The “Empty Bank Account” Lifestyle

This is one of those headlines that makes you stop and think about your own situation:

            About 45% of Americans will run out of money in retirement…

That headline, from Business Insider, actually went on longer—another dependent clause and another full sentence. So basically, the headline was really the full CliffsNotes version of the story.

But no matter, because all I really care about is that 45% of Americans running dry financially before their internal oxygen tank runs dry.

That number comes from Morningstar’s Center for Retirement and Policy. I don’t know the methodology Morningstar employed, and Business Insider doesn’t really spell it out. So I’m just going to assume the methodology was spot-on, the research was flawless, and the resulting number is correct.

What that leaves us with is… a crisis.

Nearly half of Americans who reach 65 face the prospect of running out of dinero while they’re still breathing. Clearly, that’s gonna be a stressful moment. Probably a stressful many years actually, because people are smart enough to realize that their nest egg is dwindling, which is when the stress is going to start.

By the time the end-of-the-money event arrives, the stress will have been so pervasive for so long that the event itself won’t mean much.

Of course, people aren’t going to literally run out of cash and end up on the streets begging for handouts. They will have Social Security coming in, which will cover 20% to maybe 30% of their post-empty-bank-account lifestyle.

Still, living on a fraction of what you used to live on is bound to be emotionally painful and the source of a whole new bout of stress.

But there is an answer…

I talk about this all the time. And you probably know where I am going next.

But read on anyway. Repetition is what gets the mind to think and ultimately act.

My solution: Think about moving abroad, either in retirement or, if you can swing it, before retirement when you’re still working.

Those who are still employed and living overseas have access to a massive tax break—Uncle Sam’s Foreign Earned Income Exclusion—that allows you to avoid paying personal income taxes on as much as $126,500 for tax year 2024. And if you choose a low-tax country, or one where the local government has implemented tax incentives to attract foreign workers, then you will owe little or nothing in your adopted country.

Both of those tax advantages—along with the lower cost of living overseas—mean your income will stretch much, much farther, allowing you to then pump up the volume of savings and investing you’re able to pursue… which will help you beef up your nest egg, so that you won’t fall into the 45% in Morningstar’s research.

If you’re already retired, well, you’re not going to benefit from the Foreign Earned Income Exclusion (unless you’re still earning some cash from a side-hustle). Nevertheless, you can still benefit from tax incentives that certain countries offer to foreign retirees who decide to live locally.

Plus, there’s the cost-of-living matter to consider.

As I have written many times, America’s cost of living has jumped the shark. Every time I’m back in the States, I am in awe at how pricey the joint is. I always overspend because the costs I end up paying for basic meals exceed my expectations.

If I go to just a basic, blue-plate-special kinda restaurant for lunch, it’s going to cost me $20 at least, including the tip.

Just down the street from me here in Lisbon, I can pop into the same kind of blue-plate-special eatery where everyday locals head for a cheap and cheerful lunch of half a roasted chicken, potatoes of some kind, bread, and a drink… and it’s going to cost me about $8. No tip needed.

I pop into US grocery stores and pharmacies when I’m home because I load up on OTC meds I can’t find in Europe, as well as all manner of ingredients, spices, and food items I miss (Pop-Tarts are the single greatest culinary creation to emerge from America’s corporate test kitchens. Facts! Also, Cracklin’ Oat Bran cereal.)

But the prices metaphorically gouge out my eyeballs when I see them. I just can’t believe how expensive America is relative to Europe. (And I’ve bought groceries in at least a half-dozen European countries over the last six years of living in the Czech Republic, Portugal, and temporarily in Ireland.)

Health insurance and healthcare costs are also madly cheaper, and the quality is superb.

Car insurance, assuming you need or want a car in Europe, is radically less costly than what I paid in the US. My annual premium in Lisbon for my 2024 Mini Cooper Countryman is about $900. I was paying more than $2,500 per year for a Mini Cooper I owned in the US.

My internet/cable/Wi-Fi package is about $110 for three phones (unlimited data), a vast assortment of TV channels, and 1-gig internet service. Electricity and water combined are about $100 per month. I was paying between $200 and $300 every month just for electricity back in the States.

My point is that a nest egg lasts a lot longer overseas because daily living costs are so much more affordable.

To be fair, that is not necessarily true if you’re looking at high-cost countries and cities such as Ireland, the UK, Paris, Zurich, Oslo, Vienna, etc. Those places can be very taxing on the pocketbook.

But Portugal, Spain, Italy, Greece, Montenegro, Croatia, the Czech Republic, Poland, Germany, even non-Parisian parts of France… they are Kmart Blue Light Specials in terms of living costs.

And they’re really quite lovely places to live. You won’t be slumming it. You’d very likely gain a lifestyle that exceeds the one you’re living now, only much cheaper. Oh, and you’re going to get by in English just fine.

So that’s my message today.

If you’re worried you might just fall into that Morningstar 45%, there’s a solution for you.

And even if you’re not likely to live a “Morningstar 45%” retirement, consider retiring abroad anyway… because this is the grandest adventure you can have in the third stage of life.