How to lower the cost of living by retiring to Europe

Retirement life planning is a large and complex industry, but if you’re thinking about how to retire early or live a more luxurious life when you retire, the calculations can be pretty simple.

“The biggest knob you can turn is the cost of living,” says certified financial planner and founder Tommy Sikes. travel fatiguewho highlighted affordable housing in France and Italy through his newsletter and social media channels.

“In the United States, you might have to spend $70,000 a year to have a middle-class retirement,” Sykes said. “If you had that much money in southern Italy, you could live like a king, renting or buying property.”

If you’re looking to retire in style while keeping costs low, European retirement may be for you. But when you start looking for a castle, keep these three tips in mind.

1. Think outside of popular locations

If you’re looking for an exciting yet cost-effective retirement destination in the United States, you might immediately check New York and Los Angeles off your list. The same is true in Europe, Sykes said.

“Paris, Rome and Milan will still be very expensive,” he said. This is certainly true for luxury vacation hotspots like Lake Como and St. Tropez, although you may not find what you’re looking for in these places.

“The core of these countries is when you go deeper into the countryside,” Sykes said. “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 the infrastructure. They still have high-speed internet and medical offices. It’s just that people may not see them as dazzling or glamorous. ,” he added.

Nevertheless, if you can spend less on basic living expenses and do more on things that make you happy, life will become more charming.

“A couple I know live in a small coastal town in southern Italy. They have beaches, a walkable town, restaurants, bars, trains — and they live on the main line,” Sykes said. “He told me he was living on $1,500 a month.”

2. Understand the rules of residence

Before you start your search, you must find out what the rules are when it comes to owning or renting property and generally living in the country where you plan to retire.

Sykes focused on France and Italy in part because the rules in those countries favor Americans who want to buy property there.

“There are zero restrictions on Americans buying property in Italy or France,” Sykes told CNBC Make It. “You don’t have to be a citizen. You don’t even have to be a resident. You can actually buy things remotely.”

Once you figure out whether you’ll be able to buy or rent in another country, residency is another question. For many people who want to become mainland retirees, the half-and-half solution is a great first step.Valid U.S. passport holders can live anywhere in the United States Schengen Areawhich includes all EU countries except Ireland and Cyprus, lasts up to 90 days in any 180-day period.

“You could go from January to March, go away for 90 days, come back in July, August, September,” Sykes said.

For full-time residency, you must explore whether citizenship or visa rules make sense for your retirement plans.

3. Work with professionals

Living on a fixed income in retirement always requires a lot of planning, and doing so abroad adds an extra layer of complexity.

You may have a pretty good idea of how distributions from 401(k) and Roth IRAs are handled from a U.S. tax perspective, but the situation may be very different in another country based on international tax treaties.

Even Sykes, a CFP, knows that it’s important to have people on both sides of the ocean who can help you develop your plan. “You need people in the country – people on the ground to help you with administrative matters,” he said. “Some of these countries are known for their bureaucracy.”

If you plan to use the property part-time and plan to rent it out while you’re away, you’ll need to develop a relationship with a property manager you trust. Even if you don’t rent it out, you have to plan for what happens when you’re not there for three months.

Even before you cross that bridge, if you’re doing a real estate transaction, chances are the sales agent won’t speak English and the documents will be in your native language. These are just a few of the reasons why Sykes strongly advocates seeking assistance.

“There are many reasons to work with a professional on your budget, rather than trying to figure it out yourself.”