After visiting several cities in Portugal, including Lisbon, Funchal, and Portimao, I was captivated by the country’s stunning natural beauty and the warmth of its people. I recently achieved my lean FI/RE number by cutting costs, aggressively saving, and investing the rest.
Madeira, in particular, stood out to me because of its access to mountains and outdoor activities. However, as I delved deeper into researching the D7 visa and what it entails, I began questioning whether Portugal was the right place for my husband and me to live.
Let’s explore both sides to help us make informed decisions, hopefully.
Here’s a breakdown of the pros and cons as I see them:
The Pros of Retiring in Portugal
Climatic Bliss
One of Portugal’s standout features is its excellent climate—mild winters and warm summers, with plenty of sunshine to brighten days. If you’ve had enough of shoveling snow or enduring scorching heat, Portugal’s Mediterranean climate might be your cup of tea. In the southern part, winters stay mild, and you rarely see snow.
However, while Portugal is famous for its great weather, it can get scorching hot, especially inland. This can be way hotter than what you’ll find along the coast. Check out the summer temperatures if you consider living away from the seaside.
Sometimes, what’s mild outdoors can be quite chilly inside, especially in older apartments, like in Lisbon. Many Portuguese buildings, especially older ones, lack central heating. So, if you move during the summer, ensure your place has an A/C unit that can heat things or another heat source.
Up in Northern Portugal, winters can be rainy and even cooler, so having proper heating becomes even more important. I learned that you can find places with remote-controlled heating and cooling units. This helps to ensure you can stay comfortable throughout the year.
Cost of Living
Portugal has many cities that offer a relatively affordable cost of living compared to many other Western European countries.
Housing, healthcare, and daily expenses are reasonable, allowing your retirement nest egg to stretch further. There are some exceptions, though, like Lisbon and Porto, where living costs can be higher due to its popularity and demand for housing.
I live in a mid-cost city in the US; surprisingly, I found accommodation costs can be comparable to Portuguese cities like Lisbon and Porto. The living costs are obviously relative to where you came before. But if you are willing to live outside these bigger cities, you can often find more affordable housing options and a lower overall cost of living.
Natural Beauty
Portugal boasts diverse landscapes, from stunning coastlines to lush green hills and historic towns. The Algarve region, in particular, is renowned for its picturesque beaches and cliffs, while the Douro Valley is famous for its vineyards. Exploring these natural wonders can be a regular part of many’s retirement routines.
Healthcare
Access to quality healthcare is a vital consideration for retirees. Portugal shines in this department, with a robust healthcare system. Healthcare cost is significantly more affordable compared to the US. Many doctors and medical professionals speak English, making it easier for expats to communicate their healthcare needs.
Residency Programs
Portugal offers attractive residency programs for retirees, such as the Non-Habitual Resident (NHR) program, which provides tax benefits for eligible ex-pats. This program allows NHR residents to reduce taxes on income, 20% if earned in Portugal and 0% if made abroad. However, there is a plan from the Portuguese government to end this program.
Safety
Safety in Portugal is generally good. It’s considered one of the safer countries in Europe. You can typically explore cities and towns without major concerns, but like in any place, it’s important to take common-sense precautions.
On the other hand, the USA has more prevalent gun violence and mass shootings than Portugal. Portugal has stricter gun control laws, resulting in fewer incidents involving firearms.
Petty crime, like pickpocketing in tourist areas, can occur, so keep an eye on your belongings. Additionally, while Portugal has a low crime rate, it’s always a good practice to be aware of your surroundings, particularly at night.
Expat Community
Portugal, particularly in its larger cities like Lisbon and Porto, boasts a thriving and diverse expat community, aka immigrants. This community provides support and a sense of belonging for newcomers, especially if you don’t speak Portuguese. It also offers opportunities for social connections, networking, and access to services designed to cater to the needs of expatriates.
The Cons of Retiring in Portugal
Language Barrier
While many Portuguese people speak English, especially in urban areas, the language barrier can still be challenging, particularly in rural regions. Learning some Portuguese phrases can go a long way in bridging this gap.
Bureaucracy
Tackling paperwork and navigating through bureaucracy can be a real headache, especially if you’re new. Sorting out things like residency, banking, and healthcare often demands patience and persistence. Honestly, it’s a bit of a deal-breaker for me. I can manage it occasionally, but I’m unsure I can tolerate it if I have to deal with it too frequently.
Real Estate Costs
While the overall cost of living is reasonable, real estate prices have increased, especially in popular areas like Lisbon and Porto. Finding an affordable home in a prime location can be tricky. I sympathize with the locals because many of them are being priced out of their own neighborhoods.
Housing Issues: Poor Insulation and Black Mold
Many homes in Portugal, including apartments and houses, may not be great at keeping in heat, blocking noise, and preventing mold. This can be a bit of a drawback.
Central heating isn’t standard in Portugal. So, people might have to deal with the cold during the winter. Electric heaters or air conditioners are often used but can drive up electricity bills, which can be expensive.
Many older buildings in Portugal lack proper insulation in their walls, especially external ones. This, combined with the country’s dampness and humidity, creates the perfect conditions for mold to grow. Black mold, a particularly nasty type, can be a problem, especially in the winter. People need to deal with this, and getting a good humidifier is one way to deal with it.
If you move there, you might want to be ready for some property challenges related to insulation, heating, and mold in Portugal, especially in older buildings.
Roads are narrow, and hills are everywhere.
Portugal’s got these narrow roads, especially in older towns, which can make parking and getting around a bit tricky.
Traffic can get congested, and driving might feel nerve-wracking on those tight streets. Then there are the hills – they can be challenging for walking or cycling, and it could be a workout if you’re not used to it.
Portugal is a country with a lot of hilly terrain. You’ll find hills almost everywhere you go. This can affect your daily activities. For example, if you’re walking around in a hilly area, you might find it a bit more tiring than strolling on flat ground. If you’re elderly, these hills might present a challenge, as they can be physically demanding to navigate, potentially limiting your mobility in certain areas.
Dog Poops
One of the unique aspects of living in Portugal is the issue of dog waste in public spaces. While the country is generally pet-friendly, not all pet owners diligently clean up after their dogs. There are also stray dogs that contribute to the waste. You might encounter dog waste on sidewalks or public parks in some areas.
Transportation Challenges
While Portugal has a good transportation network, public transportation in some rural areas may not be as convenient. But this probably does not only apply to Portugal. You might need a car for easier access to services and amenities, depending on your location. The buses were also prone to leaving or arriving late, so giving yourself extra time for transfers would be best.
Healthcare Wait Times
While the healthcare system is generally excellent, sometimes you may encounter longer wait times for non-urgent medical procedures, a common concern in many countries with universal healthcare systems. However, you can choose private healthcare for quicker access to medical services if you want things to move faster.
Reconsidering Portugal: Weighing the Benefits and Drawbacks
Like many others, I got a bit carried away with my excitement for Portugal. I was tempted to pack up and move right away. I even contacted a lawyer and was on the verge of opening a bank account. But one thing that gave me pause was looking into the tax situation. While the Non-Habitual Resident (NHR) status offers ten years of tax exemption, there are tax obligations afterward. This made me reconsider my plans.
We also took a trip to the Algarve region in the middle of the year, and I loved it. The abundant sunshine and the lower cost of groceries compared to where I currently live were definite perks.
However, I had the opportunity to visit Austria and Germany (specifically, Gosau and Berchtesgaden), and my husband and I fell in love with the Alpine region.
It became clear that I wanted to live closer to the Alps and have regular access to hiking opportunities. We hope to find a livable and affordable town with community and easy access to the Alps. That’s one of the incredible things about travel—it reveals new desires you may not have realized.
There are a few aspects of living in Portugal that concern me:
- Bureaucracy: As mentioned above, getting things done can be slow in Portugal. While I can handle government-related delays, waiting for everyday tasks to be completed sounds frustrating.
- Capital Gains Tax: Disclaimer: I’m not a tax expert, but I read somewhere that Portugal’s capital gains tax rate is 28%, which, while lower than neighboring countries, is still significant, and I’m unsure if this applies as NHR resident. Many mentioned that the total living cost is still lower overall than where they came from, but it’s something to consider.
- Driving in Madeira: This might be specific to Madiera Island. Madiera Island presents a unique challenge when it comes to driving. The winding and narrow roads can be tricky, especially for someone like me who tends to experience motion sickness. While I don’t mind having a car, I prefer to live in a walkable city with access to nature and public transportation.
Making Your Decision
Deciding to retire in Portugal is a significant life choice, and you might want to consider your individual preferences and circumstances. Here are a few things you might want to consider:
Visit First
Before committing, I’d suggest spending some time exploring Portugal. Last time, we spent about ~2k per person / ~4k in total for 12 days. Travel around the country, visit different regions, and experience the local lifestyle. This firsthand experience will give you a better sense of what retirement in Portugal might be like.
Monthly Living Cost & Taxes
Create a comprehensive retirement budget considering all your expenses, including healthcare, housing, and leisure activities. This will help you determine if Portugal aligns with your financial plans.
Calculate your income sources, such as social security and investment, and see if this suffice to cover your living cost, and apply for D7 visa.
I’d recommend checking out the Numbeo site to find out the living cost of your targeted city and research/consult about taxes.
Find an accountant or tax attorney who is familiar with the taxation in the country you are from and Portugal. For example, if you are from US and plan to live off your capital gain taxes, will you be taxed on 401k or Roth IRA withdrawals? Do you have to pay capital gain taxes with NHR (Non-Habitual Residency)? Does the US and Portugal have a tax treaty to prevent double taxation? These are essential questions to determine if it makes sense to retire there.
Are you open to learning Portuguese?
While you can get by with English in many areas, learning Portuguese can significantly enhance your experience and integration into the local community.
Immigration
Immigration has its own challenges and Portugal is no exception. I’d find out which visa you are eligible for and what the requirements are.
The most popular route for American expats is often through the D7 Visa, usually for retirees, freelancers, or anyone with a stable income.
Another popular route is the Golden visa, which allows individuals and families to obtain residency by investing in the country. However, with the recent government changes, people will no longer be able to apply for a Golden Visa through real estate investment.
Wrap up
To wrap things up, the road to retiring in Portugal is filled with exciting possibilities and a few speed bumps to be aware of. Portugal’s sunny weather, beautiful landscapes, and reasonable living costs make it a tempting prospect for retirement. There’s also good healthcare and a welcoming expat community.
However, like any big decision, there are downsides to consider, too. Dealing with the language, bureaucracy, or housing market quirks can sometimes test your patience. Also, some regions have unique challenges, like the twisty roads in Madeira.
In the end, the decision to retire in Portugal is deeply personal. It’s all about what you value and how you want to spend your golden years.
Taking a trip to explore the country firsthand, creating a detailed budget, and looking into visa options are crucial steps in making the right choice. While Portugal has lots to offer, your ideal retirement spot is the one that fits your dreams and needs the best.
Vi, a software engineer with a keen interest in personal finance, had planned to retire once she reached her lean FI/RE (Financial Independence/Retire Early) goal. However, after achieving the goal, she took few months of a mini-retirement filled with travel and adventure and decided to continue her career.
For the past five years, Vi has been using Personal Capital (Empower), a free financial tool. Her favorite features include the dashboard for net worth, allocation, and planning, which help track her FI/RE goal and keep those investment fees in check.