I bring this story to you from a hotel room in South Louisiana, where I am holed up with a case of COVID I picked up while visiting the U.S.
One of my childhood friends just dropped off some lunch for me. He drove to a nearby Sonic burger joint and grabbed for me a cheeseburger, some tater tots, and an unsweet iced tea. My bill: just under $8.
I tell you that because it fits the theme of this month’s dispatch: Upsizing your lifestyle instead of downsizing your retirement.
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Too many of us Americans will never afford the retirement we imagined, and which the American Dream promised when we were younger. The cost of living a typical American life today has exploded past anything resembling rationality and has taken expected lifestyle off the table for so many.
But it doesn’t have to be that way.
There’s an opportunity to live a far-richer life if you’re willing to think beyond borders.
And there’s very good reason to think that way.
Consider some numbers: The average cost of a house in America is now $375,000. The average cost of a new car in America is now approaching $50,000. Median income, meanwhile, is between $42,000 and $56,000, depending on various measurements.
When I was growing up with my grandparents in the 1970s and early ’80s, we were lower middle-class. But my grandparents could afford a decent life, in a decent home, in a nice neighborhood in the center of the city. Never took vacations, but food, shelter, and clothing were never in question.
Today, I look at modern American costs, and I look back on that childhood, and I realize my grandparents lived better in retirement back then than typical retirees do today.
A study last year from the Boston College Century for Retirement Research reported that more than half of American households face retirement insecurity. Meanwhile, a separate study from the National Institute of Retirement Security reported last year that the vast majority of the country agrees that America faces a retirement crisis.
Not hard to understand why when so many are barely hanging on to “middle class” status, and why so many survive on easy access to credit until they can crawl past the finish line of retirement and snag a barely adequate Social Security check… only to then die under a mountain of debt. And that’s not hyperbole. A 2017 study showed that 73% of Americans carry debt to their grave, and the average amount is more than $61,500.
That 1990s bumper sticker, “He who dies with the most toys wins” is darkly accurate today, because dying in debt somehow means winning the game of life in modern America. You lived larger than you could afford, and the credit-card companies ate the loss.
All of which goes back to that $8 fast food meal my friend delivered and this idea of upsizing your lifestyle…
Eight bucks doesn’t seem like much. But that’s because most people see those eight dollars in terms of everyday U.S. spending. I see that $8 expense in the context of having lived in Prague for more than three years now.
I recently had dinner with my wife, Yulia, at a nice pub near our apartment in one of the most fashionable neighborhoods in Prague. We each had a schnitzel, split an oversized order of garlic-bacon green beans, and shared a half-liter of local beer.
Total cost: $9.77.
And, frankly, I am being unfair in comparing a pub to a fast-food burger joint.
A fairer comparison is the dinner I had with my son at a basic restaurant here in Baton Rouge. He had chicken wings, a sandwich, and tea, and I had an order of fries and a tea (I was feeling under the weather). With tax: $42.
That’s a crazy amount of money, and it helps explain why so many retirees are forced to downsize their American retirement. When basic meals for two people are that expensive, it’s no wonder that more than 30% of retirees report living a reduced lifestyle in retirement.
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But let’s shift focus now to how it could be instead…
By opening yourself to the possibility of retiring overseas, even if for just the first 10 or 20 active years of retirement, you are guaranteeing yourself an upgraded standard of living.
A lot of times, writers like me write about retiring to beaches in Mexico or Central America, or quaint hamlets in South America or Asia. And, certainly, huge opportunities exist in those places to dramatically upgrade a retirement.
But as my own life in Prague demonstrates, you can live a high-end lifestyle even in the heart of Europe, in a major metropolitan city, with all the creature comforts and conveniences of home. More, really. And your cost of living is demonstrably less than it would be in the U.S.
You don’t see this when you’re living in America daily. You don’t see it when you’re visiting a foreign country on vacation. Both lock you into a particular economic bubble. Living in America, you can’t see beyond what your lifestyle actually costs. And on vacation, you’re paying tourist prices and the “gringo tax” in most of your transactions.
Get outside of that bubble and you quickly realize that the cost of living in the U.S. has jumped the shark. And I don’t mean cost of living in places such as New York, Los Angeles, Seattle…or even Dallas, Kansas City, and Atlanta. I mean the cost of living in middle America—places like Jackson, Mississippi; Des Moines, Iowa; or Baton Rouge, where I grew up and am visiting my kids.
My life in a major, European capital—a picturesque city with 1,000 years of history—is 25% to 30% cheaper than Baton Rouge—a second-tier city.
That’s not a knock against my hometown, so much as it’s a statistical indicator of the outsized cost disparity that life in America represents these days.
What does disparity really look like, though, in practical terms?
Well, in my case it means a greater ability to stuff money into a retirement account after a divorce halved it. It means greater free cash flow to pursue interesting, income-oriented crypto investments I’m finding these days. It means greater freedom for my new wife and me to travel. It means not really worrying about eating out whenever we want, or spending on spur-of-the-moment purchases.
It means a far—far!—nicer apartment right in the heart of Prague, in a beautiful neighborhood of low-rise 18th century apartment buildings, shops, boutiques, restaurants, a bevy of leafy parks, and pretty much anything we need within a five-minute walk.
It means financial freedom and flexibility, and less worries about too much month running headlong into too little income.
In short, I upgraded my lifestyle to one that I would label “luxury” relative to what I was living in the U.S.
The same holds true for colleagues living in southern France. In Madrid. In Lisbon.
I have a decade’s-long friend living like royalty in Bangkok. Another lives exceedingly well along the Mexican Riviera, alongside a manicured golf course, with a cook and a cleaner allowing her to spend her days focused on writing a memoir of her life that she wants to give to her children.
Not a single one of them would change the lifestyle to which they’ve upgraded.
This is the luxury I could never afford.
“If I’d stayed in Ohio, no way I’d be living this happily,” the memoir writer told me. “I was scared to death to make this move. Now, I wish I’d done it sooner. My friends come down here to visit, and they’re shocked at my lifestyle and my house because they knew my lifestyle and my house back home. I tell them they can live the same way, and I think one or two are really considering it. Others, it’s just too hard to get their heads around the idea of leaving the U.S. in retirement. But for me, this is the luxury I could never afford.”
I look at my friends approaching retirement in the States, and all of them are living lives of aspiration. They’re living good lives, happy lives, but they’re grinding their fingers to the bone in doing so. And they all concede that at some point, they’re going to have to accept that they’re not going to live at this same level when the paychecks stop, because they’ve simply not been able to save adequately for retirement. The cost of making a good life for themselves and their family today is just too dear.
Which, sadly, reflects the reality so many Americans share: A downgrade at retirement, in which people will hang up their lunch pail one last time, start collecting their Social Security, and drawing upon a modest nest egg.
In that process, they’re going to have to figure out how to shoe-horn their retirement into a reduced lifestyle… because being middle class in America in 2022 is the real retirement luxury.
And too many of us don’t have the luxury anymore.
Well, across most of Europe, Latin America, and Asia, luxury never went out of style. It’s there waiting for anyone willing to live abroad in retirement.
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