Avoid This Salary Trap If You Want to Retire Rich

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Posted by The Savvy Retiree on February 1, 2021 in Live Better

“If I could just get to $50,000,” Jason told me, “I’d be set. I’d be happy for the rest of my life.”

I occasionally reflect on that moment, circa 1995, when I was standing in my front yard with my then brother-in-law. This was in Corinth, Texas, just north of Dallas. My then-wife and I had just bought our second home and Jason was helping me with some landscaping. I was 29 years old and I’d just seen my salary increase from about $44,000 to nearly $70,000, which prompted Jason’s comment. He’d just graduated from college and was in his first job making about $25,000.

“You’re lucky,” he told me.

I still remember how I replied: “Trust me—the more money you make, the more expensive your life becomes. We all grow into our salaries.”

That memory returned this week as I was culling an abundance of emails and saw a subject line that captured my attention: “Half of Americans with incomes over $100,000 fear they’ll never retire.”

On the surface, it seems like nonsense. You earn more than 65% of the country and you can’t save enough from your salary to retire? And then that comment I made to Jason pops into my head and I realize why even a six-figure income in the U.S. isn’t what it seems.

I used this statistic in a story I wrote last year at some point, but I think it says so much: The cost of living in Prague is less than an equal lifestyle in Biloxi, Mississippi.

I’m not trying to belittle Biloxi. Been there many times; spent an anniversary there one year; had family there years ago. My point is simply that a third-tier U.S. city is more expensive than one of Europe’s cultural capitals. So, I understand why it’s so hard to plan for tomorrow in America…because today is so freakin’ expensive.

My colleagues over at International Living recently released their Global Retirement Index for 2021, and I was perusing the list to gauge how many of the top 25 destinations I’ve been to (13) and I was thinking about just how affordable so many of those locations really are.

France is a really good example. It’s #8 on the list. It’s a country with certain perceptions when it comes to cost—namely, France is crazy expensive!

And it is—if your only reference point is Paris.

But outside of Paris, the country is actually quite affordable. The French themselves rate Rennes, in the heart of Brittany, as the best place to live in France—a high-quality lifestyle that mixes Parisian big-city convenience with the quietude and hominess of small-town France.

Living in Rennes costs about the same as St. Louis, one of the cheapest big cities in the U.S. Aix-en-Provence, a gorgeous city of just 140,000 near the French Riviera, is cheaper than Charleston, South Carolina.

And, yes, all these comparisons are never really apples-to-apples. But they’re close enough to underscore my bigger point: A six-figure salary might not be enough to help you sleep soundly at night in the U.S., but if you look beyond America’s borders, you can find stunning, amazing, beautiful, safe, lovely, livable places where your retirement can be spectacular—even if Social Security will be your predominant means of survival.

In fact, if Social Security will be your predominant means of survival, then that’s all the more reason to think about the countries on the International Living 2021 index. And, to be clear, I’m not saying that to push the IL index. I say it because my goal has always been to help my readers live a richer retirement.

Sadly, it’s increasingly difficult (borderline impossible) for the typical American to live that rich retirement at home because life at home is now so costly. All the money that might go to enriching activities such as travel or whatever makes you happy, instead will go to healthcare and taxes and the expensive daily costs of the average American life.

I am thinking about that myself, actually.

This past week I hit 55. I can just about see the offramp to retirement there in the distance. And while I absolutely expect to drive right past that exit and continue on my current path, the fact is I am approaching that age where I have to think about where I want to live in my latter years.

Aside from the Czech Republic, where I currently live (and which wasn’t part of the IL math), there are four countries on the IL list that are on my list as well: Spain, Portugal, Ireland, and Uruguay. Once I have my European Union passport from my years of living in Prague, I will have the right to live in the first three without going through the residence-permit process. And with my upcoming efforts to obtain Uruguayan residency, I will have the right to live there as well (as I’ve written many times, Uruguay is one of my favorite countries among the nearly 70 I’ve hit so far).

Dublin can certainly be pricey; so can Barcelona and, to a lesser degree, Lisbon. But by and large, all four of those countries are places where my expected Social Security, and the nest egg I’ve so far squirreled away should afford me a high-quality retirement.

So, I encourage you to join me. If you have any worries about whether your current income will support the rich retirement you want, then pull out a globe and give the world a spin…

By Jeff D. Opdyke