FIRE & Living in Portugal: The Perfect Retirement Combination?

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Over the past few years, the FIRE movement (Financial Independence, Retire Early) has grown in rapid popularity in the US and, increasingly, in other parts of the world like the UK and Europe. 

FIRE is about deferment. It’s about saving and investing as much of your income as you can while you’re in your 20s and 30s so that, by the time you reach your 40s or 50s, your wealth will have grown to the point where you can simply draw a small percentage annually from that point for the rest of your life. And, yes, retire early. 

It’s not a realistic option for everyone, but is feasible for many people with large salaries. And, some of those salaries will make your eyes water. 

Like many movements, FIRE can seem extreme — at least to those outside the US. When FIRE is discussed in the US  most people are looking at building up a pot of anywhere between $1 million to $2.5 million to draw from, although there are subcultures within the subculture that are aiming for even more (known as FATFIRE). 

The amount varies, and depends on each person’s own estimates of their expected living expenses during retirement, but the numbers are often high: $60,000 per year, $100,000 per year, and often even more. Because, that’s what it costs to live in somewhere like San Francisco, New York, and maybe even London. 

But, not Portugal. 

Portugal’s Cost of Living

In Portugal, the average salary is less than €1,000 per month. While it is possible to live in Lisbon and Porto on that much money, it’s going to be a lot more challenging than it is in other parts of the country. It is doable, though, and even more feasible if you own your own property. 

€1,000 per month will go a lot further in other parts of the country, though, including the Algarve. €2,000 or €3,000 and you’ll be very comfortable. 

Food and drink is extremely affordable here, and it’s possible for two people to comfortably eat out at a traditional restaurant for €10-25 per meal. Modern restaurants, particularly in Lisbon, will run more expensive but you shouldn’t expect to pay more than €15 for a main course (excluding Michelin-star places obviously). Grocery shopping is also incredibly cheap and the quality of products is high. 

Accommodation costs vary, depending on where you live. Lisbon, Porto, and parts of the Algarve have seen a rapid increase in rental and purchase prices, although it’s still very affordable, but the rest of the country is still incredibly cheap. There are plenty of parts of Portugal where you can rent a house for less than €500 per month or even buy for less than €50,000. 

Healthcare costs are also much lower here than they are in the USA as Portugal, like most European countries, has a public health service. You do still pay for this service in the form of social security and taxes, but it works out much cheaper than paying for health insurance. 

That’s not to say that’s everything’s cheap here. Some things like cars, utilities, toll roads, and cosmetics, are more expensive here, but overall the cost of living is very affordable. 

Incentives to move to Portugal

If the low cost of living and the beaches weren’t a big incentive, Portugal has a number of schemes designed to attract outsiders to move to Portugal. 

Golden Visa Scheme

The Golden Visa scheme, for example, gives a 5 year residence visa to those who purchase a property worth €500k or more (in some cases €350k). After 5 years, you can apply for citizenship and get a Portuguese passport. Portugal recognises dual citizenship, so won’t ask you to give up your current passport. 

And, the Golden Visa scheme only requires you to spend an average of 7 days per year in Portugal – ideal for those that have travel on the brain. 

D7 Passive Income Residency

Even if you’re not ready to invest in a property in Portugal, Portugal’s D7 Visa & Residence Scheme is extremely attractive. The scheme is designed to attract those with a regular passive income (through dividends, a pension, rental income, etc.) and who already earn enough to live in Portugal (less than €1,000 per month). 

This does require you to spend the majority of your time in Portugal, but gives you freedom to move within the Schengen Area and the opportunity to apply for Portuguese Citizenship after 5 years. 

Read more about the D7

NHR (Non-Habitual Tax Resident)

Then, there’s the NHR (Non-Habitual Tax Resident) scheme, which is designed to reduce the tax you pay on non-Portuguese income over 10 years. Many, particularly those who receive their income in the form of dividends or royalties – and this would apply for a lot of FIRE members – have been able to completely (or almost completely) avoid paying tax. 

Finally

It’s worth mentioning that Portugal is an EU country, has good healthcare, and is one of the safest countries in the world. We’re not talking about retiring in a 3rd world Asian or South American country here. Yes, some things won’t be up to the same standards as some Western countries like the US (Portugal has its downsides, let’s be honest) but they will be up to a European level. 

Whether you’re looking to retire earlier or you want better value for money from your retirement income, it’s fair to say that Portugal has a lot to offer those in the FIRE movement. 

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