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Ways to Achieve an Early Retirement While Living Abroad

By Benjamin Harper


While exploring exotic locations is certainly one aspect of traveling the world, the primary benefit for most international expats is the savings. When you can cut your cost of living down from $25,000 per year (the median cost of living per working adult in the United States as of 2010, according to the U.S. Census Bureau), to a mere $8,000 to $10,000 while retaining access to all of the exact same amenities you are accustomed to, all that money goes straight back in your pocket rather than disappearing into thin air.

The median wage (again, according to the U.S. Census Bureau) as of 2010 was the same: $25,000 per year. That is take-home pay, after taxes. The pre-tax number is just above $36,000 dollars. But the other benefit most people don't know about is the fact that when you live abroad as an independent expat you don't have to pay the same tax rates that you do while living in the United States. Choosing a country that has a tax treaty with the U.S. means you can pay the local rate of taxes in your chosen country rather than the higher rate back home, effectively allowing you to retain even more of your salary and thus obtain an early retirement.

One of the primary reasons expats choose to go to a country like Colombia, Greece or Italy is because the median cost of living in those countries is between $8,000 and $10,000 per year. Not only that, but the tax rates are generally lower than what they are in the United States, which means your take-home pay on a median salary of $36,000 per year is significantly higher than 25k. Plus, since you only need 8-10k to live the digital nomad existence you can take your extra 20k or so per year and utilize it as you see fit, either living like a king or putting the money away for your early retirement.

The cost of living in other countries doesn't only apply to those people who are still part of the active work force. Pensioners living on a monthly allotment of around $1,000 per month can take advantage of the expat lifestyle just as easily, and they actually have been for years. When the cost of living in a country like Mexico is around $600 to $800 per month, you can use your $1,000 per month to enjoy the tropical destination and an early retirement, rather than barely scraping by. And since universal healthcare is the norm in most countries around the world, you don't have to worry about paying thousands for medical care and medicine.

Living abroad as an expat means you can reduce your working hours if you choose, because you need significantly less to pay for your cost of living. Or you can do as many other professionals are doing, which is working abroad for three to five years, working normal hours on your old salary and keeping that money so you can enjoy an early retirement by the time you are 30 or 35, rather than waiting until you are 60 or 65. When you can buy three bedroom house in a place like Italy for $35,000, it's easy to save up in a few short years and retire comfortably at an early age.




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