Author Topic: FIRE via Geo-Arbitrage  (Read 1311 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.

spartana

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Re: FIRE via Geo-Arbitrage
« Reply #9 on: December 30, 2018, 09:46:30 AM »
OP you might want to check out Early Retirement Extreme (ERE.com) as this is a common strategy there.

For me, I was lean FIRE living in a paid off home with a small passive income and could easily live under $1000/month. But selling my place and moving to a LCOL area greatly enhanced my FIRE. I chose to stay in the US as I was able to live cheaper than I could anywhere overseas but had I choose to relocate out of country I would want to have a back up plan in case I wanted to move back to the US.

ETA I just moved to a mountain/ski town not too far from where I previously lived so no need to spend a lot of money or time checking places out. Now I'm combining travel so checking out other areas
« Last Edit: December 30, 2018, 09:59:26 AM by spartana »

FIKristen

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Re: FIRE via Geo-Arbitrage
« Reply #10 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 #11 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 #12 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 #13 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 #14 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 #15 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 950/month in Western Europe and about 200/month of that goes to travel. That makes a budget of 11.5k/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 #16 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 #17 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 #18 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 #19 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 #20 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 #21 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.