‘We cut our expenses by 50%’
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.
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:
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.
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
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.
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.
5. Consistently pleasant weather
Temperatures in Lisbon range from an average high of 82 degrees Fahrenheit in July to an average low of 47 degrees Fahrenheit in January, which compares favorably to the sweltering heat and piles of snow typical in Washington, D.C.
In Lisbon, we rarely use an air conditioner in the summer. The thick stone of our apartment walls help moderate temperature indoors. And we never bother with hats or gloves in the winter.
6. Getting off the hamster wheel
Living abroad has completely changed our outlook and priorities in life. We substantially streamlined our belongings when we moved to Portugal. We now focus far more on how we spend our time.
I try to build downtime into my day and spend a lot of time in nature. Some of my happiest moments are when I am walking along the seashore at Guincho Beach or hiking through eucalyptus forests in the hills of Sintra and Colares.
I also take every opportunity to travel with my family. Backpacking through Europe is our daughter’s favorite thing about living in Portugal. She treasures every moment, whether she’s attending a math competition in Geneva or taking a family drive to Seville for the weekend.
Alex Trias is a retired attorney. He and his wife and daughter have been living in Portugal since 2015. He is the author of the “Investment Pancake” series on SeekingAlpha.com and has published nearly 500 articles about tax planning, investing, early retirement, and where to find the best meals in Lisbon.