How Much to Spend on Retirement Home in Portugal?

[Nemo2]

To paraphrase my first posting, I have x savings, y expenses, and z income. Those'd be the variables.

Lots of people want to dive into issues they assume I haven't considered. I have, in fact, considered them. And, anyway, I didn't ask for help determining hidden variables. I asked for help determining a spending limit.

"Hey, I want to buy a vehicle, how much should I spend? What kind of vehicle...I dunno."

Personally, I'd say the variables are:

1) Which town/city or country/rural?

2) Right downtown or suburban?

3) House or apartment?

But, before I bow out I'll say $750,000...makes as much sense as everything else.

 

[Eric S]

Spending limit has no relationship with those factors.

If I wanted to build a second Taj Mahal for myself in Central Park, I still couldn't pay much more than $1M (and still feed myself). And if I wanted a muddy basement in rural Peru, I could still afford to pay at least $500K.

The upper limit of what I can afford is probably somewhere between those numbers, and it has nothing to do with anything except what I can afford. I'm not sure what that number is, but I'm certainly going to need to narrow it down before I start hunting.

Gauging by reaction, I seem to have asked a very very odd question. Which, to me, seems very very odd, because it's THE question for retirees.

 

[braumeister]

I think it would first be necessary to decide where you want to live in Portugal. Next step would be to look at all the housing currently on the market in that area to get a feel for prevailing prices. Without that information it would be impossible to come up with a "prudent max".

But once you know those things, it's simply a matter of deciding what you would be happy with and negotiating a sale.

 

[MichaelB]

To paraphrase my first posting, I have x savings, y expenses, and z income. Those'd be the variables.

Lots of people want to dive into issues they assume I haven't considered. I have, in fact, considered them. And, anyway, I didn't ask for help revealing hidden variables. I asked for help determining a spending limit.

When your assets are in one currency and your expenses in another, you take on an additional risk most members here don’t face. In addition there is the possibility you may need to return to the US but are unable to sell the home and repatriate the proceeds. Expat retirement is riskier and that argues to a more conservative portfolio IMO.

 

[NW-Bound]

To paraphrase my first posting, I have x savings, y expenses, and z income. Those'd be the variables.

Lots of people want to dive into issues they assume I haven't considered. I have, in fact, considered them. And, anyway, I didn't ask for help revealing hidden variables. I asked for help determining a spending limit.

Being serious about relocation, you have considered many things specific about Portugal that most readers here have not. It is doubtful that we can give you a meaningful number, or something better than what you already have in mind.

 

[cyber888]

Since you are single and probably love to travel, no more than 230K-300K Euros in Portugal. Max of maybe 350K euro. Keep the rest liquid.

 

[Lagniappe]

That's what I'd heard. Does it shoot up sharply for older people? How about pre-existing conditions (I have a cardiac stent, though am in good health)

If you have a notarized statement of continuous coverage from you US insurer, several companies will waive pre-existing condition exclusions and waiting periods.

It is very hard to get initial coverage after age 70. But if you already have coverage, they will continue your policy. As far as increasing with age, here are two policies from the same company, both providing outstanding coverage and travel insurance. These are not the lowest price policies offered by this insurer:

Nice policy. Premium policy
46-55. €1092. €1450
56-60. €1495. €1900
61-65. €1540. €2400
66-70. €1967. €2850
71-75. €1967. €3400
76+. €1967 €3798

Apparently you can get much cheaper policies through bank partnerships etc., once you are in country, but many expats start with policies like these.

 

[Eric S]

Thanks, Lagniappe.

Those numbers - even the highest ones - are dwarfed by the $900/month I currently pay here. So...fine!

But this seems crucial:

It is very hard to get initial coverage after age 70.

So I clearly need to do this move before I get anywhere near that age. Good to know!

However, since I don't intend to renew my American insurance while living abroad, I'll need to consider where my preexisting condition lands me. I couldn't possibly be the only emigre with a stent in his chest.

 

[CaliforniaBlues]

I can't answer your question but you might want to check out Our Rich Journey on Youtube. It's a family that retired early and moved to Portugal and they have quite a few videos on Portugal and buying a house. It might give you a little more info so you can come up with your own answer.

 

[FIREd]

As far as health insurance goes... Even if you have to get expensive private health coverage, it will only be for a few months. I know that in France for example, one only has to be a legal resident and show proof of stable residency in the country for 90+ days to become eligible for the national health insurance scheme. Based on my research on the EU Commission's website, Portugal may be even more generous with its access to public health insurance.

In terms of housing, location is a huge factor - like everywhere else. Based on my research, real estate generally seems quite cheap in Portugal compared to France for example but I'm sure that there are huge differences between Lisbon and other areas. When buying abroad, I would be hesitant to sink a large amount of money in something as illiquid as a home. In addition, with an expensive home come large expenses. Those will be in euros while your stash will probably remain denominated in US dollars. This could create some financial stress down the road (as it did for many US expats when the Euro peaked over $1.5 back in 2008).

 

[Badger]

Another similar book is Extra Virgin. To young British women travel to Italy for a summer of adventure, Italian men, and sun. But they end up in a very conservative small town far from the beach scene and known for its olive oil. They are immediately suspect, and labeled as ‘stranieri’ Strangers! See how the title is a great play on words?

A book (not movie) that I have read a few times is "A Year in Provence" by Peter Mayle. A cute description of a move to Provence and the escapades of trying to buy and fix a home. There is also a sequel titled "Toujours Provence".



Cheers!

 

[NW-Bound]

There’s a nice wine documentary on Netflix or Prime called “A Year In Port,” which can give you a feel for the Douro and the wine industry there.

Thanks for the recommendation.

I do not subscribe to any video service, but found this documentary on pluto.tv. I liked it enough to watch despite all the ads that that Web site inserted (I knew the Web site had to make some money somehow).

It was informative to learn about the hard life of the villagers working at the vineyards during the harvest: pick grapes all day, then spend another 3 hours stomping grape.

I found it funny to see them march to a called out cadence. The following clip is not from the movie, but shows a similar scene.

My wife was not watching with me, but heard the cadence and looked over my shoulder at my laptop and asked what was going on.

It reminded me of a scene in Ben Hur. "Battle Speed!" Attack Speed!" "Ramming Speed!"

 

[NW-Bound]

Another similar book is Extra Virgin. To young British women travel to Italy for a summer of adventure, Italian men, and sun. But they end up in a very conservative small town far from the beach scene and known for its olive oil. They are immediately suspect, and labeled as ‘stranieri’ Strangers! See how the title is a great play on words?

I will see if the local library has this book.

A book (not movie) that I have read a few times is "A Year in Provence" by Peter Mayle. A cute description of a move to Provence and the escapades of trying to buy and fix a home. There is also a sequel titled "Toujours Provence".

Cheers!

As mentioned, reading Peter Mayle's books gave me the fantasy of following in his footsteps. I soon realized the impracticality of owning a 2nd home in Provence, but indeed, there were many imitators when his book became a best seller and was translated into 20 languages.

Besides the first book A Year in Provence (1989), I also read Toujours Provence (1990), and Encore Provence (2000), plus a couple more. And I still remember that I first learned of the jazz singer Diana Krall as she was mentioned in his fiction Chasing Cézanne (1997).

A couple of his books have been made into movies, but I forgot to look into it until now. Will see if the local library has a DVD copy.

And I also just learned that he put out the last book before his death: My Twenty-Five Years in Provence: Reflections on Then and Now (2018).

Peter Mayle sold his Provence home in 1993 when his fame brought him constant harassment.

From an interview:

"We had people coming up the drive from Japan, from Australia, from Germany, from Sweden, from England, from America. At the beginning, it was really quite exciting ... Then it just increased in volume until we were getting four, five, six visits a day."

A party of Swiss people elected to have a picnic outside his front door, and on another occasion he was about to sit down to Sunday lunch when he heard splashing sounds coming from his swimming pool: "When I went round to see what was going on, it was a couple of Italians with a video camera in the pool. They were taking photographs of each other with our house in the background."

 

[davismills]

Nice interview with an expat military widow that moved to Portugal and bought a house. I believe she spent 350K euros on a 2 bedroom apartment.

https://www.poppinsmoke.com/expat-retiree-profile-american-moving-to-portugal/

 

[bmcgonig]

If you have a notarized statement of continuous coverage from you US insurer, several companies will waive pre-existing condition exclusions and waiting periods.

It is very hard to get initial coverage after age 70. But if you already have coverage, they will continue your policy. As far as increasing with age, here are two policies from the same company, both providing outstanding coverage and travel insurance. These are not the lowest price policies offered by this insurer:

Nice policy. Premium policy
46-55. €1092. €1450
56-60. €1495. €1900
61-65. €1540. €2400
66-70. €1967. €2850
71-75. €1967. €3400
76+. €1967 €3798

Apparently you can get much cheaper policies through bank partnerships etc., once you are in country, but many expats start with policies like these.

Thanks for that. What company is it?

 

[Lagniappe]

Thanks for that. What company is it?

This is either Medis or Medal. You have to join a local expat organization (AFPOP) for a nominal fee to get the rates and the pre-existing condition waiver. From the interviews I have seen, the private hospitals they work with are modern and extremely responsive.

 

[jj]

What is "8g"?

I think it was a mis-typing of 8kg (kilos). The local airlines that have cheap flights around Europe often have much stricter carry-on bag policies, with the bag dimensions much smaller than US airlines and strictly applied weight limits of 7 or 8kg.

 

[NW-Bound]

Nice interview with an expat military widow that moved to Portugal and bought a house. I believe she spent 350K euros on a 2 bedroom apartment.

https://www.poppinsmoke.com/expat-retiree-profile-american-moving-to-portugal/

It's good read.

She paid 150K euros, not 350K, for her apartment in 2018.

 

[Finance Dave]

Maybe oversimplified and using very rough numbers but...

You said you spend $60k/year. Subtract your SS of about $11k/year, that leaves $49k/year you need from investments. Using the 4% rule, you need about $1.25M invested to maintain your lifestyle. Subtract that from the $2.5M you have, and that means you can spend about $1.25M on a house...but you said you wouldn't go over $700k so you should be fine.

However, the above assumes you start getting SS now...which you won't....so you'll have to adjust for getting the extra $11k between now and your FRA...which you should be able to do.

Whether you pay cash or mortgage will depend...I don't know anything about tax policy in Portugal....but I'd lean towards paying cash if no financial benefit to financing.


Good luck!

 

[imnontrad]

I think first of all, you have to decide WHERE you want to live. You might be better just renting until you decide (I am thinking of Altura, Portugal near the Spanish border - warmer winters). Also look at visa requirements. There is a 1 year visa but there is also a "Golden Visa" for buying a home over a certain amount - however, that also starts at 1 year block.
So I think you'd hate to buy a property and then not be able to get a visa to stay there.
Also, when you do decide to buy, determine how much time you want to spend on home maintenance. Maybe an apartment, which would give you more free time to travel would be a consideration.

 

[ychuck46]

Questions:

1. What would be the prudent max to spend on a house in Portugal? (note: I wouldn't imagine paying over $700K). I'm not thinking of it as an investment (though I do expect prices there to rise); I don't intend to move again, and my heirs are already well taken care of.

2. Should I mortgage it? I don't pay much taxes, so I guess it's mostly an inflation-related question. I do expect to beat the current 30 year rate with my investments....

thanks!

If I was in your shoes I wouldn't buy at all, but rent. You have no idea as to whether Portugal will float your boat after you have been there awhile. And the current situation there may change dramatically. If people think buying and selling a home here can be complicated, try doing that in a country you likely won't be a citizen in, perhaps the language will be a barrier, and so on. Rent and if you decide that you want to stay permanently then reevaluate.

 

[veganbetty]

I'm also considering eventual move to Portugal but I'm thinking that renting sounds best so that I can easily pick up and move elsewhere when I want. I would think you'd want to rent first and then think about buying.

 

[HI Bill]

Given your assets and budget, I'd say spend up to 1/3 of your total net worth. If you can get a loan for less than 3%, then that may be a way to increase your cash flow. But it really comes down to what level of home do you want, and what other spending priorities do you have? While you may easily be able to live on $40K, would doubling that budget and living in a smaller place give you the ability to do more travel, buy more toys, or enjoy more hobbies? Priorities of yours are unknown to us!

 

[shafer9]

I’m 75 so we r in different categories. But with your situation, I’d rent a nice place and travel all the time. Until you get tired of it. I would not worry about pennies, just have fun. I’ve had enough cancer (ok for now) to know you should never put off anything you dream of doing or think might be fun. Enjoy yourself, Portugal is a cool country.

 

[tenant13]

Residing in Portugal has additional financial incentive: https://tax-free.today/blog/nhr-residency-in-portugal/ It's only for 10 years but you're going to be there legally why not apply.

And here's a link to a real estate investment website for anyone interested.
https://www.pearlsofportugal.de/special-offer-nomad-gate