How Much Money Do You Need to Retire in Portugal?
For the second year in a row, the Algarve region of Portugal was No.1 on the Live and Invest Overseas annual index of the 21 best places to retire abroad. In fact, the founder and publisher of Live and Invest Overseas, Kathleen Peddicord, is bullish on all of Portugal. So much so that she and her husband just bought a two-bedroom home in Lagos (pronounced La-Goosh), “a classic old world harbor town” on the Algarve coast that was the starting point for many voyages during Portugal’s “Age of Discovery.” Peddicord paid about $105,000 for the apartment in one of the town’s older buildings and anticipates that, after minor renovations, she will be able to rent it out for $550–$650 per month. She admits that she got a bargain but says that there are many other desirable properties to be had in the area for under $150,000.
Real estate in Portugal is still undervalued and although a slow recovery has begun, ”thank you to the soaring greenback,” says Peddicord, ”someone with a U.S. budget is in a good position to buy.” (For more on buying a home overseas, see Do You Get U.S. Tax Deductions On Real Estate Abroad? and How To Finance Foreign Real Estate.)
A good housing market is a powerful draw but most would-be retirees have other items on their wish list as well. When Dennis and Susan Shay retired in 2010, they decided it was time to follow through on their desire to experience living in another country. They started their search by creating a short list of what was important to them: “good weather, which means lots of sun but not too hot; low cost of living; an environment receptive to foreigners and a location convenient for local and regional travel.” Portugal met all of their criteria. (For more, see Things To Consider Before Retiring Abroad.)
Glynna Prentice, senior editor of International Living, says that retirees are “welcomed with open arms” in Portugal, adding that the Portuguese are “amazingly courtly and courteous – not gushy but genuinely nice and helpful toward strangers.” Most of the younger people speak English, and, in the larger towns, English is widely spoken and understood.
International Living rates Portugal No.9 in its 2015 Global Retirement Index and gives it a score of 84.8 out of a possible 100, taking into account the cost of renting and buying a home, benefits, cost of living, “fitting in,” infrastructure, climate and more.
[Prices in this article have been converted from euros at the late November 2016 exchange rate of one euro to US$1.06.]
The Portuguese government makes it relatively easy for U.S. citizens to establish residency. The most common path begins with a visa good for a 120-day stay; the required paperwork asks for proof that you will have at least $1,070 per month available to you once you arrive. If all goes well and you decide to stay, you can apply for a one-year residence permit, which can be renewed for successive two-year periods. After five years of temporary residence you can request permanent residency status.
For anyone who is willing to make a substantial investment in Portugal, the government offers the Golden Visa – a fast track scheme that requires the transfer of a minimum of one million euros ($1.06 million) to Portugal or the purchase of a property worth at least $530,000 ($370,000 for properties that are more than 30 years old or located in an urban renewal area). Not surprisingly, the Golden Visa comes with lots of other perks as well.
Another interesting shortcut to residency is designed specifically for Jews who can prove their Sephardic ancestry. With the right documentation, they are granted all the benefits of Portuguese citizenship while retaining citizenship in their home country.
Yet another lure that the government has put in place for retirees and others is the non-habitual resident status, which offers some very real tax benefits that extend up to 10 years for foreign residents and property owners.
It is also important for prospective retirees to know that they (and their money) will be safe in their chosen destination. In the Global Peace Index from the Institute for Economics & Peace, Portugal is 11th of 162 countries rated on the basis of their relative safety and peacefulness.
Cost of Living
When it comes to the make-or-break category of cost of living, Portugal is often cited as one of the, if not THE, most affordable European retirement destination. The Shays say that they lived on half of what the equivalent cost would be in most U.S. cities and “that included eating out more than we do in the U.S. and doing a great deal of traveling.” They estimate that they spent about $3,000 per month plus long-distance travel expenses but add that many people they know live quite comfortably on $1,600 to $2,100 per month. “It depends on what you need in the way of accommodations and whether or not you can function without a car.” (For more, see Can I Retire In Portugal With $200,000 of Savings?)
More good news on the cost of living front from Michelle Sanchez who moved to Lisbon three years ago: “The cost of living here is extremely cheap – rent, food, utilities, cell phones, etc.,” she wrote in an email. “For $30,000 per year we live a very, very comfortable lifestyle: I can afford to get a manicure/pedicure weekly and have my hair done (shampoo, cut, color and a blowout) at an upscale salon similar to an establishment on Rodeo Drive. And I can eat out twice a week with friends at mid-range restaurants."
Now, let’s take a closer look at the costs of some of the necessities (and a few of the luxuries) of life in Portugal to help you decide whether that country might be the right retirement destination for you.
As you’d expect, the cost of your home or apartment will depend on where it is and what it is. Do you plan on renting or are you going to buy? Whatever the choice, an apartment in Lisbon is going to be more expensive than one in a village in the interior of the country; a property in a tourist-y resort area will be more than something more in more “undiscovered” territory. (See Top 4 Retirement Cities in Portugal.)
According to the website Expat Arrivals, property in Portugal is less expensive than the European average and “unlike most expats elsewhere, a large number of foreigners living in Portugal actually opt to buy property rather than renting. Renting is a good value – an expat living in Portugal will spend between a third and a half of the average Portuguese salary on rent.” Since the average Portuguese salary is approximately $1,060 per month, that would mean that rent would be somewhere between $350 and $530 per month. Quite the bargain for anyone used to U.S. prices.
In a recent Live and Invest Overseas Retirement Letter that includes a lengthy report on retiring to Portugal, the writer says that anyone wanting a “comfortable, quality lifestyle” in the Algarve region should expect to spend about $635 per month on housing; someone on a more frugal budget can plan on a one-bedroom for $475.
According to Greg Boegner, founder of the lifestyle blog Portugal Confidential, renting a single-family home in the Algarve might be $630–$1,050 or so, and in Lisbon, depending on the location and age of the building, rents could be $850–$2,120, with the higher end being a “luxury apartment in a nice part of town.”
Prentice says that you can buy a “two-bedroom apartment in a neighborhood a 10- to 15-minute bus ride from the Praca do Comercio in the center of Lisbon for $160,000 or even less. In a smaller town – a place like Evora, say, 87 miles south of Lisbon – you can buy a place for under $106,000.” There’s something to fit every budget: One real estate website lists properties for sale all over Portugal that range from one that is – really and truly – listed as a “ruin” in a village in central Portugal. It has exterior walls and a roof “in reasonable condition” and not much else for a purchase price of $9,000. At the other end of the spectrum, you might prefer an eight-bedroom walled fortress of a house in the Porto area with 14 bathrooms, a pool, cinema room, gym, private airport (you get the picture) for just over $20 million.
Before you embark on your house or apartment hunt, consider this very practical advice from the Shays, who paid around $1,160 per month for an 800-square-foot apartment in Cascais, which they say is one of the most expensive places to live in Portugal: “The big issue is finding an apartment that is properly equipped, at least by American standards. Most Portuguese apartments do not have central heat and air-conditioning...If you can survive without either, you can cut your housing costs considerably. The second big thing for us was having a decent kitchen. A typical Portuguese kitchen is quite minimal – probably only a two-burner stove top, and a refrigerator about the size of one you would have in a motor home is considered large by Portuguese standards.”
Food and Clothing
According to one website, one of the eight worst decisions you can make in Portugal is the decision to diet while you’re living there: “The only thing which may be worse than missing out on the traditional Portuguese gastronomy is deciding you will not have dessert. At least once you must have a three-course meal in a small typical restaurant and end it with a baba de camelo (camel’s drool!) or a toucinho do céu (heaven’s bacon) — your ears might not like the sound of it, but your taste buds will be grateful forever!”
Prentice says that a dinner for two can “cost as little as $21 but in Lisbon that would be more like $42–$47, less in the provinces.” Peddicord reports that she had lunch a few months ago, in the center of Lagos, in the tourist-y area where prices are usually the highest, and the tab was just a little over $6. According to the Overseas Retirement Letter, “for a retired couple it is often cost-effective to eat out for lunch and warm up the leftovers in the evening (the portions in Portugal are generous)."
One of the reasons the fridges in Portuguese kitchens are so small is that people shop regularly for fresh food, so long-term storage isn’t needed. “Everyone here still actually likes to go to the grocery store,” says Sanchez.
If you’re a wine lover, Boegner says that Portugal is paradise; the country produces thousands of labels of high-quality wines and most stay within the country. As a locally produced product, the government doesn’t tax wine so a good drinkable bottle will cost as little as $4, a moderate wine, under $10. Prefer beer? An imperial (half pint) at a local bar will cost about $1.
As for coffee, don’t bother asking for it “to go.” Coffee is a sit down affair here – unless you are in one of only five Starbucks coffee shops in all of Portugal. Expect to pay $1.35 for a cappuccino in Lisbon, just a little less for a Coke.
Clothing is not the bargain that food and drink are. Boegner says he doesn’t shop for clothing very much in Portugal where he says the “quality is not as good as we are used to in the States and the sizing is more suitable to European bodies.” Instead, he shops online from the U.S. or UK. “Clothing costs [in Portugal] are moderate, though,” he says: “$21–$32 for a man’s shirt, $32–$42 for jeans.” Sales, discounts and bargain pricing – so common in the U.S. – are rare in Portugal.
Movies and TV shows are shown in their original language (with subtitles in Portuguese) so you won’t have to miss out on what your friends and family are watching at home. Films will cost between $5–$6. If you like trendy nightclubs, expect a $20 cover charge and then a $5–$10 charge per cocktail.
If you prefer more active pastimes, a month’s membership in a gym costs about $40 and renting a tennis court for an hour on a weekend is just under $9 per hour. A hike in what Boegner describes as “the solitude of untouched nature” is free.
According to International Living, retirees from non-EU countries “generally need to have private health insurance which allows you to use both public and private medical services. When applying for a residence card you will have to provide proof of this coverage. Good medical care is available, but facilities may be limited to small health centers outside urban areas. Public hospitals offer services at costs lower than private hospitals but sometimes do not maintain the same comforts or high-tech facilities as hospitals in the US.”
The Shays bought private coverage that cost them $220 per month. For them, the healthcare in Portugal was a big – and pleasant – surprise. “We liked the level of care and the system that they used better than the one in the U.S.“
Writing in the Wall Street Journal, retired television executive Roger B. Adams explains what he gets for his private coverage: “The ability to make an appointment, wait less than half an hour for a consultation, see a specialist if I wish and, if necessary, get some important part of me repaired quickly. All health and dental-care services and drugs are far less expensive here than in the U.S.”
And on the subject of prescription drugs, Shay describes the Portuguese system as streamlined: “Pharmacists are allowed to dispense drugs directly, with few exceptions, and the drugs we required typically cost us about 10% to 25% what they would have cost in the U.S. even after allowing for insurance copays.”
Sanchez says that public transportation in Lisbon is “awesome and cheap.” She doesn’t have a car and “we get to places easily. The only time I miss having a car here is to get to IKEA and some of the other big-box retailers that are located outside the city.”
In Lisbon a metro ticket costs about $1.50 and the bus under $2 and you can buy a monthly pass for both that costs about $37. A typical taxi ride in Lisbon is under $10, and Uber is ready and willing to help you get around as well.
Owning a car in Portugal is an expensive proposition. Gasoline is a big expense. It is sold by the liter, which is a quarter of a gallon, and one liter costs about $1.60.
You can generally rent a car for $26 per day, but most major highways have toll roads that are expensive: The drive from Lisbon to Porto costs about $32 in tolls.
Taking the train to Porto from Lisbon is a less expensive option; the train fare is approximately $32 and the bus fare, $21. One long-time Lisbon resident says he prefers the train “since it is a little bit faster and a lot more comfortable.”
The Bottom Line
You’ll be able to live comfortably for much less in Portugal than in the United States. In Lisbon, according to Numbeo.com, consumer prices, when rent is included, are about two-thirds lower than in New York City and half as much as in Chicago. If you choose to live in a smaller Portuguese town, the savings may be even greater. Portugal’s low cost of living is one reason it has recently been cited as a good choice for retirees from the United States but, as Kathleen Peddicord of Live and Invest Overseas says, you have to enjoy old-world living and European culture for it to be a good fit. As with any move – especially one to another country – you need to do a lot of careful research months before you actually pack up your belongings.
Remember, too, that any move will have start-up costs – rent deposits, freight charges for moving your “stuff,” possible legal fees, furniture for your new digs, Internet and television connections, etc. And then there’s the all-important emergency fund that you must set aside for transportation back home or unanticipated health problems. As International Living advises, “Put some cushion in your retirement cushion.”