How Much Will it Take?

How much do you need to retire? That all depends on several factors....where you will live, the lifestyle you need to support, how often you will travel back home, whether you buy or rent.

Where you will live - if you live in expensive countries.....Canada, US, "expensive" Europe (England, Ireland, France, Italy), you can expect to need pretty close to what you earn now. But you also have to ignore the dire forecasts of money managers who want you to believe you need $millions in order to retire. Once you retire, or daytrade for a living, you can eliminate many expenses...gas, car, clothes, lunches, etc. You may also own your own home, and if it is near payed off you suddenly free up a $ thousand a month, or so. But you can still expect to have a relatively hefty monthy earnings requirement in order to live in many first world countries.

If you live in inexpensive countries......"inexpensive" Europe (Spain, Croatia), South America, Central America, you might be surprised at how little you need. There are certainly plenty of places in the world where you can live in a 2 bedroom condo, eat out several times a week, own a car, have a full-time maid and gardener, and keep your monthly expenses under $1,500...and many places you can do the same for under $1,000!

The lifestyle you want to support - Will you travel, and stay in nice hotels, and eat in nice restaurants, or does budget travel suit you better? Will you buy (or rent) in a big city, or are you happy to live on the beach, or the country, or a small town? Do you buy at supermarkets when you do eat at home, and prefer restaurants, or do you like to cook at home, and buy fresh and cheap at street markets? Do you need all the amenties of your current life (new car, 60-inch plasma tv, expensive furniture, top appliances), or are you looking for a simpler life (old, or no, car, no tv)? 

Many people feel they need to live the same lifestyle they currently live, and for those you can expect to pay a bit higher monthly. But many others, myslef included, are looking for a simpler life. I like to cook, I want to buy my meals every day in a street market. I would rather spend 3 hours with a good book than 3 hours planted in front of a massive television. Give me a choice between nightclubbing or a nice, quiet walk, and I'll take the walk every day. I would probably want a car, but I would do most of my local travel by bike, bus, or on foot.

Whatever you choose, you have to be realistic. How many people who "claim" they want a simpler life would be happy in one? I will cover this topic in a seperate post, but my suggestion is you should try living a simpler life for 4-8 months somewhere before you jump in. You might find you need more amenities than you thought.

How often will you travel back home - this could be a big one. Do you have family....children, grandchildren, friends...that you would want to visit monthly, or bi-annually? A trip back to the States from Europe, or South America, might blow your budget out of the water. Or maybe you decide to make one country your home base, but want to travel the world. You must factor in travel costs if these situations arise. 

There is another travel cost you might need to factor in if you decide to live offshore half the time, and the remainder of the time in the US working to support your offshore life. Remember you will need to pay for flights, the cost of renting a new apartment, perhaps staying in a hotel while you look, setting up utilities, etc. Much of this can be done online before you return, but some will need to happen once you get back.

Botton line...BE REALISTIC. Factor in some of these before you finalize your budget.

Buy or rent -  this is a big one, and very personal. There are countries out there where you can buy a top end 2 bedroom condo in a big city, or a 4 bedroom home in a smaller one, for under $60,000. Prices run the gamut, from under $25,000 to well over $300,000, depending on what you want, and where you want it. But buying usually means staying put. If you buy a home in Ecuador, you aren't likely to move to England a year later. On the other hand, buying means your monthly expenses are reduced to a bare minimum.

Renting offers flexibility. You can spend several months in one city, or country, and then move to a completely different environment months later. If you decide to travel for an extended period you can give up a home base altogether. If you have to return to the US to work half the year, this might be your best option. It means a slightly higher monthly budget, but nice 2 bedroom apartments are available in many very nice places for under $300 monthly.

So, how much will it take? Only you can answer this for yourself. But you should sit down and do some serious number crunching, and some serious self-examination, before you come up with a budget. There are a lot of factors to consider, and the last thing you need is to underestimate your needs.