that these are "minor adventures" rather than "frustrations" you will probably enjoy living overseas.  If you can't, I doubt the money you (might) save is worthwhile. 


2Birds1Stone

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Re: FIRE via Geo-Arbitrage
« Reply #19 on: January 14, 2019, 07:37:38 AM »
Thank you for the explanation @ROF Expat. We in no way plan on replicating our Western lifestyle in SE Asia. Eating local, and living more "local" is a big part of the draw for us. Slow travel, or staying in places for weeks/months at a time. Eating American/European food is not something we plan on doing often/at all. Same with accommodations and transportation. 


ROF Expat

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Re: FIRE via Geo-Arbitrage
« Reply #20 on: January 14, 2019, 07:52:10 AM »
Thank you for the explanation @ROF Expat. We in no way plan on replicating our Western lifestyle in SE Asia. Eating local, and living more "local" is a big part of the draw for us. Slow travel, or staying in places for weeks/months at a time. Eating American/European food is not something we plan on doing often/at all. Same with accommodations and transportation.

2Birds1Stone,

My comments weren't aimed at you specifically.  I had the sense that the OP was not particularly familiar with some of the countries he/she listed and I wanted to throw some of what I've learned living overseas into the mix.  You previously mentioned already speaking Polish, so I presume you're very aware of what you're doing.  I also think snowbirding and slow travel are a much easier and more flexible option than a permanent move.  I suspect that slow travel around the world will probably become a greater part of my own life in the future. 

Villanelle

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Re: FIRE via Geo-Arbitrage
« Reply #21 on: January 17, 2019, 07:08:27 AM »
I've spent the last decade living overseas. (Not FIREd, but as a trailing spouse for DH's work.)

I am quite sure this depends largely on personality, but living overseas can be far, far more challenging than I think most people consider.  Sure, there's the language barrier and that can be a challenge and source of frustration.  But it's also at least somewhat fixable.  You can learn enough to be a functional part of society.  That can take time, and be frustrating during that time. But learning native level language skills? Really, really hard and will take years, if you can ever manage it.  For someone like me who thrives on the nuances of language and communication, that sucks, a lot.  I can order a coffee and get my pizza with no onions and ask for directions.  But I can't have a philosophical conversation. I can't carefully choose my words to make sure I'm not misunderstood.  I can't thread the needle of awkward situations or difficult questions with carefully chosen words.  I hate it.

And even if you master that, you will almost never master what I call cultural literacy.  This is all the little things you learn without ever realizing you are learning, and know without even being aware that you know.  They are everywhere in our lives.  How to stand in line in Germany (hint: be right up on the person in front of you, or someone will see the opening and take it).  That you pre-pay for a parking garage there.  (If you drive up to the arm not having paid, you can't get out and the people behind you will be pissed and everyone will have to back up to let you out. It's embarrassing as hell.)  That you don't wear even slippers on a tatami mat in Japan.  Those are just a few, and they are the more concrete things.  IME, I will always, always, always feel like a bit of an outsider overseas, and the more different from my home culture the place is, the more that's true--the larger and more difficult to bridge is the gap.

That said some people deal better with these things than others.  That parking garage experience (which I actually avoided thanks to great info from friends when we arrived) is they type of thing that would have me feeling shame and humiliation for an hour.  Getting screamed at in German (when I understood almost none) by the old lady in line behind me in line at the grocery store until you cried?  Not fun.  (She was expressing that one is supposed to lay down the bottles on the conveyer belt, not set them upright, but that was only figured out after much screaming from her and some crying by the bottle-placement-violator.) 

And some places will be far, far more accepting of outsiders.  Some places will also allow you to blend a bit better.  (I stand out more in Japan than I did in Germany, for example.)  That can be good, but also bad.  No one in Japan ever mistakes me for a local and starts talking at me before I can explain I don't understand (or at least need them to speak very slowly and with small words).  But they also never turn me away at the door with a "no foreigners". 

Anyway, I think FIREing overseas can absolutely be great and is a viable option for many people.  But the cavalierness with which some people toss it out there is misleading and does a disservice to those considering it.  It's a huge decision, with implications I don't think most people can ever comprehend until they try it.  But they can make sure they do as much research as possible and are honest with themselves and as prepared as possible for what is to come. 

ysette9

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Re: FIRE via Geo-Arbitrage
« Reply #22 on: January 17, 2019, 10:10:49 AM »
Thank you, @Villanelle, for sharing your experiences. While I was only abroad for a year as an exchange student, a lot of what your wrote resonates with me as well. I found not being able to really express myself to be incredibly frustrating and isolating. I hung out with “friends” but didn’t feel close to them at all because I couldn’t share my true self with them due to that barrier.

I believe attitude matters a lot. I really missed my home and that made it difficult to view differences in a positive light. “Why the hell is the grocery store in my village closed for lunch? How stupid can you be?” Versus “what an amazing quality of life where a lunch break is universally valued to that degree.”

I suspect the age you go abroad also matters. I found it easier to adapt and have adventures with good spirits when I was younger, poorer, and had lower expectations. Now I’ve grow accustomed to certain creature comforts and find it harder to go without.

That said, I strongly encourage everyone to spend time abroad, just to learn that the word is a much bigger and diverse place than your own home corner of the world. Americans in particular are guilty of believing that our way is the best without ever experiencing anything else.

Padonak

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Re: FIRE via Geo-Arbitrage
« Reply #23 on: January 17, 2019, 11:10:31 AM »
Ptf

dougules

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Re: FIRE via Geo-Arbitrage
« Reply #24 on: January 17, 2019, 12:28:01 PM »
I think it's worth adding that a lot of the same cautions apply to a certain degree to people moving within a country.  It could be worse in the sense that people may not be expecting culture shocks if they haven't crossed an international border. 

If you live in New York and decide you're going to reduce your expenses by moving to Tennessee, you may find you don't fit in.  Different food, different nuances in language, different cultural expectations, etc. 

I guess the sum of it is make sure you either know you'll be happy when you're a goat living with horses or have a plan B to go back home if things don't work out. 

(Partly just PTF)
« Last Edit: January 17, 2019, 12:29:40 PM by dougules »

MrThatsDifferent

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Re: FIRE via Geo-Arbitrage
« Reply #25 on: January 17, 2019, 01:49:38 PM »
I've spent the last decade living overseas. (Not FIREd, but as a trailing spouse for DH's work.)

I am quite sure this depends largely on personality, but living overseas can be far, far more challenging than I think most people consider.  Sure, there's the language barrier and that can be a challenge and source of frustration.  But it's also at least somewhat fixable.  You can learn enough to be a functional part of society.  That can take time, and be frustrating during that time. But learning native level language skills? Really, really hard and will take years, if you can ever manage it.  For someone like me who thrives on the nuances of language and communication, that sucks, a lot.  I can order a coffee and get my pizza with no onions and ask for directions.  But I can't have a philosophical conversation. I can't carefully choose my words to make sure I'm not misunderstood.  I can't thread the needle of awkward situations or difficult questions with carefully chosen words.  I hate it.

And even if you master that, you will almost never master what I call cultural literacy.  This is all the little things you learn without ever realizing you are learning, and know without even being aware that you know.  They are everywhere in our lives.  How to stand in line in Germany (hint: be right up on the person in front of you, or someone will see the opening and take it).  That you pre-pay for a parking garage there.  (If you drive up to the arm not having paid, you can't get out and the people behind you will be pissed and everyone will have to back up to let you out. It's embarrassing as hell.)  That you don't wear even slippers on a tatami mat in Japan.  Those are just a few, and they are the more concrete things.  IME, I will always, always, always feel like a bit of an outsider overseas, and the more different from my home culture the place is, the more that's true--the larger and more difficult to bridge is the gap.

That said some people deal better with these things than others.  That parking garage experience (which I actually avoided thanks to great info from friends when we arrived) is they type of thing that would have me feeling shame and humiliation for an hour.  Getting screamed at in German (when I understood almost none) by the old lady in line behind me in line at the grocery store until you cried?  Not fun.  (She was expressing that one is supposed to lay down the bottles on the conveyer belt, not set them upright, but that was only figured out after much screaming from her and some crying by the bottle-placement-violator.) 

And some places will be far, far more accepting of outsiders.  Some places will also allow you to blend a bit better.  (I stand out more in Japan than I did in Germany, for example.)  That can be good, but also bad.  No one in Japan ever mistakes me for a local and starts talking at me before I can explain I don't understand (or at least need them to speak very slowly and with small words).  But they also never turn me away at the door with a "no foreigners". 

Anyway, I think FIREing overseas can absolutely be great and is a viable option for many people.  But the cavalierness with which some people toss it out there is misleading and does a disservice to those considering it.  It's a huge decision, with implications I don't think most people can ever comprehend until they try it.  But they can make sure they do as much research as possible and are honest with themselves and as prepared as possible for what is to come.

This is quite insightful and resonates strongly. What Iíve learned is to embrace the adventure and the failures. They are all learning experiences. Nothing will be smooth, mistakes will be made, thatís the fun. You wanna be kept on your toes, hyper-aware, and always present? Make a big move somewhere new. It isnít easy and itís not for everyone. You can make it work if you can approach it with the right attitude and frames, and you give yourself the opportunity to retreat to a safe space, as needed.

electriceagle

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Re: FIRE via Geo-Arbitrage
« Reply #26 on: January 25, 2019, 02:37:16 PM »
I keep finding articles online talking about placing you can retire with $200k. And these articles often make the places look quite appealing - Coastal Belize or Costa Rica, beautiful cities in Croatia or Slovenia, etc.

I don't mean to rain on your parade, but I feel compelled to remind you of the big, bad wolf of geo-arbitrage: inflation.

The 4% rule is an observation based on US stock returns and US inflation. The "developing world" is in fact developing and thus has higher inflation. Nobody knows how much you can withdraw and still keep up with developing world inflation.

This doesn't mean that it can't be done. Just that higher inflation should be taken into account.

ROF Expat

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Re: FIRE via Geo-Arbitrage
« Reply #27 on: January 26, 2019, 03:06:32 AM »
A fair reminder, but not much of an issue for expats unless your finances are completely converted to local currency.  If your stash and/or income is in dollars and you only convert it to local currency as needed, you avoid much of the local inflation risk.  In fact, inflation might mean that local products become that much cheaper for you.  What you will have, though, is exchange rate risk.  Regardless of local inflation, if the dollar (or whatever your home currency is) depreciates against the local currency, all your local expenses go up proportionately.  In my experience, exchange rate fluctuations have had more impact on me (positive and negative) than local inflation rates.   

terran

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Re: FIRE via Geo-Arbitrage
« Reply #28 on: January 27, 2019, 06:56:55 AM »
A fair reminder, but not much of an issue for expats unless your finances are completely converted to local currency.  If your stash and/or income is in dollars and you only convert it to local currency as needed, you avoid much of the local inflation risk.  In fact, inflation might mean that local products become that much cheaper for you.  What you will have, though, is exchange rate risk.  Regardless of local inflation, if the dollar (or whatever your home currency is) depreciates against the local currency, all your local expenses go up proportionately.  In my experience, exchange rate fluctuations have had more impact on me (positive and negative) than local inflation rates.   

I could be wrong, but I think @electriceagle's point was not that your stash would depreciate from the local inflation, but rather that given that many of the best places for geo-arbitrage are still developing economies, they have higher inflation in the sense that cost of living increases at a faster rate than it does in the developed world. If you retire based on the "4% rule" (or whatever your chosen percent is) you're using the assumptions of those studies, which include developed world levels of inflation. If your personal inflation is higher because you experience developing world inflation, then you might be in trouble.

electriceagle

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Re: FIRE via Geo-Arbitrage
« Reply #29 on: January 27, 2019, 05:15:52 PM »
A fair reminder, but not much of an issue for expats unless your finances are completely converted to local currency.  If your stash and/or income is in dollars and you only convert it to local currency as needed, you avoid much of the local inflation risk.  In fact, inflation might mean that local products become that much cheaper for you.  What you will have, though, is exchange rate risk.  Regardless of local inflation, if the dollar (or whatever your home currency is) depreciates against the local currency, all your local expenses go up proportionately.  In my experience, exchange rate fluctuations have had more impact on me (positive and negative) than local inflation rates.   

I could be wrong, but I think @electriceagle's point was not that your stash would depreciate from the local inflation, but rather that given that many of the best places for geo-arbitrage are still developing economies, they have higher inflation in the sense that cost of living increases at a faster rate than it does in the developed world. If you retire based on the "4% rule" (or whatever your chosen percent is) you're using the assumptions of those studies, which include developed world levels of inflation. If your personal inflation is higher because you experience developing world inflation, then you might be in trouble.

Bingo.

"Developing" world inflation is higher than "developed" country inflation in US dollar terms. Either you need to pull an unknown % of your stache (less than 4%) or you need to buy developing world assets that produce income/displace expenses.

ROF Expat

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Re: FIRE via Geo-Arbitrage
« Reply #30 on: January 28, 2019, 10:00:01 AM »
A fair reminder, but not much of an issue for expats unless your finances are completely converted to local currency.  If your stash and/or income is in dollars and you only convert it to local currency as needed, you avoid much of the local inflation risk.  In fact, inflation might mean that local products become that much cheaper for you.  What you will have, though, is exchange rate risk.  Regardless of local inflation, if the dollar (or whatever your home currency is) depreciates against the local currency, all your local expenses go up proportionately.  In my experience, exchange rate fluctuations have had more impact on me (positive and negative) than local inflation rates.   

I could be wrong, but I think @electriceagle's point was not that your stash would depreciate from the local inflation, but rather that given that many of the best places for geo-arbitrage are still developing economies, they have higher inflation in the sense that cost of living increases at a faster rate than it does in the developed world. If you retire based on the "4% rule" (or whatever your chosen percent is) you're using the assumptions of those studies, which include developed world levels of inflation. If your personal inflation is higher because you experience developing world inflation, then you might be in trouble.

Bingo.

"Developing" world inflation is higher than "developed" country inflation in US dollar terms. Either you need to pull an unknown % of your stache (less than 4%) or you need to buy developing world assets that produce income/displace expenses.

Electric Eagle,

OK, now I think I understand where you're coming from.  In my own experience, high inflation rates have tended to come from poor economic management, so it was usually balanced out by depreciation of the local currency.  For example, if you lived in Zimbabwe during the hyperinflation period, you didn't feel that inflation if you had a hard currency like dollars, euros, or South African Rand.  On the other hand, if you're living in a country where increasing inflation and cost of living reflect rising wages and an improving standards of living, there might not be any related weakening in the currency.  Someone who comfortably lived in pre-EU Croatia in the 1990s on a fixed income might be in a very different financial position today. 

Classical_Liberal

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Re: FIRE via Geo-Arbitrage
« Reply #31 on: January 28, 2019, 07:37:41 PM »
Someone who comfortably lived in pre-EU Croatia in the 1990s on a fixed income might be in a very different financial position today.

This is not a risk associated with Geo-Arbitrage, it is a feature of this strategy.  Someone retiring in San Fran or Denver in 1990's on a fix income would be in a difficult financial position today without leaving the US.  So the Geo-Arbitrage FIREee would move by definition of this strategy.

ROF Expat

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Re: FIRE via Geo-Arbitrage
« Reply #32 on: January 29, 2019, 01:33:21 AM »
Someone who comfortably lived in pre-EU Croatia in the 1990s on a fixed income might be in a very different financial position today.

This is not a risk associated with Geo-Arbitrage, it is a feature of this strategy.  Someone retiring in San Fran or Denver in 1990's on a fix income would be in a difficult financial position today without leaving the US.  So the Geo-Arbitrage FIREee would move by definition of this strategy.

Thanks for the clarification.  I hadn't realized that most Geo-Arbitragers would be prepared to move as necessary. 

Hula Hoop

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Re: FIRE via Geo-Arbitrage
« Reply #33 on: January 29, 2019, 04:06:26 AM »
As an American in Italy I'd like to reaffirm what others have said.  Obviously, this is a developed Western European country, yet it can be hard and I've had some down times due to the language and cultural barrier.  I speak Italian fluently now but it took me a while to get here.  I know some cultural references but I still don't get a lot of jokes and cultural references from my friends.  And watching my kids grow up in a different culture and school system - with a whole different set of values (for example, they LOVE rote learning here - love it - and exams are almost always oral exams in front of a whole group of peole which is torture for my shy child) is really tough.  I'm often the only crazy person who thinks something - as I'm the only one who didn't grow up in this culture/school system.  Long term - it can be tough.  And I'm talking Western Europe here. 

Also food.  The person who talked about cheese above is spot on.  Italian food is good but it took me several years to adapt to a life without certain foods that I've always taken for granted.  For example, you can't get cheddar cheese here (BTW - I don't agree that American cheese is bad - I desperately long for both cheddar and pepper jack cheese), you can't get brown sugar (so I can't make chocolate chip cookies) and lots of other small things like tofu (unless you trek to the one Chinese market in my town), rice noodles, good corn on the cob, Mexican food etc etc.  I'm pretty used to eating Italian food all the time now but I go nuts when I'm back in the US and can get things like Thai food, Japanese food, good Chinese and above all cheddar cheese.  I'm a foodie so this stuff is important to me.  You have to really think - can I eat the local diet day in and day out without going crazy?

Geo-arbitrage wise, our life is a lot cheaper here that the extremely HCOL US city I come from.  But salaries are also a lot lower and taxes are a lot higher.  If you're retired I guess this is OK but we're effectively locked out of the real estate market back 'home' at this point so I've had to make my peace with living here long term.  My kids are young, but it seems likely that they might move either to Northern Europe or the US when they get older because the job situation is so dire here so I might end up stuck here in a LCOL country which is not my own once my kids have flown the coop.
« Last Edit: January 29, 2019, 04:10:06 AM by Hula Hoop »

patrickza

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Re: FIRE via Geo-Arbitrage
« Reply #34 on: January 29, 2019, 04:10:10 AM »
I don't mean to rain on your parade, but I feel compelled to remind you of the big, bad wolf of geo-arbitrage: inflation.

The 4% rule is an observation based on US stock returns and US inflation. The "developing world" is in fact developing and thus has higher inflation. Nobody knows how much you can withdraw and still keep up with developing world inflation.

This doesn't mean that it can't be done. Just that higher inflation should be taken into account.
With inflation comes a drop in the exchange rate with the dollar, so it's cancelled out if you're invested in or earning a solid currency.

I spent time in Zimbabwe when there was hyperinflation. The only change you need to make is that you don't convert large sums of US$ at a time.

2Birds1Stone

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Re: FIRE via Geo-Arbitrage
« Reply #35 on: January 29, 2019, 05:36:39 AM »
@Hula Hoop, why can't you move as well?

terran

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Re: FIRE via Geo-Arbitrage
« Reply #36 on: January 29, 2019, 06:05:04 AM »
I don't mean to rain on your parade, but I feel compelled to remind you of the big, bad wolf of geo-arbitrage: inflation.

The 4% rule is an observation based on US stock returns and US inflation. The "developing world" is in fact developing and thus has higher inflation. Nobody knows how much you can withdraw and still keep up with developing world inflation.

This doesn't mean that it can't be done. Just that higher inflation should be taken into account.
With inflation comes a drop in the exchange rate with the dollar, so it's cancelled out if you're invested in or earning a solid currency.

I spent time in Zimbabwe when there was hyperinflation. The only change you need to make is that you don't convert large sums of US$ at a time.

Maybe I'm not well enough versed in exchange rates and global economics, and maybe inflation was the wrong term, but is it not true that some (many?) countries that are starting at a lower standard of living than the "western" countries are likely to see standard of living, and therefore cost, rise at a faster rate than the countries that already have a comparatively high standard of living? I think that is the type of inflation being discussed here, not currency inflation.

Hula Hoop

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Re: FIRE via Geo-Arbitrage
« Reply #37 on: January 29, 2019, 07:45:34 AM »
@Hula Hoop, why can't you move as well?

I'm married to a local and he's not willing to move.  Also, COL is way higher in the area I'm from in the US and we probably wouldn't be able to get decent jobs there that would support that high COL.

And TBH I don't think I'd want to move back to the US.  Moving to a different country gets complicated when you have jobs and kids in the local school system (and fluent in the local language) to think about.
« Last Edit: January 29, 2019, 07:49:49 AM by Hula Hoop »

Hirondelle

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Re: FIRE via Geo-Arbitrage
« Reply #38 on: January 29, 2019, 10:01:38 AM »

Also food.  The person who talked about cheese above is spot on.  Italian food is good but it took me several years to adapt to a life without certain foods that I've always taken for granted.  For example, you can't get cheddar cheese here (BTW - I don't agree that American cheese is bad - I desperately long for both cheddar and pepper jack cheese), you can't get brown sugar (so I can't make chocolate chip cookies) and lots of other small things like tofu (unless you trek to the one Chinese market in my town), rice noodles, good corn on the cob, Mexican food etc etc.  I'm pretty used to eating Italian food all the time now but I go nuts when I'm back in the US and can get things like Thai food, Japanese food, good Chinese and above all cheddar cheese.  I'm a foodie so this stuff is important to me.  You have to really think - can I eat the local diet day in and day out without going crazy?

Except that cheddar is English ;)

(sorry, couldn't resist)
I'm not a big fan of cheddar but I can understand why one would like it. Nothing wrong with some good quality cheddar cheese. However, I mostly talked about this type of cheese which is generally called 'American cheese'.

I think a lot of the thing you mention about Italy are quite Italy-specific though. Somehow they tend to stick to their own food very religiously. In the rest of Europe all of the things you mention usually aren't a problem in medium sized cities and up. But I totally get the frustration :)

Hula Hoop

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Re: FIRE via Geo-Arbitrage
« Reply #39 on: January 29, 2019, 10:49:07 AM »
Yeah - when I bring my 'foreign' food to work I get "oooh yuk, that food smells disgusting." along with desperate window opening and face fanning. I find this incredibly rude. Today it was left over chicken in teriyaki sauce, white rice and sambal oelek (Indonesian hot sauce that I get at the Chinese grocery) so not exactly exotic to anyone who isn't Italian.  Many Italians (not all, thank God) think that all foreign food is gross, by definition. 


ysette9

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Re: FIRE via Geo-Arbitrage
« Reply #40 on: January 29, 2019, 12:46:57 PM »
Yeah, I remember when I excitedly brought home a tiny kid of peanut butter when I lived in France. My host mother sniffed at it and said something like “this is why Americans are so fat”.

Hirondelle

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Re: FIRE via Geo-Arbitrage
« Reply #41 on: January 29, 2019, 02:07:02 PM »
Oh yes, peanut butter is another big one. American peanut butter =/= peanut butter to me :p. It's peanut sugar (yes, I know there's sugar-free ones for twice the price).

Ok, let's not derail the thread in me complaining about American foods :p.

Hula Hoop

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Re: FIRE via Geo-Arbitrage
« Reply #42 on: January 29, 2019, 03:34:06 PM »
Oh yes, peanut butter is another big one. American peanut butter =/= peanut butter to me :p. It's peanut sugar (yes, I know there's sugar-free ones for twice the price).

Ok, let's not derail the thread in me complaining about American foods :p.

Sorry but I'm American and either make my own peanut butter or (when I lived in the US) bought the natural non-hydrogenated, no sugar peanut butter with oil on top.  You seem to equate American food with junk food for some reason.  This is the same stereotype of American food that I battle here in Italy.

FreeBear

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Re: FIRE via Geo-Arbitrage
« Reply #43 on: January 29, 2019, 03:53:15 PM »
As an American in Italy I'd like to reaffirm what others have said.  Obviously, this is a developed Western European country, yet it can be hard and I've had some down times due to the language and cultural barrier.  I speak Italian fluently now but it took me a while to get here.  I know some cultural references but I still don't get a lot of jokes and cultural references from my friends.  And watching my kids grow up in a different culture and school system - with a whole different set of values (for example, they LOVE rote learning here - love it - and exams are almost always oral exams in front of a whole group of peole which is torture for my shy child) is really tough.  I'm often the only crazy person who thinks something - as I'm the only one who didn't grow up in this culture/school system.  Long term - it can be tough.  And I'm talking Western Europe here. 

It's impressive that you've become that fluent, both linguistically and culturally.  Maybe this is less common here in the US compared to other places in the world like Europe.  I don't speak anything fluently except English.  I spent lots of time w*rking in Asia through a multi-national company. 

Our Asian colleagues treated very well since we came for corporate headquarters.  We enjoyed nightly dinners and drinks as well as all-day sight seeing on the weekends.  I must admit that we all enjoyed this flattering and attention.  After many trips, though, this became tiring, even burdensome, both for our ourselves as well as our hosts.  We knew our hosts well enough to negotiate quietly for lower key events and more personal down time.

Over time, I stopped requesting a ride to w*rk or even taking a taxi.  I just walked like most of the locals.  Gradually, my colleagues started taking me to everyday restaurant that they normally enjoyed with their families, instead of fancy expense account places favored by management.  I also started to meet my colleagues' families.  All this was a wonderful break from the normal corporate grind. 

After dozens of these trips, however, the novelty of experience wore off.  My colleagues spent less time speaking English among themselves, the only language I could understand.  In a sense, I blended in too well, and I found it very isolating.  It became just another job, and I became just another guy going to w*rk, except without my family and close friends that I could really talk to without a sense of obligation they are doing it as part of their job. 

Talking to other Americans or even Asians that became expats in the US, it seemed that others also struggled with the isolation, but tried to hide it.  I'm sure some people would love this kind of opportunity to really localize in a foreign country, but it wasn't for me. I retired almost immediately after my last overseas trip, and live a quite life near my home town.

Freedomin5

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Re: FIRE via Geo-Arbitrage
« Reply #44 on: January 30, 2019, 03:51:48 AM »
Even when you speak the local language and have local friends, it can be isolating. Customs, cultures, and ways of thinking are just really different. And even if you have an open mind and can understand why they do things a certain way, itís still hard to agree with that way.

I speak relatively fluent Chinese and most of my friends are local Chinese. At the same time, I still donít connect to them the same way I do my Canadian friends. Lifestyle and opportunities are just too different. There are big chunks of my life that they donít really get, like how we travel each summer and winter, or the fact that it was relatively easy for me to go abroad for school, or how (relatively) easily we can buy a condo. Having traveled extensively and also being trained in a ďcritical thinkingĒ educational model means that the way we look at the world is also very different.

And if you make friends with expats, it can still be isolating because expats tend to be transient. Most expat contracts are 2 to 3 years.

DoNorth

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Re: FIRE via Geo-Arbitrage
« Reply #45 on: February 01, 2019, 07:58:11 PM »
I'm an American living in southwest france.  Centrally located apartments are 600-700 Ä, medical is very reasonable.  I just had minor foot surgery for 50Ä, dental cleaning was 28Ä today.  Restaurants are more expensive than I've found in other areas of Europe, but groceries at Lidl are on par or below with lower cost US grocery stores.  Internet, cell service etc. are way lower than the US.  I could easily live in my town for under 2000Ä/mo

2Birds1Stone

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Re: FIRE via Geo-Arbitrage
« Reply #46 on: February 02, 2019, 06:42:07 AM »
@DoNorth, that's not bad, but $2,300 is a lot more than what OP is referring to though.

Is that for a single person? Or family?

You could retire in 80%+ of the world on that amount.





electriceagle

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Re: FIRE via Geo-Arbitrage
« Reply #47 on: February 03, 2019, 02:33:39 AM »
I don't mean to rain on your parade, but I feel compelled to remind you of the big, bad wolf of geo-arbitrage: inflation.

The 4% rule is an observation based on US stock returns and US inflation. The "developing world" is in fact developing and thus has higher inflation. Nobody knows how much you can withdraw and still keep up with developing world inflation.

This doesn't mean that it can't be done. Just that higher inflation should be taken into account.
With inflation comes a drop in the exchange rate with the dollar, so it's cancelled out if you're invested in or earning a solid currency.

I spent time in Zimbabwe when there was hyperinflation. The only change you need to make is that you don't convert large sums of US$ at a time.

Maybe I'm not well enough versed in exchange rates and global economics, and maybe inflation was the wrong term, but is it not true that some (many?) countries that are starting at a lower standard of living than the "western" countries are likely to see standard of living, and therefore cost, rise at a faster rate than the countries that already have a comparatively high standard of living? I think that is the type of inflation being discussed here, not currency inflation.

Bingo. This isn't about hyperinflation due to poor monetary management.

Low-cost countries are such because wages/cost of living are low. This provides low prices for everything made/grown in the country, as well as all goods whose costs include a real estate component (i.e. everything: the retail store, factory, etc can sell at lower prices because the rent is low. The rent is low because the property purchase price was low, etc etc.

As wages increase in US dollar terms, the cost of living does as well.

DoNorth

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Re: FIRE via Geo-Arbitrage
« Reply #48 on: February 10, 2019, 01:54:36 PM »
@DoNorth, that's not bad, but $2,300 is a lot more than what OP is referring to though.

Is that for a single person? Or family?

You could retire in 80%+ of the world on that amount.

For a family of 4.  Yes, you probably could retire in a lot of places for that much, but a significant percentage of those may not share comparable infrastructure, culture attractions, medical care, government stability and so forth.  I just wanted to illustrate a recent anecdotal example at a particular level of spending at what could be a potential alternative.  I can't speak to what the income/visa requirements are because I'm here on a work visa, but in the spirit of arbitraging, using US earned dollars in a social democracy (where you don't have to pay taxes) could be very attractive.

kaizen soze

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Re: FIRE via Geo-Arbitrage
« Reply #49 on: February 10, 2019, 04:36:52 PM »
There is an episode of the chooseFI podcast with a guy who lives with his family most of the year in central America. He was pretty cool on the idea of using geoarbitrage as a means of retiring early. He argued that successful geoarbritagers adopt the local lifestyle, using public transit, cooking their own meals, living in a modest apartment. But these are all things you can do in a LCOL area of the US. The big difference is that other than rent and probably health care, costs for things are much cheaper in the US than in many developing countries. I bring this up mostly not to pour cold water on anyone's plan to move internationally. But to suggest that a person who doesn't want to move overseas can get the best of both worlds by making some lifestyle changes at home.