Author Topic: FIRE Abroad  (Read 1027 times)

bob22

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FIRE Abroad
« on: July 16, 2017, 02:59:16 PM »
Hey all,

My wife and I are thinking about FIREing about 5 years from now—we’ll both be about 49. We currently have approximately $1.45M liquid net worth ($325K taxable accounts, $1.055M tax deferred, and $70K in Roths). We currently save $125K/year—maxing out retirement contributions ($61K) and saving the remainder ($64K) of our unspent paychecks. Most of our non-employer accounts are through Schwab, and our total expense ratio for all accounts is about 9 basis points for a moderate allocation. We have a house that’s paid off and valued (by SmartZip) at $341K—though I actually think it is worth around $315K, based on recent sales in the area. We spend $72K/year and don’t carry debt of any kind.

We currently live in the U.S., but would like to move to Spain when we FIRE—wife and kids have citizenship, there. My plan would be to have $2M - $2.5M saved between now and then, to generate between $80K and $100K/year of passive income (using Bernstein’s 4% rule). This income would cover our normal spending (estimated to be 20% - 30% lower overall than in the U.S.) and college for our 3 kids—tuition is lower (around $2500/year/kid at public university). We would use the revenue from the sale of our house to purchase a home in Spain. Health care is not a large expenditure as it is in the U.S., and insurance can be purchased relatively cheaply. We would use a Roth conversion ladder, as required.

My questions are:
1) Does anyone else have a similar situation? If so, I’d love to hear it.
2) Are there any forums or blogs for people in similar situations? If so, where?
3) Are there critical details or traps (financial or non-financial) that I would need to plan for either before or after FIREing?

RetireMeNow

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Re: FIRE Abroad
« Reply #1 on: July 18, 2017, 04:18:38 PM »
Hi bob22,

We moved to a suburb of Madrid late last year from Boston for an extended sabbatical for me and for DH (both late 30's) to launch his startup, for which our location was irrelevant, so we settled on geoarbitrage. DH and kids have Spanish citizenship. So far, life is cheap, slow and wonderful. I don't know where you all are but for us, take into consideration that we're coming from Boston where the prices were really absurd. Kids are in school at 10% the cost of back on the East Coast. Health care, food, car insurance, everything seems like a bargain and housing (we're renting since we don't want to own anymore) is very affordable. IMO you could make the move right now.

BTW, to us the real estate market here seems strange -- sellers don't seem motivated and things are listed for months. I would suggest waiting to buy a home to make sure this place is right for you guys because I don't get the feeling it's that easy to sell if you change your mind. Also, there aren't tax benefits and financial incentives when you sell as you have in the US.

Anyway, these are our impressions after less than a year so hopefully you can get some feedback from folks who've been here longer.

I haven't found any expat blog/forum about Spain so please do let me know if you find one!

Good luck!

bob22

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Re: FIRE Abroad
« Reply #2 on: July 19, 2017, 09:11:54 AM »
Thanks, and will do. We would be coming from the tri-state area, so pretty expensive. If I can ask, how did the kids handle the transition? It's one of the biggest concerns that I have, and what I consider to be my biggest job should we do it. My would be to rent for at least the first year, in the area we want to live, to find out if we really like it. I'm also not sure how difficult the tax situation will be.

PapaBear

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Re: FIRE Abroad
« Reply #3 on: July 19, 2017, 09:25:38 AM »
A few comments from my side:

- When moving to Spain, you might want to adjust your asset allocation more towards International/Euro zone as a natural hedge for currency risk. Your major expenses will all be in Euro, thus some of your income streams should also be in Euro to reduce currency risks.

- Taxation will be a topic you need to cope with. You might want to look at the US-Spain tax treaties in terms of double taxation and accessing retirement funds. Additionally, after you have gained basic knowledge, consulting a tax expert in both taxation systems (US/Spain) might be worth the hourly fee.
EDIT: A first link with some information on the local capital gains tax: https://www.blevinsfranks.com/news/blevinsfranks/article/capital-gains-tax-spain
Would be interesting to know, how your IRAs will be treated there.
EDIT 2: Found another interesting article directly from the tax authorities... Some information regarding pensions included, but my Spanish is too little to understand the full context - maybe your family can help: http://www.agenciatributaria.es/static_files/AEAT/Contenidos_Comunes/La_Agencia_Tributaria/Segmentos_Usuarios/Ciudadanos/Rentas_obtenidas_en_el_extranjero/EE_UU.pdf

- You might get more responses if you ask a moderator to move this thread to the "Ask a mustachian" subsection. There are far more people active there.
« Last Edit: July 19, 2017, 09:33:39 AM by PapaBear »