I am American and my wife is Brazilian, and we plan to save up our stash here in the states and then buy a small house/plot in rural Brazil once we reach FI. We started with a COL budget and determined to meet our basic necessities we would need about R$2,500 a month to retire in Brazil (that's in brazilian reals). We would keep our bank accounts and investments in USD, as the brazilian real has historically had problems with inflation and has had wild swings in the exchange rate. In the space of 10 years it's been as low as 3.5 reals to the dollar, and as high as 1.5 to the dollar. Inflation this year has reached as high as 6.5%. Planning on the worst case scenario, we are basing all of our calculations on the highest the real has ever been against the dollar, which is 1.56. So to get R$2,500 that's about $1,602 USD at an exchange rate of 1.56. $1,602 x 12 months in a year = $19,224 per year needed to meet our basic necessities while in Brazil. Let's round that up to $20,000 just for good measure. Using MMM's retirement rule of needing your yearly expenses x 25 that puts our FI number at $500,000 USD.
Now the beauty of this is that this entire calculation is based on the worst case scenario of the dollar's exchange rate being at the lowest it's ever been in history against the real, which is 1.56. Today the exchange rate is a generous 2.55, but over the course of the real's existence the average has been about 2.21. If we are to take the average of 2.21 and apply that to $20,000 USD a year that would translate into R$44,200 a year, which is R$3,683 per month. Well above our needs. During times of favorable exchange rates we would be taking out only what we need, which would be less than 4%, ensuring that our stash continues to grow well into the future.
The beauty of the exchange rate is it's kind of like a wild card money multiplier. Of course there is the possibility that the exchange rate could dip below 1.56, which would throw our plans out of whack. But that's where MMM's concept of flexibility comes in. If that were to happen (and I find it unlikely) we can work (my wife's family owns businesses, so we will have easy employment if necessary), we can grow our own food, we can rent out our house for carnival, and as we become more accustomed to life in Brazil we could probably even lower our expenses. etc etc etc.
We would need to save about an additional $130,000 USD to cover buying a house, car and moving expenses. So all said and done we're talking about around $630,000 USD before we can retire in Brazil.
