If you dream of retiring in Europe, Portugal should be on your list of possible new homes. It’s one of the most affordable European countries and many people speak English, especially in the main cities and on the coast. There are sunny beaches in Algarve, wine in Porto and a historic metropolis in Lisbon. What’s more, in recent years the Portuguese government has eased residency requirements and taxes to make the country more appealing to tourists and expatriates. You may be eligible to receive up to 10 years of tax benefits, which will certainly help you extend your retirement savings. A financial advisor can also assist in stretching your nest egg and help you financially decide if Portugal is where you should spend your golden years.
Cost of Living and Housing in Portugal
Portugal is an increasingly popular retirement destination in large part because of its low cost of living. On average, the cost of living excluding rent is almost 29% lower than in the U.S., according to numbeo.com. Even if your only income is the average Social Security benefit, $1,400, you could live comfortably in a small city. But this would require you to live a bit frugally if you want to reside in a major city, like Lisbon. You could also get more bang for your buck if you live outside of a city. Having a monthly budget of about $2,000 would allow you to live a more luxurious lifestyle.
For housing, in particular, you can expect to pay $1,000 or less for a one-bedroom apartment in the center of a big city, like Lisbon. Living farther from the city center will save you as much as a few hundred dollars per month. Living more like a local, in the countryside, would also save you money.
If you do plan to spend years in Portugal, it might even be worth buying your own home. You can find apartments both in and out of the city at a price where your mortgage would be similar to the cost of renting.
For a greater comparison, the table below breaks down basic utilities, apartment rentals and apartment buying costs for Lisbon and Porto in Portugal, New York, New York, The Villages, Florida and Savannah, Georgia. Data was pulled from Numbeo.com in February 2023.
Monthly Cost of Living Comparison: Portugal vs. United States
|Costs||Lisbon, Portugal||Porto, Portugal||New York, New York||The Villages, Florida||Savannah, Georgia|
|Electricity, Heating, Cooling, Water and Garbage for 915 Sq. Ft. Apt.||$135.14||$122.32||$177.57||$176.67||$147.09|
|Rent Apt. 1 Bedroom City Center||$1,090.10||$864.74||$3,793.47||$2,000.00||$1,883.33|
|Rent Apt. 1 Bedroom Outside City Center||$1,292.41||$674.95||$2,380.18||$1,500.00||$1,100.00|
|Buy Apt. City Center per Sq. Ft.||$563.58||$315.48||$1,326.45||$240.00||$307.50|
|Buy Apt. Outside City Center per Sq. Ft.||$307.38||$323.61||$861.69||$120.00||$115.00|
Portugal Visas and Residence Permits
In order to move to Portugal as a retiree, you will need to get a residence permit. As with other countries in the European Union (E.U.), getting residency in Portugal is rather easy for E.U. citizens. But the process is also simple for U.S. citizens. In fact, getting residency in Portugal is easier than it is for getting residency in other European countries. The country’s government has specifically taken steps in recent years to make itself a welcoming place for expatriate retirees.
For U.S. citizens to apply for residency, they should visit a nearby consulate. You must complete an application and provide some documents, such as your passport, proof of income and evidence that you have health insurance. You will also go through a criminal background check.
After you go through the application process, you can obtain a temporary residence permit. This will last you five years. You can apply for a permanent permit when your temporary one expires.
Golden Visas in Portugal
Wealthy non-European Union nationals and anyone outside of the European Free Trade Association can take advantage of Portugal’s fast-tack golden visa program. This program gives you fast-tracked citizenship in Portugal and free travel to all EU countries.
You can get a golden visa through one of these methods:
- Make a minimum investment of 500,000 euros in scientific research
- Purchase real estate worth at least 500,000 euros
- Make a transfer of 1.5 million euros or more to Portugal
Many people have gone the real estate route and bought real estate in coastal cities. Portugal has since restricted the purchase of the real estate in those cities as well as in Lisbon and Porto from qualifying for the golden vis program.
Access to Healthcare
The National Health Service in Portugal (Serviço Nacional de Saude) provides free healthcare to Portuguese citizens. Unfortunately, Americans aren’t eligible for this free healthcare until they’ve lived in the country for five years and have become permanent residents. (E.U. citizens have access right away.) So you will need to pay for any health or medical services you use.
As noted earlier, though, you should have health insurance before moving to Portugal anyway. One of the requirements for applying for residence as a retiree is proof that you already have health insurance. Once you live in the country, you can change to a Portuguese private health insurance plan, which tends to be cheaper than U.S. insurance.
In terms of cost, what you pay for private insurance will depend on your age. According to InternationalLiving.com, private insurance, which the middle class and upper-middle class tend to have, can cost as little as 4 euros a month. But that low rate is only available to people who are younger than 55. Many insurers won’t offer policies to people who are older than that. Three companies that do are Fidelidade/Multicare, Tranquilidade and Millennium Bank/Médis. Also, the Médis company sells plans to people up to age 75 and will not cancel policies once you have one.
Taxes For Retirees in Portugal
Portugal typically taxes all income. This includes pension income and income from international sources. However, as mentioned earlier, the Portuguese government has taken steps to make the country a welcoming place for expatriates. This includes something called Non-habitual Residence (NHR) status. NHR applies to people who have not been tax-paying residents of Portugal in the previous five years. If you qualify, your income is exempt from Portuguese income tax for 10 years. This includes income from work, investments, capital gains, pensions and rental income.
Qualifying for NHR can save you a considerable chunk of change, so it might be a good idea to look into it. If you have specific questions on how to apply or whether you can apply at all, talk to an expert like a financial advisor who specializes in international tax law.
Portugal offers the best of both worlds if you’re looking to retire abroad. It’s a beautiful, European destination, and it’s affordable for the average retiree. This is why it has become one of the world’s most popular expat and retiree locations. Recent changes by the government to help attract foreigners could also allow you to save money on taxes for up to 10 years. In order to retire in Portugal, you must apply for residency.
The process may take some time but it is straightforward. The application requires you to provide a passport, proof that you have a regular income and proof that you have health insurance. You will also have to submit to a criminal background check. And while this process may sound like a hassle, it will be worth it when you’re kicking back and enjoying your golden years in European style.
Tips to Help You Afford Retirement
- As you start to plan for retirement, you should consider speaking with a financial advisor who can help prepare you for your golden years abroad. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have free introductory calls with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- As mentioned above, you can retire comfortably in Portugal, in a small city, on an income of $1,400 per month — or less. For some people, the value of your Social Security benefit is enough to cover your costs of living. You can estimate your benefit amount with this Social Security calculator.
- Whether you want to retire comfortably abroad or in the U.S., both an IRA or a 401(k) plan will offer you tax benefits and help you grow your retirement savings with compound interest.
Photo credit: ©iStock.com/Sean Pavone, ©iStock.com/Silvia Bianchini, ©iStock.com/SeanPavonePhoto