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How to decrease your cost of living by retiring to Europe


There’s a vast and complicated industry around planning for life in retirement, but if you’re thinking about how you can call it quits earlier or live more luxuriously when you do retire, the calculus can be remarkably simple.

“The big knob you can turn is cost of living,” says Tommy Sikes, a certified financial planner and founder of Traveltirement, where he highlights affordable homes in France and Italy through a newsletter and social media channels.

“It might cost you $70,000 a year to have a middle-class retirement in the United States,” Sikes says. “If you have that money in southern Italy, you can live like a king, including renting or purchasing a property.”

If you’re hoping to retire in style while keeping costs low, a European retirement may be right for you. But as you begin searching for chateaus, keep these three tips in mind.

1. Think outside of popular spots

If you were looking for an exciting but cost-effective retirement destination in the U.S., you’d likely scratch New York and Los Angeles off your list right off the bat. The same goes in Europe, says Sikes.

“Paris, Rome and Milan are still going to be expensive,” he says. That’s true for luxury vacation hotspots such as Lake Como and Saint-Tropez, though you may not find what you’re looking for in those places anyway.

“The heart of these countries is when you get further into the countryside,” Sikes says. “We’re not talking about living in the middle of nowhere. There are hundreds, if not thousands, of small towns and villages that still have infrastructure. They still have high-speed internet and medical offices. It’s just that people may not see them as glitzy or glamorous,” he adds.

Nevertheless, life can feel glamorous if you can spend less on basic living expenses and more on doing the things that make you happy.

“A couple I know lives in southern Italy in a coastal town. So they have beaches, a walkable town, restaurants, bars, trains — they live on the main line,” Sikes says. “He tells me he lives on $1,500 a month.”

2. Know the residency rules

3. Work with professionals

Living on a fixed income in retirement always requires a good deal of planning, and doing so abroad adds another layer of complexity.

You may have a pretty good handle on how distributions from your 401(k) and Roth IRA are handled from a U.S. tax perspective, but that picture could look drastically different in another country depending on international tax treaties.

Even Sikes, a CFP, knows that it’s important to have people on both sides of the ocean that can help you plan. “You need people in the country — boots on the ground to help you through the administrative stuff,” he says. “Some of these countries are famous for their bureaucracies.”

If you’re planning on using a property part time, and plan to rent it when you’re not there, you’ll need to establish a relationship with a property manager that you trust. Even if you’re not renting it out, you’ll have to plan for what happens when you’re not there for three months.

Even before you cross that bridge, if you’re making real estate deals, there’s a good chance the selling agent won’t speak English and the documents will be in the native language. Those are just a couple more reasons why Sikes strongly advocates enlisting help.

“There are many reasons to budget for working with a professional and not trying to figure it out for yourself.”

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