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How to Retire in Portugal

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Few countries make a better retirement destination than Portugal. Its old-world charm, mild weather and low cost of living attract people from all over the world. Portugal could be your dream retirement spot. But first you need to know about the process. These topics will help you learn how to retire in Portugal. 

Cost to Retire in Portugal

The Portuguese government has made a major effort to make this country more accessible and affordable to expatriate retirees. A couple could conceivably live well in the beautiful Algarve for about $1,400 per month. However, a monthly income of $2,000 would allow a retired couple to live very comfortably. 

Here is a typical monthly budget for a retired couple living in suburban areas of Portugal. 

ExpensesCost per Month
Rent (furnished 2-bedroom apt.)$690
Utilities (including water)$104
Entertainment$290
Health insurance$112
Weekly maid service$52
Internet/Phone/TV$69
Transportation$200

The average Social Security payment for a retired couple is $2,861 per month. This is more than enough for a couple to meet monthly expenses in Portugal. But plans don’t always work out as well as we anticipate. You may encounter unexpected expenses. An emergency may occur, for example, or you may want to take a cruise to explore the Mediterranean. This is the reason you should save around $250,000 to comfortably retire in Portugal.

Requirements to Retire in Portugal

The process of retiring in Portugal starts in your local Portuguese consulate. Before relocating to Portugal, you must apply for a temporary resident permit. The requirements are these:

  • Proof of income
  • Valid passport
  • Proof of insurance
  • Agreement to a criminal background check

Completing this process will allow you to get your temporary residence permit. It is good for 5 years. After this period, you can apply for permanent residence. 

How to Get a Visa to Live in Portugal

The Portuguese government created the Golden Visa to attract foreign investors. Obtaining this visa would give you these special privileges:

  • Application of permanent residence
  • Path to Portuguese citizenship by naturalization
  • A residence visa waiver for entering the country
  • Family reunification

To qualify, you must meet at least 1 of the following criteria:

  • Support Portugal’s local arts by transferring a capital investment of at least $275,606. 
  • Add a minimum of 10 job positions.
  • Execute a capital investment equal to $1,102,425 to benefit the country.
  • Capitalize on small and medium companies in Portugal by making a $551,257 capital investment.
  • Buy real estate property valued at least $385,892 to refurbish homes 30 years old or older.
  • Contribute a capital investment worth $385,892 for public and private scientific research.
  • Buy real estate worth at least $551,257.

Does Portugal Have Retirement Benefits for Foreigners?

Portugal attempts to attract expatriates by offering a special tax status for nonresidents. The Non-Habitual Resident tax  (NHR) status makes your income tax-exempt for 10 years. This applies to pensions, rental income, capital gains and investments. 

Once you become a permanent citizen, you can take advantage of Portugal’s public healthcare system. It provides medical care for little or no cost. Until then, you need to carry your own health insurance. The cost of Portuguese healthcare insurance is about $112 per month. 

Places to Retire in Portugal

If you want to retire in Portugal, this country provides many safe and affordable choices. Your ultimate decision will depend on your personal preferences. You may prefer vibrant cities, coastal beach towns or small villages. Here are some suggestions.

Algarve

Algarve is the deepest southern region of Portugal. It has been a tourist favorite for a long time. Presently, it has evolved into a very popular retirement destination for expatriates. The eastern and western/central regions of Algarve are fantastic places to retire in Portugal. 

The western-central region is the land of gorgeous beaches and endless activity. It has a constant party atmosphere. There are many fine restaurants, nightclubs and sports activities. The city of Portimao is in the Faro District. It is the home of many expatriates and Praia da Rocha beach. Algarve’s eastern region sits in stark contrast to the western/central region. The pace is slower and development in the area is meager. It’s suitable for retirees who want a relaxing environment.

Lisbon

Portugal’s capital, Lisbon, rests on the southwestern coast. It combines the native Portuguese culture with a hodgepodge of 87 other cultures. It has its own version of Chinatown and a slew of other ethnic restaurants. The beaches, bars, nightclubs and restaurants are within a short distance from the main part of the city. The friendly atmosphere and the low cost of living make Lisbon a great place to retire in Portugal. 

Cascais

A short train ride from Lisbon takes you to Cascais. If you like pleasant weather and scenic beaches, you’ll love Cascais. It represents the classic European town with its narrow streets and oceanside walkways. Casais could serve as the setting for a romance movie. It’s a favorite retirement location for expatriates. And, the excitement in Lisbon is not too far away. 

How to Save for Retirement in Portugal

Saving $250,000 is not as hard as you may think, even with a 0 savings balance. It doesn’t matter whether you are 40 or 50 years old. You still have about 15 to 20 years left to save. Your 401(k) or IRA plan at work is a perfect savings vehicle. See what happens when you contribute 9% to 15% of your income to a traditional 401(k) retirement plan for 20 years. 

% of Contribution15%12%10%9%
Annual Salary$40,000 per year$50,000$60,000$70,000
Current Age50505050
Age of Retirement70707070
Current 401(k) Balance0000
Annual Rate of Return7%7%7%7%
Total Employee Contribution$120,000*$120,000*$120,000*$126,000*
End 401(k) Balance$255,203$255,203$255,203$267,963

* 401(k) contributions are tax-deferred.

All 401(k) and IRA retirement savings plans are not the same. Consult with your employer about the details of your retirement plan. Get information on the plan’s investment portfolio and the tax implications. Some employers offer a 401(k) match plan. This means your employer will match your annual 401(k) contribution. For every dollar you commit to the plan, your employer’s contribution could range from $0.50 to $1. The maximum employer contribution limit is usually around 6% of your annual salary. For added insight, read the best investment for retirees

There is a possibility that you can get higher returns from stocks and other securities. The stock market has a 10-year average return of 10%. However, stocks investing can be treacherous for the novice. Even if you use a broker, educate yourself on the various investment strategies. Read about comparing online brokers and the best retirement books.

Financial Advisors

You can also try out a financial advisor to help plan your retirement. Financial advisors are professionals who understand the complexities of saving for your post-working life. To find a financial advisor, try SmartAsset’s free tool which will match you with 3 advisors in your area.