Where you decide to live has a big impact on your cost of living during retirement (obviously). Choosing to live somewhere that is inexpensive yet provides all the things you want in retirement enables you to hit the magic number sooner. Since you don’t have to work you aren’t tied to any specific location so you can live anywhere. For many, including myself, that choice is in another country.
I’m from the U.S. I traveled quite a bit when I was younger to a lot of places that were, as they say, a nice place to visit but I wouldn’t want to live there. By the time I discovered Thailand I had already reached the magic number and then some. It’s just that I didn’t know it yet. But when I got around to running the numbers I realized I was well over the magic number of 25. I could quit my job anytime.
There is a little thing called foreign exchange rates that can play a big part in your retirement plans if you are considering expat retirement. When I retired the U.S. dollar bought about 42 to 45 Thai baht. I kept most of my money in the U.S., transfering money as needed to Thailand. Then we saw the war on terror expand, U.S. debt balloon, and the dollar weaken. In the short span of a couple of months in early 2006 the dollar fell from over 41 to under 38. That’s about a 10% hit to my retirement nest egg in a matter of a couple of months. Fortunately I was well over the magic number of 25 so no worries. But many retired expats in European countries were hurt much worse by the weakening dollar. Some of them lamented on expat forums about 30% hits to their fixed incomes that were forcing them to make drastic changes in their retirement.
So, if you are considering expat retirement you need to remember that currency fluctuations can be sudden and have a big impact. Making plans to mitigate that is important.