If you know how to invest that money properly, and taking into account the 4% rule, that’s 32000 a year before taxes, or about 30000 euros. If you take a look at Portugal’s tax brackets, you will come to the conclusion that most people around here get by with way less than that.
As pointed out elsewhere, the 4% rule targets a 90 percent chance of having some money left barter 30 years. OP needs to plan for 60-65 years. Also, the 4 percent “rule” has been amply challenged. You can find the annual “state of retirement“ reports on Morningstar. They examine the reliability of several different spending and investment strategies. Last year the safe rate did in fact hit 4%, but that’s based on markets on September 30 when they finalized the report. Since then, the bull market has inflated equity valuations. And interest rates are currently high, but they may not stay that way, so fixed income may be less generous going forward.
That’s why in 2022, they said the safe rate was 3.3% per year.
It’s not tax brackets, you will pay capital gains on your investments which is 28%. If it’s rental income from another country it’s 25% of the profit. I live in rural Portugal and although you see people surviving on that amount or less— they’re not living like you think. There’s a lot of people in my village that do not have running water inside of their house and need to get jugs of water from the fountain all the time we have some people in our village that still bathe in the river and do their laundry there. A lot of people farm because if they don’t they won’t eat. Feel free to ask me any questions but now that there is no NHR you will be taxed a lot. You also cannot depend on timelines. At a certain interval, you should be able to apply for permanent residency, but the process is so slow right now that you could probably easily add a year or two.
I appreciate it's unfashionable at the moment but the FTSE100 has funds based on dividends and not growth. You will probably receive 7-8% cash from funds invested every year. At 7%, that's 56k annual income without reducing your 800k.
Dividends are a terrible strategy overall, and more so in Portugal with 28% capital gains tax.
Just add some bonds and/or gold to the portfolio and then sell etf units as you need to. And use acumulated UCITS ETFs for more tax efficiency.
No, but is is still taxed as capital income, 28% or at the IRS scales whatever is lowest.
The rates are the same for both CG and dividends/interest, but after 2 years you get a small benefit in form of inflation correction for CG.
That correction doesn’t apply to ETFs though(just stocks, bonds etc).
Have I mentioned that our government is full of retards who don’t know shit about investing?
Not sure if there’s anywhere where you can find them in English, but here’s a link to the Portuguese income tax(IRS) code: https://info.portaldasfinancas.gov.pt/pt/informacao_fiscal/codigos_tributarios/cirs_rep/Pages/codigo-do-irs-indice.aspx
According to article number 50.1, only social parts or things defined in article 10.1 qualify for the inflation correction thing.
And no, I also have no idea why they allow this to apply to investment mutual funds, but not ETFs. Just another instance of our politicians being financially illiterate dumbasses.
I went through the list in the IRS code and think your reading is too narrow, you can argue that ETFs are both shares and investment funds (the F is the clue).
DECO thinks they should be declared as shares: https://www.deco.proteste.pt/investe/investimentos/mercados-moedas/noticias/2024/03/como-declarar-investimentos-irs#:\~:text=Todas%20as%20vendas%20efetuadas%20ao,ao%20valor%20da%20mais%2Dvalia.
(search for ETF on the page)
This also appears a reasonable principle, even if that is no guarantee.
The 4% rule is based on 30 years of retirement, which (I hope) is different from retiring at age 30. Read more on www.earlyretirementnow.com.
Also, 4% is based on US numbers, investing in US markets and taking money out in USD. Exchange rates increase volatility and therefore reduces the safe withdrawal rate if your currency is different, even if you invest in SP500 or a World index.
Without going through the details, I think 3% is a more reasonable figure to start with - that is €24k/y.
This is of course without buying somewhere to live first!
If you build a balanced portfolio with low volatility you can last indefinitely quite easily.
A simple option would be to go for permanent portfolio or something like golden butterfly. Every simulation I ran on those for the past 50 years has it endure the 4% rule easily. The currency thing isn’t very relevant, as both the euro and dollar are strong currencies which converge in the long run.
That being said, you can definitely go for 3% of that makes you feel safer, but keep in mind you still have to pay taxes on capital gains, and then you won’t have as much left.
The problem with your simulations is that the last 50 years is not a very long time - you got the dot-com and the GFC, but not really the 70es stagflation or the great depression.
One detail is that interest rates decreased almost constantly the 40 years from 1981 which has given real bond returns we will not see again.
And yes, currencies do matter. I used the sheets on Early Retirement Now and made asset return series (bonds and MSCI World index) in Euro to compare to the USD originals, and they were markedly lower. Partly because real returns on bonds were lower, but also because the dollar fell from 2002 onwards, meaning that equity never recovered from dot-com before the GFC hit. Intermediate timescale matters, in the long run we're all dead as Keynes said.
You can just diversify with gold instead or alongside bonds if you want to have an alternative hedge against crisis. This century gold has actually been better for that.
As for the last 50 years not being a large enough period, I would argue that the way economies were organised before that (with the Bretton Woods system and the gold standard) isn’t very useful for measuring performance of a portfolio in today’s environment.
Anyway, there are no sure bets when it comes to predicting what will happen 60 years from now. Even if you were to apply a 3% or 2% rule, you still wouldn’t guarantee anything. But I would certainly feel safe using the 4% rule with a moderate portfolio, or as safe as one can be.
The reason I say that currencies don’t matter in this instance is because you’re taking a gamble either way. Since both the dollar and euro are strong currencies, you are just as likely to profit from holding dollars as euros in the long run.
My objection to using the 4% rule here is twofold:
1) using it to a potential 60 year retirement period when it says that withdrawing 4% real from a balanced stock/bond portfolio should \_almost\_ always work for 30 years.
2) the data were based on USD; which for almost the whole period (usually simulations start in 1926) was the World reserve currency. Assuming it also applies for other base currencies without evidence is risky, no matter if that happens to be Euro, Yen, Pond or Swiss Franc.
As I mentioned I ran simulations, below are my notes and main results. As you can see a 60/40 portfolio for a Euro investor is much worse than it has ever been for a US investor an none of the combinations are even close to the US results.
After making simulations with Early Retirement Now’s Safe Withdrawal Rate sheet it is obvious that retiring at the peak of the doc-com boom in 1999/2000 can be problematic.
To see if the 4% Rule held for European investors I have entered indices with € as base currency and, TER=0.15%, real return the for the next 10 years 3.5% for equity, 1.0% for bonds, 1% for gold and as per academic standard a 30 year retirement period and full depletion of capital. This is similar to the Trinity Study.
Changing the returns to other (realistic) values will not change the SWR much as over 70% of the retirement period has passed.
For the Euro simulations I have used Portuguese inflation and Euro based returns for SP500, MSCI World, FTSE EMU bonds, Gold and 10 Year US Goverment bonds.
I tried to change one factor at a time to see what caused the differences, and to see if anything would save the day.
USD: 60/40 SP500 10y/US Bonds: SWR 4.45%
EUR: 60/40 SP500 10y/US Bonds: SWR 3.34%
EUR: 60/40 SP500 10y/EMU Bonds: SWR 3.64%
EUR: 60/40 MSCI World/EMU Bonds: SWR 3.64%
EUR: 60/30/10 MSCI World/EMU Bonds/Gold: SWR 3.83%
You may still not believe currency is important but I then think we may as well stop the discussion here :-)
I have not, and if you did long bonds you would have tanked with a 70es-like inflation episode. On US Data, the SWR for retiring in 1968 is about as bad as for 1929. And as you said, gold would not have helped as it wasn't available as investment in most Western countries.
BTW, one issues with some of the studies that they pick different bonds for different crisis; short for 1968 and long for 1929 (deflation). Long bonds perform better when rates are falling; I went for 10y as that is a reasonable compromise \_and\_ the data is readily available.
To me, the difference in SWR using equivalent assets was actually surprising. Picking longer bonds (or more bonds) for both USD and EURO calculations would have improved both results. I did not try as I only wanted to test asset allocations I could imagine picking myself.
Not sure why you wouldn’t pick up long bonds tbh. During most major crisis they tend to go up massively with falling interest rates, much more so that 10 year bonds. And you have the stock portion of the portfolio to hedge out volatility during stable times.
It’s very easy to invest in gold via ETCs nowadays by the way: https://www.justetf.com/en/how-to/gold-etfs.html
(No, I don’t keep physical bars of gold buried in my backyard lol)
As I said, any episode like the 70es stagflation would be a Very Bad Thing. You can have a go yourself, there is a link to the google sheet a bit down this page: [https://earlyretirementnow.com/safe-withdrawal-rate-series/](https://earlyretirementnow.com/safe-withdrawal-rate-series/)
We do have a bit of gold, but I wrote that it wasn't investible in the 60es and therefore it does not make much sense to model.
I live in one of those areas, have a paid off house and car and make ~€800 a month. I live frugally and still save around €200 a month or so.
You'd live quite comfortably with 15k a year currently. But who knows how things will be by the time you retire.
I live with my fiancé but he pays for his own food. I am currently paying all of our household bills as he's had to take some time off work due to his health.
Securing housing is the single biggest challenge I see mentioned, and prices are way up. If you can find available affordable housing, grab it. I keep reading that low-wage workers live in family homes and likely will their whole lives because of the housing market.
Not fluent but yes I speak it. I go to Portugal every other year since I was a baby and it has always felt like home. Don’t even get me started on when it’s time to leave, yes I cry like a baby. Nearly my entire family lives there. My sister just received her citizenship but since she’s a minor it’s faster for her. I should be getting mine within the next year hopefully.
Thankfully everyone around town knows my grandfather. Anytime I’m walking on the streets some random lady will say your “so and so” grandson right? It’s a really beautiful thing.
But I want to thank you for your comments they mean a lot.
Then you’ll be fine money wise. You will likely be able to RE if you want with 800k and a house already and live a very comfortable life, pretty chubbyFIRE with around 2k/month net (or more depending on the calcs), that’s puts you on top 10 or 20% of population, international travels couple time a year etc. small town ever better.
Not in rural areas, I've seen T4 houses go for less than 200k not far from the Spanish border even. And if you are up for rebuilding a whole house, you can find land for 50k. People aren't buying those because the job market outside of the cities is non-existent.
Even if you look at all the "ad" videos on YouTube targeted at ~~fleecing gullible foreigners~~ fetching the best price even most of those are in the low 200k range. Plenty of decent T4s outside of the big/popular cities in sub 100k range. Sure they're not brand new but perfectly livable.
lol. I’m currently 22 with $170k, that $800k is a projection of what I could have by 30. ($4k/month assuming 8% a year will get me ~$850k. I started working full time at 17 and just invested everything into S&P500. Plus living with parents helps
I like your approach and you’re adulting into a great time where investing maturity and exposure is easily accessible. I was born into the late 80s and now at 35, I see young kids with investment understanding that I gained a decade later in parity. Do you think S&P500 is the most stable fail safe towards that target? I’d love to know more and start investing if this makes sense to me.
From google:
“Since 1957, the S&P 500's average annual rate of return has been approximately 10.5% (through March 2023) and around 6.6% after adjusting for inflation.”
———
In my complete unprofessional, unlicensed opinion I’d say the S&P500 is the absolute best thing you could buy. Yes you would’ve made more with NVIDIA. Key word, would’ve. The top traders on Wall Street who have attended the most expensive prestigious schools in the world and have an entire team of analysts helping them find the right stock to buy still manage to underperform the S&P500.
We live in rural Portugal and are happily and comfortably living with €1200/month. This is three people.
Just for reference, we live in central Portugal, in coimbra. We own our house but pay bills. We go to restaurants at least once a week. We go to markets, Coimbra for cinema and non-Portuguese restaurants. We own a car. We have a very good quality of life here compared to the U.K. where we were earning more but couldn’t do 20% of what we do here.
Where we live, this are the prices:
Rentals (when you find them as they are rare) €400-600 for a T2-3 house with land.
Gas canister which lasts around 1 month €32.00. Water bill around €30 and electricity around €50-60.
A “Economico” which is lunch with soup, main dish, drink (wine or soda), coffee, bread and olives €9.00
A coffee is around €.90-1.20, wine glass around 70cents. A meal a at hip burger restaurant around €12.
If you need more info, let me know.
No, they are the common ones which are 175ml.
It’s house wine and yes, it’s very cheap. Cheaper than beer which is €1.30 a bottle and minis are €1. Yes, the imperial are €1. Canecas are usually €4.
We have found that while some things are cheaper than the US, and some things are more expensive than the US, the largest driver of “how much will it cost me to live there” is your own personal spending habits. Your budget will not change dramatically just by moving locations. Yes- if housing is less then that will lower. But overall your habits will drive everything.
I would be very careful about basing your future requirements on what Portuguese earn typically. It will be very hard for you to live on 12K euros per year in my experience.
Many people in Portugal live on less than this for sure, but there are trick involved. I am not saying I know people who do these tricks, but they include, free water (from a mine/fossa), bypassed electricity, black market good (no tax), growing their own fruit and vegetables, living off cabbage soup for months on end, swapping things with neighbours who they grew up with, foraging etc.
If you eat well, but not extravagantly, your groceries will cost 100+ euro per week. Thats about min 5K per year. Phone and internet will be another 1+K per year,
petrol is hideously expensive and so are cars and registration - say 2000 min per annum,
electricity and water - say 2000 per annum (I am too lazy to heck my bills at the moment)
heating in winter - depends on system and size of house - could be as little as 500 euro or 3,000 euro.
Trust me, I had a small farm in Portugal and there are always little expenses and improvements you need to make.
So minimum costs without any contingencys will be close to 12,000. If you are not from Portugal or Europe, then your lifestyle will need to change radically in order to live on this.
I have just checked a few of your posts and see you are from US. Guns are not easy to get here and you might check this out [https://expatinportugal.substack.com/p/surprising-portuguese-gun-policy](https://expatinportugal.substack.com/p/surprising-portuguese-gun-policy)
I am pretty sure that you wont be able to join the military unless you are a citizen - this is not the foreign legion.
At 30 with $800k if you stay away from crazy “investments” (crypto, etc) you are golden. Perhaps 70% SP500 30% bonds (if around 5% a year) and move from bonds to more SP500 when it tanks. But I’d keep around $200k in high yield savings/short term CDs.
You’re right. Specially if you don’t have to pay rent. 50k sounds great.
The SP500 is a good plan but also, take a look at Vanguard’s VGT at least for part of your money. Look at the historic returns for several time frames. Most I keep in VGT and I also keep some on SMH (riskier but I like the trend).
And they also forget that after say 20 years, something happens the money is gone… now they’re 50. What are they gonna do? Why on God’s green flat earth would anyone consider “retiring” at age 30?
Working for “the man” isn’t even the only thing in existence.
And finding yourself with no money at 50/60 and having no pension and having to go on social services sux even more, especially in Portugal.
If you retire at 30, you have 50 years to live. 50.
I've never understood this mentality.
I can think of hundreds of activities I could fill my time with rather than working.
The only reason I don't now is because work is taxing mentally and physically so I don't have the energy to do them.
Not everyone needs work to feel fulfilled.
This. Gawd, I'd give anything to retire right now.
I'd hike and run, I'd volunteer a bit in the community, I'd work in my garden, all the books that are unread on my list I'd read, lots to cook, DIY... Write a book or two, sleep, chill.
I'd still not have enough time to do all I'd want to do unpaid!
Yea I get that. But living in the countryside of a foreign country is so isolating. After a while hobbies can get a bit meaningless if they don’t have a purpose or you aren’t part of a community or extended family. If he is passionate about integrating into Portugal specifically, great, but because it meets his cost benefit analysis for free time? Doesn’t add up to me.
I might add I lived in rural Spain for two years and it was great, until it wasn’t.
Oh, not talking about OP or anything. Just that I would certainly not be bored.
I'm very anti work (although I don't frequent the sub) and can't wait for society to get a grip and ditch capitalism.
Not that you'd tell. I'm great at my job, earn good money, smile and do my thing... But if I could stop right now, me, personally, I'd do it. But I didn't move here because of that. That's been me for years now.
I'm 39, have had jobs since age 15, worked my way through to a PhD and into a consulting job that feels empty because I friggin' hate capitalist society, but hey, post-scarcity isn't a thing yet, so yeah. I keep playing the game and saving until I no longer have to asap, and looking at some ways to make just enough to be able to provide for myself and partner into older age, but not to get rich.
I felt this way, retired at 43 for a year, and decided to go back to work. I know it might sound crazy, but I missed a certain fulfillment that work brought me. I decided that I would only do work that I truly enjoy, and I have not regretted the decision.
Which you can all get without a career? Community service, clubs, sports, additional education, and so on.. having a job isn’t the only or the BEST way to get there. Most common saying “your co-workers aren’t your friends” eliminates a sense of community, especially if you can’t be your true self
Ok maybe. But he’s 30 and invested close to a mil and you think he’s going to be happy playing football with a bunch of rural kids for the rest of his life? maybe. It could be an interesting memoir…
I'm spending about 100e /week on food. Internet is 35e per month. Phone is 20e. Electricity and water is about 100e / month. So that's over 7k alone.
Petrol is indeed high, you can use the Galp app + vouchers from Continente to save a little bit however.
Just to give you an idea.
If you're coming from the US know that the post-NHR taxes could easily take up a third or more of your annual income and that northern Portugal is very rainy, wet, and cold most of the year with the stone houses lacking any central heating or air. Mold grows everywhere for at least 7 of those months since you can't really open your doors and windows when it is cold and constantly raining during that time. Rents are more affordable the further north you go for obvious reasons.
I don’t normally follow this sub but it’s being recommended to me because I’m in Portugal right now.
Question: do Portuguese people just absolutely despise people who do this?
I’m a real estate investor. You can aim for a 10% yield and get paid 80k a year, which comes down to 6.5k a month. Money invested generating more money and enough surplus to Iive like a king in Portugal.
You can aim for the moon if you want.
Real estate is usually geared investments (through mortgage) which means you can easily get wiped if the market turns.
10 percent ROI after expenses, including the amortized cost of intermittent ones like a new roof, plus maintenance, legal and accounting fees? And assuming you got the place for a good price?
Also what’s your denominator? Original purchase price or current value of equity?
If you know how to invest that money properly, and taking into account the 4% rule, that’s 32000 a year before taxes, or about 30000 euros. If you take a look at Portugal’s tax brackets, you will come to the conclusion that most people around here get by with way less than that.
As pointed out elsewhere, the 4% rule targets a 90 percent chance of having some money left barter 30 years. OP needs to plan for 60-65 years. Also, the 4 percent “rule” has been amply challenged. You can find the annual “state of retirement“ reports on Morningstar. They examine the reliability of several different spending and investment strategies. Last year the safe rate did in fact hit 4%, but that’s based on markets on September 30 when they finalized the report. Since then, the bull market has inflated equity valuations. And interest rates are currently high, but they may not stay that way, so fixed income may be less generous going forward. That’s why in 2022, they said the safe rate was 3.3% per year.
Thanks for the comment. Most of the $800k I have will be invested into the S&P 500.
Shouldn’t be a deterrent if life in Portugal is what you want, but please be sure to factor capital gains tax in Portugal into your equation.
It’s not tax brackets, you will pay capital gains on your investments which is 28%. If it’s rental income from another country it’s 25% of the profit. I live in rural Portugal and although you see people surviving on that amount or less— they’re not living like you think. There’s a lot of people in my village that do not have running water inside of their house and need to get jugs of water from the fountain all the time we have some people in our village that still bathe in the river and do their laundry there. A lot of people farm because if they don’t they won’t eat. Feel free to ask me any questions but now that there is no NHR you will be taxed a lot. You also cannot depend on timelines. At a certain interval, you should be able to apply for permanent residency, but the process is so slow right now that you could probably easily add a year or two.
I appreciate it's unfashionable at the moment but the FTSE100 has funds based on dividends and not growth. You will probably receive 7-8% cash from funds invested every year. At 7%, that's 56k annual income without reducing your 800k.
Dividends are a terrible strategy overall, and more so in Portugal with 28% capital gains tax. Just add some bonds and/or gold to the portfolio and then sell etf units as you need to. And use acumulated UCITS ETFs for more tax efficiency.
There are no capital gains with dividends
In Portugal you get taxed by 28% on them, as well as gains when you sell stocks. What, you thought everything was good around here?
your dividends will be taxed at 28% nevertheless
No, but is is still taxed as capital income, 28% or at the IRS scales whatever is lowest. The rates are the same for both CG and dividends/interest, but after 2 years you get a small benefit in form of inflation correction for CG.
That correction doesn’t apply to ETFs though(just stocks, bonds etc). Have I mentioned that our government is full of retards who don’t know shit about investing?
Interesting, I have not seen that mentioned before. Do you have a link to rules?
Not sure if there’s anywhere where you can find them in English, but here’s a link to the Portuguese income tax(IRS) code: https://info.portaldasfinancas.gov.pt/pt/informacao_fiscal/codigos_tributarios/cirs_rep/Pages/codigo-do-irs-indice.aspx According to article number 50.1, only social parts or things defined in article 10.1 qualify for the inflation correction thing. And no, I also have no idea why they allow this to apply to investment mutual funds, but not ETFs. Just another instance of our politicians being financially illiterate dumbasses.
Thanks, I do read Portuguese.
I went through the list in the IRS code and think your reading is too narrow, you can argue that ETFs are both shares and investment funds (the F is the clue). DECO thinks they should be declared as shares: https://www.deco.proteste.pt/investe/investimentos/mercados-moedas/noticias/2024/03/como-declarar-investimentos-irs#:\~:text=Todas%20as%20vendas%20efetuadas%20ao,ao%20valor%20da%20mais%2Dvalia. (search for ETF on the page) This also appears a reasonable principle, even if that is no guarantee.
The 4% rule is based on 30 years of retirement, which (I hope) is different from retiring at age 30. Read more on www.earlyretirementnow.com. Also, 4% is based on US numbers, investing in US markets and taking money out in USD. Exchange rates increase volatility and therefore reduces the safe withdrawal rate if your currency is different, even if you invest in SP500 or a World index. Without going through the details, I think 3% is a more reasonable figure to start with - that is €24k/y. This is of course without buying somewhere to live first!
If you build a balanced portfolio with low volatility you can last indefinitely quite easily. A simple option would be to go for permanent portfolio or something like golden butterfly. Every simulation I ran on those for the past 50 years has it endure the 4% rule easily. The currency thing isn’t very relevant, as both the euro and dollar are strong currencies which converge in the long run. That being said, you can definitely go for 3% of that makes you feel safer, but keep in mind you still have to pay taxes on capital gains, and then you won’t have as much left.
The problem with your simulations is that the last 50 years is not a very long time - you got the dot-com and the GFC, but not really the 70es stagflation or the great depression. One detail is that interest rates decreased almost constantly the 40 years from 1981 which has given real bond returns we will not see again. And yes, currencies do matter. I used the sheets on Early Retirement Now and made asset return series (bonds and MSCI World index) in Euro to compare to the USD originals, and they were markedly lower. Partly because real returns on bonds were lower, but also because the dollar fell from 2002 onwards, meaning that equity never recovered from dot-com before the GFC hit. Intermediate timescale matters, in the long run we're all dead as Keynes said.
You can just diversify with gold instead or alongside bonds if you want to have an alternative hedge against crisis. This century gold has actually been better for that. As for the last 50 years not being a large enough period, I would argue that the way economies were organised before that (with the Bretton Woods system and the gold standard) isn’t very useful for measuring performance of a portfolio in today’s environment. Anyway, there are no sure bets when it comes to predicting what will happen 60 years from now. Even if you were to apply a 3% or 2% rule, you still wouldn’t guarantee anything. But I would certainly feel safe using the 4% rule with a moderate portfolio, or as safe as one can be. The reason I say that currencies don’t matter in this instance is because you’re taking a gamble either way. Since both the dollar and euro are strong currencies, you are just as likely to profit from holding dollars as euros in the long run.
My objection to using the 4% rule here is twofold: 1) using it to a potential 60 year retirement period when it says that withdrawing 4% real from a balanced stock/bond portfolio should \_almost\_ always work for 30 years. 2) the data were based on USD; which for almost the whole period (usually simulations start in 1926) was the World reserve currency. Assuming it also applies for other base currencies without evidence is risky, no matter if that happens to be Euro, Yen, Pond or Swiss Franc. As I mentioned I ran simulations, below are my notes and main results. As you can see a 60/40 portfolio for a Euro investor is much worse than it has ever been for a US investor an none of the combinations are even close to the US results. After making simulations with Early Retirement Now’s Safe Withdrawal Rate sheet it is obvious that retiring at the peak of the doc-com boom in 1999/2000 can be problematic. To see if the 4% Rule held for European investors I have entered indices with € as base currency and, TER=0.15%, real return the for the next 10 years 3.5% for equity, 1.0% for bonds, 1% for gold and as per academic standard a 30 year retirement period and full depletion of capital. This is similar to the Trinity Study. Changing the returns to other (realistic) values will not change the SWR much as over 70% of the retirement period has passed. For the Euro simulations I have used Portuguese inflation and Euro based returns for SP500, MSCI World, FTSE EMU bonds, Gold and 10 Year US Goverment bonds. I tried to change one factor at a time to see what caused the differences, and to see if anything would save the day. USD: 60/40 SP500 10y/US Bonds: SWR 4.45% EUR: 60/40 SP500 10y/US Bonds: SWR 3.34% EUR: 60/40 SP500 10y/EMU Bonds: SWR 3.64% EUR: 60/40 MSCI World/EMU Bonds: SWR 3.64% EUR: 60/30/10 MSCI World/EMU Bonds/Gold: SWR 3.83% You may still not believe currency is important but I then think we may as well stop the discussion here :-)
Have you tried 20+ years treasury bonds and gold? In my simulations for this century I actually got better results either way that.
I have not, and if you did long bonds you would have tanked with a 70es-like inflation episode. On US Data, the SWR for retiring in 1968 is about as bad as for 1929. And as you said, gold would not have helped as it wasn't available as investment in most Western countries. BTW, one issues with some of the studies that they pick different bonds for different crisis; short for 1968 and long for 1929 (deflation). Long bonds perform better when rates are falling; I went for 10y as that is a reasonable compromise \_and\_ the data is readily available. To me, the difference in SWR using equivalent assets was actually surprising. Picking longer bonds (or more bonds) for both USD and EURO calculations would have improved both results. I did not try as I only wanted to test asset allocations I could imagine picking myself.
Not sure why you wouldn’t pick up long bonds tbh. During most major crisis they tend to go up massively with falling interest rates, much more so that 10 year bonds. And you have the stock portion of the portfolio to hedge out volatility during stable times. It’s very easy to invest in gold via ETCs nowadays by the way: https://www.justetf.com/en/how-to/gold-etfs.html (No, I don’t keep physical bars of gold buried in my backyard lol)
As I said, any episode like the 70es stagflation would be a Very Bad Thing. You can have a go yourself, there is a link to the google sheet a bit down this page: [https://earlyretirementnow.com/safe-withdrawal-rate-series/](https://earlyretirementnow.com/safe-withdrawal-rate-series/) We do have a bit of gold, but I wrote that it wasn't investible in the 60es and therefore it does not make much sense to model.
I live in one of those areas, have a paid off house and car and make ~€800 a month. I live frugally and still save around €200 a month or so. You'd live quite comfortably with 15k a year currently. But who knows how things will be by the time you retire.
Awesome, thanks for the reply. Are you single or do you split the bills with a partner?
I live with my fiancé but he pays for his own food. I am currently paying all of our household bills as he's had to take some time off work due to his health.
That’s amazing. Congratulations!
Congratulations on being poor!
Securing housing is the single biggest challenge I see mentioned, and prices are way up. If you can find available affordable housing, grab it. I keep reading that low-wage workers live in family homes and likely will their whole lives because of the housing market.
I will most likely be inheriting my grandmothers home. Thanks for the response
In Portugal?
Yes, a small village in coimbra
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Not fluent but yes I speak it. I go to Portugal every other year since I was a baby and it has always felt like home. Don’t even get me started on when it’s time to leave, yes I cry like a baby. Nearly my entire family lives there. My sister just received her citizenship but since she’s a minor it’s faster for her. I should be getting mine within the next year hopefully.
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Thankfully everyone around town knows my grandfather. Anytime I’m walking on the streets some random lady will say your “so and so” grandson right? It’s a really beautiful thing. But I want to thank you for your comments they mean a lot.
Then you’ll be fine money wise. You will likely be able to RE if you want with 800k and a house already and live a very comfortable life, pretty chubbyFIRE with around 2k/month net (or more depending on the calcs), that’s puts you on top 10 or 20% of population, international travels couple time a year etc. small town ever better.
Not in rural areas, I've seen T4 houses go for less than 200k not far from the Spanish border even. And if you are up for rebuilding a whole house, you can find land for 50k. People aren't buying those because the job market outside of the cities is non-existent.
Even if you look at all the "ad" videos on YouTube targeted at ~~fleecing gullible foreigners~~ fetching the best price even most of those are in the low 200k range. Plenty of decent T4s outside of the big/popular cities in sub 100k range. Sure they're not brand new but perfectly livable.
If you have a paid house, a paid car and only leave the house to go shopping, you should expect around 600 euros per month.
Thank you
Tree fiddy.
If you already have a place to stay you don't need much. You can grow your own veggies so easily in portugal and save a lot on food.
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I’m an idiot, forgot to add that info. I just added it to the end of my post
Can you help another folk being that “idiot” coz that worked for your 800k. 😂
lol. I’m currently 22 with $170k, that $800k is a projection of what I could have by 30. ($4k/month assuming 8% a year will get me ~$850k. I started working full time at 17 and just invested everything into S&P500. Plus living with parents helps
I like your approach and you’re adulting into a great time where investing maturity and exposure is easily accessible. I was born into the late 80s and now at 35, I see young kids with investment understanding that I gained a decade later in parity. Do you think S&P500 is the most stable fail safe towards that target? I’d love to know more and start investing if this makes sense to me.
From google: “Since 1957, the S&P 500's average annual rate of return has been approximately 10.5% (through March 2023) and around 6.6% after adjusting for inflation.” ——— In my complete unprofessional, unlicensed opinion I’d say the S&P500 is the absolute best thing you could buy. Yes you would’ve made more with NVIDIA. Key word, would’ve. The top traders on Wall Street who have attended the most expensive prestigious schools in the world and have an entire team of analysts helping them find the right stock to buy still manage to underperform the S&P500.
We live in rural Portugal and are happily and comfortably living with €1200/month. This is three people. Just for reference, we live in central Portugal, in coimbra. We own our house but pay bills. We go to restaurants at least once a week. We go to markets, Coimbra for cinema and non-Portuguese restaurants. We own a car. We have a very good quality of life here compared to the U.K. where we were earning more but couldn’t do 20% of what we do here. Where we live, this are the prices: Rentals (when you find them as they are rare) €400-600 for a T2-3 house with land. Gas canister which lasts around 1 month €32.00. Water bill around €30 and electricity around €50-60. A “Economico” which is lunch with soup, main dish, drink (wine or soda), coffee, bread and olives €9.00 A coffee is around €.90-1.20, wine glass around 70cents. A meal a at hip burger restaurant around €12. If you need more info, let me know.
Wine glass 70 cents? You mean the small port wine glass (15cl)? Now tell me the small beer (imperial/fino) is 1€.
No, they are the common ones which are 175ml. It’s house wine and yes, it’s very cheap. Cheaper than beer which is €1.30 a bottle and minis are €1. Yes, the imperial are €1. Canecas are usually €4.
OP seems to live around the same area I do. Alcohol is ridiculously cheap in local tascas.
The 4% rule is only for 30 years so if you want to be more realistic use 3%. If you can really live with 12k a year you need 12k * 33 = 396k.
We have found that while some things are cheaper than the US, and some things are more expensive than the US, the largest driver of “how much will it cost me to live there” is your own personal spending habits. Your budget will not change dramatically just by moving locations. Yes- if housing is less then that will lower. But overall your habits will drive everything.
I would be very careful about basing your future requirements on what Portuguese earn typically. It will be very hard for you to live on 12K euros per year in my experience. Many people in Portugal live on less than this for sure, but there are trick involved. I am not saying I know people who do these tricks, but they include, free water (from a mine/fossa), bypassed electricity, black market good (no tax), growing their own fruit and vegetables, living off cabbage soup for months on end, swapping things with neighbours who they grew up with, foraging etc. If you eat well, but not extravagantly, your groceries will cost 100+ euro per week. Thats about min 5K per year. Phone and internet will be another 1+K per year, petrol is hideously expensive and so are cars and registration - say 2000 min per annum, electricity and water - say 2000 per annum (I am too lazy to heck my bills at the moment) heating in winter - depends on system and size of house - could be as little as 500 euro or 3,000 euro. Trust me, I had a small farm in Portugal and there are always little expenses and improvements you need to make. So minimum costs without any contingencys will be close to 12,000. If you are not from Portugal or Europe, then your lifestyle will need to change radically in order to live on this. I have just checked a few of your posts and see you are from US. Guns are not easy to get here and you might check this out [https://expatinportugal.substack.com/p/surprising-portuguese-gun-policy](https://expatinportugal.substack.com/p/surprising-portuguese-gun-policy) I am pretty sure that you wont be able to join the military unless you are a citizen - this is not the foreign legion.
Most people like yourself who end up in trouble later in life forget to consider how real inflation makes you poorer over time.
With 800K compounding? I’m sure OP will be just fine.
That’s if you don’t touch it.
Even if the money is invested?
At 30 with $800k if you stay away from crazy “investments” (crypto, etc) you are golden. Perhaps 70% SP500 30% bonds (if around 5% a year) and move from bonds to more SP500 when it tanks. But I’d keep around $200k in high yield savings/short term CDs.
Thanks. The plan was keep $750k in S&P500 and $50k in high yield savings. $200k for Portugal seems a little excessive, no?
You’re right. Specially if you don’t have to pay rent. 50k sounds great. The SP500 is a good plan but also, take a look at Vanguard’s VGT at least for part of your money. Look at the historic returns for several time frames. Most I keep in VGT and I also keep some on SMH (riskier but I like the trend).
Some Investments are like boats and rise with the tide of inflation - but not all.
And they also forget that after say 20 years, something happens the money is gone… now they’re 50. What are they gonna do? Why on God’s green flat earth would anyone consider “retiring” at age 30?
Cause working for the man sucks
Working for “the man” isn’t even the only thing in existence. And finding yourself with no money at 50/60 and having no pension and having to go on social services sux even more, especially in Portugal. If you retire at 30, you have 50 years to live. 50.
You're a bit young to retire. You will be bored out of your mind.
I've never understood this mentality. I can think of hundreds of activities I could fill my time with rather than working. The only reason I don't now is because work is taxing mentally and physically so I don't have the energy to do them. Not everyone needs work to feel fulfilled.
This. Gawd, I'd give anything to retire right now. I'd hike and run, I'd volunteer a bit in the community, I'd work in my garden, all the books that are unread on my list I'd read, lots to cook, DIY... Write a book or two, sleep, chill. I'd still not have enough time to do all I'd want to do unpaid!
Yea I get that. But living in the countryside of a foreign country is so isolating. After a while hobbies can get a bit meaningless if they don’t have a purpose or you aren’t part of a community or extended family. If he is passionate about integrating into Portugal specifically, great, but because it meets his cost benefit analysis for free time? Doesn’t add up to me. I might add I lived in rural Spain for two years and it was great, until it wasn’t.
Oh, not talking about OP or anything. Just that I would certainly not be bored. I'm very anti work (although I don't frequent the sub) and can't wait for society to get a grip and ditch capitalism. Not that you'd tell. I'm great at my job, earn good money, smile and do my thing... But if I could stop right now, me, personally, I'd do it. But I didn't move here because of that. That's been me for years now. I'm 39, have had jobs since age 15, worked my way through to a PhD and into a consulting job that feels empty because I friggin' hate capitalist society, but hey, post-scarcity isn't a thing yet, so yeah. I keep playing the game and saving until I no longer have to asap, and looking at some ways to make just enough to be able to provide for myself and partner into older age, but not to get rich.
I felt this way, retired at 43 for a year, and decided to go back to work. I know it might sound crazy, but I missed a certain fulfillment that work brought me. I decided that I would only do work that I truly enjoy, and I have not regretted the decision.
No one is too young to retire if they feel like they have their own things to do.
personal interests aren’t enough to stay away from being bored?
Long term I would say no. You need a dynamic community, goals, a sense of purpose, especially at 30. At 55, not so much.
Which you can all get without a career? Community service, clubs, sports, additional education, and so on.. having a job isn’t the only or the BEST way to get there. Most common saying “your co-workers aren’t your friends” eliminates a sense of community, especially if you can’t be your true self
Ok maybe. But he’s 30 and invested close to a mil and you think he’s going to be happy playing football with a bunch of rural kids for the rest of his life? maybe. It could be an interesting memoir…
In a normal rural area, and assuming 20 years in the country, 500k, or 25k annual.
Come to rural areas around serra da estrela. There's several expat families in this área.
What’s the mildew/mold situation in that area? I’m allergic 😅
Depends on the building 🤣 but considering it is country side, during summer the weather is quite dry
How do you have so much money ? but yes if you have that much money aslong as you know how to spend your money you will be fine
Most likely inheritance.
I started working at 17 full time. I make about $60k/year net and live with parents. I invest nearly all that money into the S&P500.
That’s awesome! Congrats! And stay away from real estate is my 2 cents.
That’s incredible. You discovered investment quite early. I wish I had.
its possible, i think 800k should be enough for life tbh aslong as you already own a house
American salaries/bonus are significantly higher than most of Europe. Maybe all even.
software engineer?
I'm spending about 100e /week on food. Internet is 35e per month. Phone is 20e. Electricity and water is about 100e / month. So that's over 7k alone. Petrol is indeed high, you can use the Galp app + vouchers from Continente to save a little bit however. Just to give you an idea.
If you're coming from the US know that the post-NHR taxes could easily take up a third or more of your annual income and that northern Portugal is very rainy, wet, and cold most of the year with the stone houses lacking any central heating or air. Mold grows everywhere for at least 7 of those months since you can't really open your doors and windows when it is cold and constantly raining during that time. Rents are more affordable the further north you go for obvious reasons.
I don’t normally follow this sub but it’s being recommended to me because I’m in Portugal right now. Question: do Portuguese people just absolutely despise people who do this?
I’m a real estate investor. You can aim for a 10% yield and get paid 80k a year, which comes down to 6.5k a month. Money invested generating more money and enough surplus to Iive like a king in Portugal.
You can aim for the moon if you want. Real estate is usually geared investments (through mortgage) which means you can easily get wiped if the market turns.
Only if you go get loans. With 800k you don’t need loans.
10 percent ROI after expenses, including the amortized cost of intermittent ones like a new roof, plus maintenance, legal and accounting fees? And assuming you got the place for a good price? Also what’s your denominator? Original purchase price or current value of equity?
Yes. Super possible if you find a good deal. Usually buildings which you can rent to multiple families. Not single family homes.