How to Enjoy an Early Retirement Living Abroad

While exploring exotic locations is certainly one aspect of traveling the world, the primary benefit for most international expats is the savings. When you can cut your cost of living down from $25,000 per year (the median cost of living per working adult in the United States as of 2010, according to the U.S. Census Bureau), to a mere $8,000 to $10,000 while retaining access to all of the exact same amenities you are accustomed to, all that money goes straight back in your pocket rather than disappearing into thin air.

The median wage (again, according to the U.S. Census Bureau) as of 2010 was the same: $25,000 per year. That is take-home pay, after taxes. The pre-tax number is just above $36,000 dollars. But the other benefit most people don’t know about is the fact that when you live abroad as an independent expat you don’t have to pay the same tax rates that you do while living in the United States. Choosing a country that has a tax treaty with the U.S. means you can pay the local rate of taxes in your chosen country rather than the higher rate back home, effectively allowing you to retain even more of your salary and thus obtain an early retirement.

The appeal for many expats is that they can go to a country like Colombia, where the upper middle class exists on a cost of living that is around $10,000 per year, or Bulgaria where it is around $8,000 per year, and while enjoying a lower tax rate and their same wages from back home, put a significant portion of their income back in their pockets to fund their early retirement. Being location independent means you can take a $30,000 a year salary and live like a rock star because you only need about $10,000 of that for your cost of living, and the other 20k can be spent however you see fit.

However, you don’t have to be part of the active work force to be able to utilize the lowered cost of living in foreign countries as a n expat. Pensioners can apply just as easily, and while the concept of living abroad on your pension isn’t a new ideal, many people still aren’t educated as to how easy it is to actually do. When you can take your $1,000 a month pension and live somewhere like Sofia, Bulgaria on $600 to $800 per month, you are left with several hundred dollars that you can use as you see fit, such as saving for your early retirement. Plus, since most of these countries (like Bulgaria, Colombia or Mexico) utilize universal health care systems, you don’t have to pay thousands per year on the extra things.

Another benefit of living abroad as an expat is reducing your working hours due to the fact that the cost of living is so much less. However, there is another alternative, which is what many working professionals are already doing. Namely, working their normal working shifts of 8 hours a day for the next three to five years, but instead of needing to spend all that money on the median cost of living as described earlier, the vast majority of that money is going straight into your savings. When coupled with the fact that you can find three to four bedroom houses in places like Italy, Mexico, Guatemala or Colombia for a mere $35,000 on average, you can very easily set yourself up to enjoy an early retirement by the time you are 30 to 35 rather than waiting to turn 60.

For more information on pursuing an early retirement in countries around the world, check out articles by other expats who are already living their early retirement abroad.