How Much Do You Save If You Live Abroad?

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One of the retirement options that I often think about is whether it makes sense for me to retire overseas one day. Being born in Asia and then growing up in Canada, there are quite a few places that attract our family on many levels. For one, we have many family and friends all over the globe. In fact, there are more friends and family of ours living in Hong Kong, Taiwan, or Canada than where I live. Moving to any of these places wouldn’t be much of an adjustment because the connections we have will make our family feel instantly at home.

Still, I live in Southern California and I love the lifestyle here. When I’m no longer working and the kids are out of the nest, the primary motivation for me to move would be due to the high cost of staying here. Whenever I think about how I can reduce my recurring expenses, I always think of how high our basic living costs are when we compare them to many other parts of the world. It’s almost like I have to pay just to breathe the air in America because I have to pay this amount even if I spent $0 on food.

So how much more are we talking about? Let’s take a look.

Healthcare Costs Are Ridiculously Expensive

The ACA open enrollment period just passed and we got another year of premium increases. eHealthInsurance reports that the average “silver” plan is $462 a month and $199 with the government subsidy. Plans will vary by age and location but we are talking about $700 or $800 a month for a family of four, and more like $2,000 for a family that makes a high income.

That’s not all though. All these plans include a deductible, which is the amount we have to pay out of pocket before insurance will start covering the bill. The average deductible was $7,767 for a family of four in 2020. That means any doctor visits or medicine you’re prescribed is paid out of pocket because most families aren’t going to meet the deductible unless they require surgery and other medical procedures.

Many other countries don’t require their residents to buy health insurance. And their out-of-pocket healthcare costs are lower than our discounted costs that the insurance companies supposedly negotiated on our behalf.

That means the whole amount of monthly premium is extra at $800 – $2,000 a month depending on how much I end up saving and therefore make in income through investments by the time I retire.

The good news for foreigners is that their reduced cost doesn’t affect the quality of care either. Having lived there, I have first-hand knowledge of how healthcare is like in four different countries in the world. United States healthcare is not better. It’s just more expensive for equal or possibly slightly worst care. As an aside, I hear that Japan is the place to get good care if you have the means. I have wealthy friends who fly to Japan to get elective surgery done because they are well taken care of throughout the whole process. This sounds like something only the billionaires can afford, but if you think about it, us paying $25,000 a year in premiums without a subsidy (a number eHealthInsurnace claims a family of four typically pays after taking into account the premium plus the deductible) for a few decades pays for a great deal of luxury travel and procedures in other countries.

Property Tax is Also Really High

I put this in here because we need to pay property tax even if we pay off our mortgage and supposedly own our house “free and clear”. I have friends in Asia who have similarly priced homes as mine who are paying 10% of what I pay in property tax. 10%! I do live in California though, so my property taxes are inflated. With the median price of homes in my county at $795,000 and property taxes a fraction over 1%, that’s roughly $8,000 a year. The U.S. Census Bureau reports that the average American spends $2,375 on property taxes nationally. Interestingly, California ranks as the 16th state with the lowest property taxes for an average household at $3,617. I’m assuming the big difference is due to the fact that many people have lived in their homes for years and their tax basis is just lower. As a comparison, New Jersey ranks as the most expensive with the annual taxes on home priced at the state’s median value at $8,104 a year. Let’s take $8,000 for me to live here. Compared with Asia, that 90% difference translates to an extra expense of $7,200 a month or $600 a month.

Cost of Transportation

America is the largest market for vehicles in the world and with many of the cars built within our borders, the lack of taxes and tariffs make our cars much cheaper than if we were to buy the same car in other parts of the world. My friends in Asia often envy the prices we pay for our cars because they pay roughly double the cost of the same car as we do at a minimum and sometimes they have to pay three times our prices.

At first glance, this sounds like a good thing for us in the land of the free but then when it comes to surviving costs, you have to take into account that people in many other countries don’t even need to own a car at all. Cars are a luxury when your transportation system is well implemented and convenient. Just think of living in Manhattan for a second. Why would you need a car there? Now think of transportation that’s even more convenient than traveling within Manhattan. In those countries, buying a car there is like people who choose to buy a boat here.

That’s two cars with car payments, car registration, and car insurance I can get by without. Since our gasoline bill is higher than what foreigners pay for in public transportation, all of our car costs are pretty much extra when we live in the states.

Car registration for two cars is roughly $180 a month (I know this is ridiculous. The costs have tripled for me in the past ten years), and car insurance is about $80 a month for two cars. The price of cars can range quite a bit but if you average a lease, finance, or the loss of investment returns if you buy the cars outright, then $300 a month seems reasonable. Then there’s maintenance. We’ve never paid as much as what those national websites claim maintenance need, but we still pay roughly $500 or so a year to maintain our two cars. Let’s make it $480 to make the numbers simpler.

Add these up and it’s $600 a month.

Summing It All Up

Depending on how much I make and how that affects my health insurance premiums, I’m looking at a minimum of $2,000 a month at a minimum and $3,200 a month. Sure, I won’t need to pay for my kid’s health insurance by then but Emma and I will be older and our premiums will increase.

There are other insurances like my homeowner’s insurance I could’ve added to this total but I didn’t know how much they cost in other countries so I didn’t add it. I doubt they are more expensive than here though because houses here are generally bigger and standalone structures (think more expensive per unit to replace) are more common. Ditto with dental costs. It’s cheaper in other countries too but I don’t know the exact difference and who knows how much I’ll need when I’m old. I haven’t counted anything on eating or utilities or pleasure either. I knew I had to pay more for being here but I didn’t know it was that much more. I have to pay almost $40,000 a year just for showing up, even if my house is fully paid off. If I choose to live in a place with a lower standard of living, I can save even more.

The upside is that if I were in danger of running out of money, then there are plenty of places in the world I can “flee” to in order to save money and still live a comfortable retirement.

Have you thought about moving to live abroad? How much could you save? It’s a good idea to make the calculation because the number could surprise you, as it did me.

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  • EdG says:

    If you’re willing to move a little bit in the US you can save a lot of money when you’re retired. I would hesitate on moving too far away because it’s hard to keep in touch with your friends. Friends are important.
    You can save by downsizing and living in a less expensive area nearby. You save on real estate taxes and maybe get some money out.
    CA car registration costs sound ridiculous, if you’re near a state border maybe it’s worth crossing the border when downsizing. And if you’re willing to suffer a bit, you can probably have only one one car when retired.
    As for healthcare, when retired you can save by using the ACA as a catastrophic plan. This works if you’re reasonably healthy with just a few doctor visits and tests a year.
    I’ve done some of this. I downsized, but still can move to a cheaper nearby area. I use the ACA as described. But I still have 2 cars.
    Since you have an international family moving out of the US is not such a big change for you but it is for others. I think it’s possible to live inexpensively in the US once you retire but you need to choose wisely.

    • David @ says:

      Thank you for the tips. Are you talking about using the bronze plan for the ACA as a catastrophic plan? I checked and even the bronze plan is like $300 to $400 a person. Our kids will get their own health insurance when they are in the workforce but we will still be paying through the nose once we are at retirement age.

      And CA registration fees ARE ridiculous. It wasn’t long ago when I was paying $80 a year for my car. We now pay something like $900 a year.

      Moving to Nevada is always an option but it’ll be a big change for us. As you said, family and friends are important and we really don’t know anybody there.

      Lots to think about when the time comes!

      • EdG says:

        Yes, a Bronze Plan with a HSA. I like the HSA as I can have another 9K in income and still qualify. And HSAs have great tax advantages. I pay about $250 a month for both of us in south east PA. However, the deductible is 7k per person. So we pay the negotiated rate out of pocket. But that rate is not so bad for Dr visits and tests. A hospital stay or major outpatient routine would be very expensive. But so far, 4 years, it has worked out OK.
        Don’t forget that selling /buying/moving has costs too. I’d estimate between 7-10% total with sale and purchase.
        4-6% realtor, 2% transfer taxes, 1-2% move and misc.
        I’ve been looking at maybe moving lately.
        Not much peace and quiet in my “town” and not much to do, even pre-covid. I’d like a view, quiet and more to do.

        • David @ says:

          Ahh I see. I’ll look into a HSA plan.

          I always wonder when there will be enough pressure for the realtor commissions to come down, as 4-6% is quite high for what they do.

          And speaking of selling a house, consider Southern California 😀 There’s definitely lots to do here, but I suspect I already know your answer because I’ve already told you the cost of living here!

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