‘We cut our expenses by 50%’

By Admin On Jun 6, 2022 64

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In 2011, at 41-years-old, I retired early from my six-figure career in law. My wife joined me in retirement four years later after quitting her job as a nurse.

By the time she retired in 2015, our portfolio of high-yielding stocks and mutual funds paid roughly $130,000 a year in dividends, which covered most of our living expenses in Washington, D.C.

That year, we took a family vacation to Lisbon, Portugal with our daughter, who is now 16 years old. We immediately fell in love with the city.

That’s when it hit us: Why not leave the U.S. and spend our retirement life in Lisbon?

Without wasting any time, our family of three packed up our belongings and booked one-way tickets to Portugal. The plan was to rent out our house in the U.S., cut our living expenses while living in Lisbon, then reinvest those savings into more dividend-paying stocks to compound our passive income.

The Miradouro de São Pedro de Alcântara is a perfect spot to admire Lisbon at dusk. Alex Trias and his family bought an apartment in the city for a little over €500,000 in 2015.

Photo: Alex Trias

We’ve been living here for about six years now, and we’re nowhere near ready to leave. Here’s how much we spend per month — and why we love living in Portugal:

Table of Contents

1. Living expenses are much lower than in the U.S.

Portugal is considered one of the cheapest countries to live in Western Europe.

On average, compared to life back in the U.S., we’ve cut our expenses by 50%. We’re fortunate to own our two-bedroom, one-bathroom, 1,300-square-foot apartment, which we purchased in 2015 for a little over €500,000 with no mortgage.

Our favorite Portuguese bargain: Multiple bags of fresh fruits and vegetables. A warm loaf of bread from Gleba Bakery — made with its very own homegrown heirloom wheat — costs only $4, and is worth every penny.

Portugal is famous for its delicious seafood, and you can find some of the freshest at the Mercado de Campo de Ourique. If you don’t feel like cooking, several of the restaurant booths at the Mercado pick their seafood supplies from the fish counter.

Photo: Alex Trias

One of our biggest monthly expenses is dining out at restaurants. A typical lunch at the Mercado de Campo de Ourique, a gourmet food market, can run about $16 per person. A glass of wine costs an extra $4.

Here’s a breakdown of our monthly expenses:

Health insurance (for the entire family): $258
Groceries: $407
Basic household essentials: $250
Transportation (gas, car insurance, public transportation): $250
Housing (property taxes, insurance, maintenance): $430
Water and electricity: $175
Phone and internet: $80
Eating out (10 to 12 meals per month): $600

Total: $2,450

2. A very generous tax system

European taxes tend to be very high, but unlike countries like France and Italy, Portugal doesn’t impose wealth, inheritance or estate taxes (although there is a 10% “stamp duty” on Portuguese assets that are inherited or gifted outside of the direct family).

As an expat, you are considered a Portuguese taxpayer if you reside more than 183 days in a single calendar year in Portugal or, subject to certain conditions, if you have a permanent residence available for your personal use in Portugal.

And thanks to the non-habitual resident tax regime, foreigners can benefit from a tax exemption (or a reduced tax rate) on most foreign source income for 10 years.

As U.S. citizens, we are always liable for U.S. income taxes, but we save on state and local income taxes. Plus, our property tax bill in Portugal is a fraction of what we paid in the U.S.

3. Low-cost, high-quality healthcare

In addition to Portugal’s national health services coverage, which offers subsidized or free health services to all legal residents of Portugal, my family’s private health insurance through Multicare is comprehensive and affordable.

Our premium is $258 per month, but our plan has a $0 deductible and $16 co-pays for doctor visits at a private hospital. I once had an overnight emergency room visit that involved multiple tests and consultations; the entire cost was covered by our insurance, and I paid nothing other than my co-pay.

Prescription drug prices also tend to be dramatically lower in Portugal than in the U.S. One generic prescription that would typically cost me $600 a month back home is only $21 in Portugal — for the brand name medication.

4. Low crime rates

Portugal is the fourth safest country in the world, according to the 2021 Global Peace Index, which considers terrorism, violent crime and political instability, among other factors, in its methodology.

And the Portugal News reported that 2020 had the lowest crime rates in Portugal since the country started reporting its crime data in 1989.

Beyond the statistics, my family and I feel very safe in every part of Lisbon at virtually all hours. Locals even claim tables at the Mercado by leaving their purses unattended on a chair while they go food shopping.

You can shop for fresh produce or pick up lunch at the Mercado de Campo de Ourique. The market is noticeably safe, with customers leaving their purses at their tables as they go food shopping.

Photo: Alex Trias

When we first moved here, my wife noticed there is no “cat calling,” and she has never felt harassed walking down the street. The Portuguese tend to prize good manners. “Bem educado” means “polite” in Portuguese, which comes as very high praise.

That said, pickpocketing is a genuine threat in congested tourist areas, so we’re always on guard when we ride the tram.