Is it my turn to join FIRED in Portugal??

[matjung]

Hi All
I am interested in comments, feedback

Currently I am in the unfortunate situation that my landlord gave notice to me. The house gets turned down and rebuild.
I spent the last 10+ years living in Zürich.
Given the area, my rent has always been a kind of affordable.
I did not count, but spent a few years in this forum to discuss investment stuff.
My timeline is about 9 month to find a new place to stay and
Plan A) enjoy life without depending on the labor market
Plan B) find another place to stay and remain on the labor market


Regarding Plan A).
In June I visit Lisbon in Portugal to find out, if that area is appealing to me and if nice places are on the market. Last year I visited Porto and had the feeling nice, but touristy area. Espinho or Aveiro may become my destination of choice.

Savings: For the next 300 months I could spent 2K - Then I am broke.
Investment Plan A)
I put 100K into a Savings Account. And hope it lasts for 4 years.
In a country like Portugal that should work, right?

I put the other 500K into some Investment Funds and hope it goes up from 500 to 600 in 4years time --> refilling the Savings account with 100K.
Does it sound feasible to make on average 20% net profit within 4 years.
What do I do if markets turn against me, and funds drop to 400 or 300K?


My legal retirement age is in 20 years time.
Does living from savings/investments for the next unforeseeable future sound realistic?
In 20 years time, countries like Switzerland and EU would issue a small public pension to me.
Maybe I should start reading blogs of those who successfully left the labor markets.


Investment Plan A.2
I put 100K into a Savings Account. And hope it lasts for 4 years.
I purchase an Apartment/House for 200K.
Do some Airbnb during holiday season.

I put the other 300K into some Investment Funds and hope it goes up from 300 to 360 in 4years time --> refilling the Savings account with 60K.
Hope that from the initial 100K+Airbnb income 40K are left over to refill the Savings.


If markets perform better than expected, I should have enough funds for Holidays!
During the 300 months I will inherit something (Property).
Then I may move again from Portugal to Germany

 

[music-and-ski]

It most likely will work. See this:

$600,000, 83% equity (100k bonds), $24k spending per year. Inflation adjusted of course.

https://firecalc.com/index.php?wdam...oor=0&callprocess=Submit&FIRECalcVersion=3.0&

 

[Kork13]

In the military, we have an undisputed rule: "HOPE IS NOT A COA" ('course of action' ... a viable plan).

Your plans may well be workable, but you need to do alot more research & build more detailed plans to really make it feasible. If you can indeed live on just $2k/mo in Portugal (I have no idea -- do you?), and markets don't go sideways on you, and you have a reliable/affordable place to live, and everything else goes according to your hopes/dreams/desires ..... Basically, I see alot of uncertainty.

Buying a home seems like a good option to me, which will provide security, stability, and reduce your expenses going forward... However, that will also reduce your invested funds, so you won't produce as much income to support your lifestyle (unless the AirBnB option is successful).

Why the focus on 4 years in the future off of $100k? Proof testing? Or do you mean to have Portugal only be a temporary diversion for a few years?

I wish you luck -- living/relaxing in Portugal would surely be quite enjoyable. I just hope that you build out more complete & workable plans, beyond just going for it & "hope it lasts."

 

[matjung]

In the military, we have an undisputed rule: "HOPE IS NOT A COA" ('course of action' ... a viable plan).

Your plans may well be workable, but you need to do alot more research & build more detailed plans to really make it feasible. If you can indeed live on just $2k/mo in Portugal (I have no idea -- do you?), and markets don't go sideways on you, and you have a reliable/affordable place to live, and everything else goes according to your hopes/dreams/desires ..... Basically, I see alot of uncertainty.

Why the focus on 4 years in the future off of $100k? Proof testing? Or do you mean to have Portugal only be a temporary diversion for a few years?

I understand what you mean. I spent the last couple of years doing combinations of sightseeing with retirement research. Including countries like Portugal, Greece, Malta, Dubai, Indonesia.

Regarding the 4 years, I could also do 5, but had the impression that 4 is sufficient.
My first stock crisis was 1987, then dot com bubble, subprime crisis, corona wipeout and Putin Attack. With a few minor downward trends in between.


I expect / hope that for most fund managers a period of 4 years is sufficient to make the fond price go up by 20%. So that I don't have to worry if it goes down a bit or much.
My experienced crashes started to bounce back within a 4 year period.
Of course, there is always a sector which never recovers.



Some of the funds will make quarterly dividend payments.
During good times, the funds earn a lot more than 5% a year - so I am able to refill the 100K bucket more frequently.


In the best case, total value goes up despite having me deplete savings.



Over time I probably have to increase the 2K budget to 3K.
(Too many Brits are making the country expensive)

My next trip is for Portugal. Staying in a self-service apartment.

I am going to find out what I am able to get. I spent more time viewing places and talking to landlords and agents.

At my last Portugal holiday I also stayed in self-service apartment.
Food in the Groceries was affordable.
Rent will have a big impact on the monthly budget.
On the internet I see offers like this:

Terraced house for rent in rua do Juncal de Cima, 275 s

Santo Tirso - Couto - Burgães, Santo Tirso 550 €/month


For the moment I am confident that I can execute the plan for 2K per month.
If the markets perform as expected, I have to find out.


What I consider as biggest risk for the moment is something like:
Savings are heading from 100K to 0
While markets are going down from 500K to 300K.
Solution1: Hedging, so that it won't shrink to 300K.

Solution2: Cry and rejoin the work force

The pension of my parents depends on Redistribution
Mine will depend on capital markets and/or real estate.

Don't know which concept is better.

 

[music-and-ski]

I don't know Portugal but $2k/month seems pretty lean. It might be ok for living, but occasionally you have to buy a new phone, computer, bicycle, etc. Could you take some sort of part-time employment, perhaps seasonal? Something that's fun? E.g. could work for 4 months and make $2500/month?

Download the VPW (variable percentage withdrawal) spreadsheet and check the "required flexibility" section for a sense of how things might go sideways depending on how you're invested. If you can handle going back to work if things go sideways, maybe you'll be ok.

 

[Bryan Barnfellow]

"My legal retirement age is in 20 years time.
In 20 years time, countries like Switzerland and EU would issue a small public pension to me.
Maybe I should start reading blogs of those who successfully left the labor markets."
------------------------------
Switzerland based early retiree here. Do you have a Pillar II account as well? You should be able to access that early. I did so by about 5 years. Also, the AVS (Swiss social security equivalent) is available to those who leave Switzerland as a lump sum. Have you looked into that? At least that was the case last time I researched this.

BTW, did you obtain Swiss citizenship while you were here? That will make moving around the EU easier.

I retired early in 2015 and live in Lugano with permanent residency. My wife and I will apply for citizenship early next year.

Just seeing that this is my 1,000th post! Kid's stuff among the stars in this group; but a nice milestone for me, nonetheless.

-BB

 

[matjung]

"My legal retirement age is in 20 years time.
In 20 years time, countries like Switzerland and EU would issue a small public pension to me.
Maybe I should start reading blogs of those who successfully left the labor markets."
------------------------------
Switzerland based early retiree here. Do you have a Pillar II account as well? You should be able to access that early. I did so by about 5 years. Also, the AVS (Swiss social security equivalent) is available to those who leave Switzerland as a lump sum. Have you looked into that? At least that was the case last time I researched this.

BTW, did you obtain Swiss citizenship while you were here? That will make moving around the EU easier.

I retired early in 2015 and live in Lugano with permanent residency. My wife and I will apply for citizenship early next year.

Just seeing that this is my 1,000th post! Kid's stuff among the stars in this group; but a nice milestone for me, nonetheless.

-BB

Well, I love / hate Pillar 2.

When I leave the country, I have two options - get Pillar 2/3 in a one lump sump - or wait for 20 years until it turns into a pension.
In those 20 years it probably does nothing, as it has not done much for the last 15 years. The pension fund of the employer decides about its asset allocation. For pillar 3 I have some discretion about its asset allocation - but devil in the detail. Outside the pillar system, there is more choice around. Some of my savings would come from pillar 2/3.

Celebrate your 1000th post with and :beer:
For AHV (public swiss pension) I tend to wait the 20 years for getting about 750 CHF per month. It will join my tiny public pension from Ireland and Germany.

I got born into German citizenship. No need for a change.



Where do you see value, in getting CH passport?
Foreign countries really dislike how CH handled Credit Suisse.
I think the reputation of the country has been damaged a bit.



Lugano is nice. I go there a few times a year, for the View and Sunshine.
Also Locarno, Bellinzona, Ascona.



Regarding part-time, freelance work.
Decades ago, I studied and passed the first CFA Exam.
Undecided, but thinking about doing course towards IFP or IFA - International Financial Advisor.
Most likely that topic gets regulated in Portugal / EU.
I may have to learn Portuguese before I get regulated. So, not my priority.
There is actually demand in this industry in CH. But local Treuhänder don't want to come up with the money to retrain me into this industry.
They prefer to hire graduates from Eastern Europe who are younger or those with Vitamin A who are older.
Managing my own affairs can be time consume enough -

I try to understand if Greece resumes outperforming European stock markets (check the last 2 to 3 years).

 

[Lagniappe]

Hi All
I am interested in comments, feedback




Regarding Plan A).
In June I visit Lisbon in Portugal to find out, if that area is appealing to me and if nice places are on the market. Last year I visited Porto and had the feeling nice, but touristy area. Espinho or Aveiro may become my destination of choice.

Savings: For the next 300 months I could spent 2K - Then I am broke.
Investment Plan A)
I put 100K into a Savings Account. And hope it lasts for 4 years.
In a country like Portugal that should work, right?

I live in Lisbon, and have to say, 2K per month is unrealistic to live anywhere near the city these days. I have a couple of friends who are paying 700 for studios in good neighborhoods, but they are small, on high floors with no elevator, and not very well cared for. You can probably still get a place across the river in Almada for 1K per month, or a bit further in Setubal. Both are very nice and easy to get to Lisbon. Also, be aware that there may be two rates for rent - one for locals and another for expats, so make some local friends to make initial contact for you. There are lots of cheaper places further out, but many of the low priced rental ads you see are scams. https://www.idealista.pt/ is one of the most popular listing sites for sales and rentals to give you a realistic sense of rents. There are a ton of facebook groups for expats in Portugal where people share their budgets.

Airbnb's are being restricted here because there is a housing shortage (hence the rapidly increasing rents), so your plan to buy an apartment may need some more research.

Groceries, dining out, entertainment, transportation, and utilities run less than 1K per month, even in central Lisbon, so if you can get a good apartment at a reasonable cost, you'll be okay.

 

[matjung]

I live in Lisbon, and have to say, 2K per month is unrealistic to live anywhere near the city these days. I have a couple of friends who are paying 700 for studios in good neighborhoods, but they are small, on high floors with no elevator, and not very well cared for. You can probably still get a place across the river in Almada for 1K per month, or a bit further in Setubal. Both are very nice and easy to get to Lisbon. Also, be aware that there may be two rates for rent - one for locals and another for expats, so make some local friends to make initial contact for you. There are lots of cheaper places further out, but many of the low priced rental ads you see are scams. https://www.idealista.pt/ is one of the most popular listing sites for sales and rentals to give you a realistic sense of rents. There are a ton of facebook groups for expats in Portugal where people share their budgets.


Groceries, dining out, entertainment, transportation, and utilities run less than 1K per month, even in central Lisbon, so if you can get a good apartment at a reasonable cost, you'll be okay.

This is the reason, why I love this web page.
It is an opportunity for getting inside information that a local estate agent for wealthy Expats would not share with me.
Thanks for suggesting to visit Setubal.
I owe you a drink.

 

[tfudtuckerpucker]

Thought this link might be helpful

https://www.businessinsider.com/americans-moving-to-portugal-golden-visa-d7-overcrowding-housing-costs-2023-5

Incidentally (or maybe not ) that's our daughter and son-in-law who were interviewed.

 

[matjung]

"Some say the country is now becoming crowded and more expensive, which makes it harder to move."
Plenty of European Territories witness this development.
Airbnb is not cheap anymore.
Salaries are low, but locals cannot afford to stay in Airbnb anymore.

https://www.idealista.pt/en/news/fi...an-half-of-all-employees-received-less-than-1
Dear US: Stop spending more than 40 Dollars per night per room.
For the value you get, you pay too much!

 

[matjung]

I would like to thank Lagniappe for having taken the time to talk with me in person about ER in Portugal. Her proposal to meet at - El Corte Inglés Lisboa - was a great choice.
Portugal is still on my list for ER.
Lisbon itself is not - too hilly for my taste.
Some nearby towns like Cascais or Vila Franca de Xira went still on my list why not.
The main issue for the moment seems to be that Rents went up compared with 5 or 10 years ago.
I am now closer looking into a property in Espinho.
Probably a combination of pay by cash and mortgage.
I am confident that 2K per month will last for a while.
Plan A.3
I put 100K into a Savings Account. And hope it lasts for 4 years.
I purchase an Apartment for 250K.
- 100K in cash
- 150K in mortgage


I put the other 400K into some Investment Funds and hope it goes up from 400 to 480 in 4years time --> refilling the Savings account with 80K.

It is expected to become a 2 bed room 2 bath room apartment.
Occasionally I would rent out the 2nd room and earn some 5K per year.
Expected Assets after 4 years
Savings 0
Investments Account 480
Rental Income 20

Apartment 250 (150 as mortgage - what I paid down)
--> Net Assets >= 600K
(the value of the assets did not go down - and I was living for 4 years)
Better case scenario:
The 400K Assets Under Management goes up to 600K (50% in 4 years is within probability assumptions)
In 4 years - move 150K into savings account (budget 3K per month)
Manage 450K -> 675 (50% in 4 years)
If stocks develop well, I would re-balance more frequently.
Expected Assets after 8 years
Savings 0
Investments 675
Apartment 250 (150 as mortgage - what I paid down)
--> Net Assets >= 775K
Open Points: Do I get the apartment for 250K, or will it be 300K
Are stock, bond, real estate markets supporting the concept.
Iteration-3
Move 150K into savings account (budget 3K per month)
Manage 525K -> 787 (50% in 4 years)
Expected Assets after 12 years
Savings 0
Investments 787

Apartment 250 (150 as mortgage - what I paid down)
--> Net Assets >= 887K



Open Points: Is a planing horizon of 4 years a good thing, or should it be 3 or 5 years.


I am starting to feel more confident that I found a sustainable ER solution.
With renting out a room as a form of income insurance.



Different opinions are welcome.

 

[matjung]

I live in Lisbon, and have to say,

Hello again Lagniappe
next topic - taxation.
How do you pay taxes on Interests, Dividends, Capital Gains.
Do you have to declare that at the end of the year,
is your Portuguese Bank/Stock Broker forwarding that money to the Portuguese Tax Office?
You don't own any German Stocks where you pay German dividend withholding tax - do you?

 

[Lagniappe]

Hello again Lagniappe
next topic - taxation.
How do you pay taxes on Interests, Dividends, Capital Gains.
Do you have to declare that at the end of the year,
is your Portuguese Bank/Stock Broker forwarding that money to the Portuguese Tax Office?
You don't own any German Stocks where you pay German dividend withholding tax - do you?

I would recommend you speak to a tax expert. I cannot give tax advice. However, I have been advised to leave my investments in the US, since I am American and the US will tax me regardless of where I live. Portugal does not tax income gained elsewhere as long is it is subject to tax in that other location. So my interest, dividends, and Capital Gains earned from the US are not taxable in Portugal. I don't have any German investments or connections so have no idea how they will be taxed.

There is also something in Portugal called Non-Habitual Residency (NHR) - for your first ten years as a Portuguese tax resident, certain sources of income is taxed at lower rates, depending on your profession and the origin country of the income. There is lots of misinformation on the internet regarding the NHR, so please, talk to an expert.

There are Facebook groups of Germans, Brits, Irish, etc who moved to Portugal to take advantage of the NHR - they would be better able to advise you. But make sure you trust the source. Lawyers and Accountants are not very expensive in Portugal, and several have Youtube video's introducing these concepts for free. I paid an US/Portuguese tax lawyer to walk through my specific situation with me, and it was invaluable. I also belong to a paid group that has a vetted network of experts (and videos from those experts) on all things related to immigration to Portugal that I can highly recommend. Feel free to send me a private message if you need the information.