Is FIRE Dead, What About Expat Retirement?

rogernusbaum

I'm a huge believer in the FIRE concept; financially independent, retire early. I am also a huge skeptic of the FIRE concept. Along the idea of taking bits of process from various places to create your own process (I will take credit for that wording but not the idea), saving a bunch of money, living below your means and being financially resilient creates financial independence. The idea that someone could truly retire at 35 with $500,000 and think they could make that last for 50 or 60 years has never made any sense to me. If you're 35 and have $300,000, $500,000, $700,000 then you are off to a fantastic start and arguably someone that age with that much money might not need to save more, they could just let the compounding of that nest egg do the work for them. A successful outcome in that scenario would rely on their sequence of return to some degree but if money doubles every 14 years (rule of 72 assumes a 5% return) then yeah, they might not need to save anymore. This opens the door to a whole bunch of vocational optionality.

But people in that 30's-40's age range who recently retired with the expectation of drawing 3-5% of their savings per year to live on forever are now blown up. Someone who had $500,000 a few months ago and planning to take $20,000 out might now have between $350,00 and $400,000 and so their planned $20,000 is a larger percentage than just 4%. If it takes another year before stocks start to rally (not that bad in the historical context of bear markets) and they need to take another $20,000 a year from now, that hurts their balance all the more. Then, what if this same person has a $3000 emergency in the middle of this stock market drawdown? Maybe $3000 doesn't sound huge but against a $20,000 income it's pretty big.

If someone with a large account balance who thinks they may not need to save more wants to get out of the "rat race" and cobble several streams of income together that pay the bills, allow more autonomy and spur more joy, I am all for it. This is pretty much what I did when I was 37 (about to turn 54) other than the not saving part, we still try to sock it away. They can call it being retired if they want but that is not really being retired, it is financial independence and it makes life very fulfilling.

I am a huge believer that expat retirement can be a viable solution for many people but with a couple of big qualifications. Just as the merits of FIRE are being questioned so too might the merits of retiring overseas. My concern with permanently retiring overseas was access to quality healthcare. I realize there's quality healthcare in places and that I have some sort of bias but the question of healthcare is the first or second thing people learn about when choosing a foreign country to retire in. If you read the articles about destinations to retire to, you'll see Spain frequently pop up on those lists. I've told this story a hundred times, my father moved to Spain when he was 54 and stayed there for his remaining 34+ years. He was very healthy, then was sick for six months before passing away. I went there twice during that period and drew the conclusion that the healthcare there was dreadful although I've seen in articles that Spain's healthcare is actually pretty good. Maybe they meant relatively good?

We all know how bad Italy's Coronavirus numbers have been, it has had 110,000 cases and 13,000 deaths, but Spain isn't much better at 110,000 cases and 10,000 deaths (all those numbers from Bloomberg TV this morning). The numbers could be skewed by quite a few factors including number of tests, false negatives, how deaths are counted (I've seen speculation that not all those people are actually dying from Corona but something else) and more. But where Italy has 60 million people and 13000 have died from it and where Spain has 46 million people and 10000 have died from versus 330 million Americans and 5000 deaths it is reasonable to wonder about healthcare. The answer could be other things, that's the point, I don't know and chances are most of us do not know.

And that is the potential dilemma in permanently retiring abroad. Ecuador is a popular expat retirement destination. With a population of 16 million, Ecuador has 2700 infections with 93 deaths of which 60 are in just one area. That doesn't seem like a lot to me. Maybe Ecuador benefits from the warm weather theory (hopefully that theory is right!) although it's not that hot there at the higher elevations. Maybe they haven't had it hit yet? I don't know. I've never read anything negative about the healthcare in Ecuador but don't know how well they'd be able to handle a serious outbreak but at this point the morgue in the most affected area is overcapacity.

If chloroquine and azithromycin turn out to be the answer (there's promise there) and you're in some other country, would you be able to get in to a hospital or urgent care equivalent and get treatment? I concede all points that the answer to these questions for the US could be no. I don't have all the answers of course and this is another element to the dilemma for leaving the US, you won't have all the answers. There are risks which need to be understood before moving and not just related to healthcare. There's something appealing about living in a small mountain village in some scenic and cheaper country where life is simpler. What happens when you settle in to that situation and the supply chain is disrupted as has been the case here? In the US it seems like the supply disruptions might be more about demand from people hoarding and the consequence thus far seems mostly to be finding alternatives to what we might usually buy (please comment if that is wrong). That's merely inconvenient. Could the disruption in that small village get to the point where there isn't enough food? Is some level of stocking up (prepping) a possibility? What about growing a few vegetables in, I don't know, a 50' by 50' area on your property (maybe you can't buy or live in an apartment) ? Maybe these types of communities are self-sufficient in terms of crops and meat or maybe some are but some are not, that's worth knowing. This is something most of us never thought about but now maybe we should.

I have had contact with someone who is retired in Ecuador. When I put this article on Twitter I will tag him and hope he will let me know whether he thinks any of what I am saying makes sense.

My take on how to retire overseas has always been to do so as a young and healthy retiree. A 60 year old couple without much savings but with a mortgage free house could move to a place like Ecuador but keep their house here and rent it out. The cash flow from the rental could go a long way to covering their expenses in Ecuador. This would allow their savings to keep growing and allow their Social Security benefit to keep growing. Keeping the house in the US means they could always come back if they needed to or wanted to for health reasons or any other reasons without getting priced out.

Someone may move to a foreign country believing they will never come back which is fine of course but the cash flow and the optionality of keeping your house should not be dismissed.