Could This Be Your Ticket to Early Retirement?

Dear Rich Lifer,

Imagine moving 1,500 miles away and making an extra $50,000 per year in salary.

Better yet, imagine moving just 10 miles away and saving $80,000 a year in expenses.

How fast could you retire then? 

A popular trend in the FIRE (Financial Independence Retire Early) community is geographic arbitrage a.k.a Geoarbitrage. 

We first heard about geoarbitrage reading Tim Ferriss’ New York Times bestseller The Four-Hour Workweek.

Ferriss defines geoarbitrage as moving to a lower cost of living area while maintaining the same or higher income.

For example, you could work for a company based in San Francisco but live in South Dakota, or spend your strong USD retirement savings in a weaker economy like Canada or Portugal. 

While world traveling is probably low on your priority list, geoarbitrage is something we strongly urge you to start considering. 

If there is one secret to early retirement, this could be it. 

And with more companies announcing extensions to their work from home policies indefinitely, this could be the perfect time for you to catch up on retirement savings. 

If you’re already retired, geoarbitrage could be your solution to stretching your nest egg further than you thought possible.

The best thing about geoarbitrage is you don’t have to travel around the world to reap the rewards.

Think Local First

We read a story about a couple living in the San Francisco Bay Area who decided to move just 10 miles to Oakland and it saved them $80,000 per year in expenses.

They were able to sell their 2-bedroom SF condo and buy a 2-bedroom Oakland condo for nearly half the price. The couple claims that this one move alone allowed them to retire 9 years ahead of schedule! 

Another story we read was about a doctor working in New York City who moved his practice 1,500 miles to Sioux Falls, South Dakota. 

Not only are doctors in rural areas in short supply but they’re compensated handsomely for the increased demand. This doctor was able to pull in an extra $50,000 a year in salary.

But it gets better, since the cost of living in Sioux Falls is so much lower than New York City (think housing that’s 394% cheaper) this man basically tripled his family’s spending power. 

A surgeon earning $330,000 in New York would need to earn $137,232 to live with similar spending habits in Sioux Falls. On the other hand, a physician in Sioux Falls earning $380,000 would need to be making $913,781 in Manhattan to enjoy the same level of spending.

If you’re thinking these are exceptions to the rule or that you’re not making a doctor’s salary so this can’t possibly work for you, think again.  

You could have a lower cost of living and no state income tax by living in Washington instead of California. Even better, move across the state line to Portland, OR where there’s no sales tax.

The point is you don’t have to look far to find price discrepancies that you can be taking advantage of. 

How to Start Your Geoarbitrage Journey

First, identify what stage of life you’re in because this will determine your plan. 

Are you in an earning stage of life? Are you close to retirement? Or are you already retired and looking to relax? 

Think about how you want to spend your time or need to spend your time. And think about what activities and people are most important to you. 

Next, figure out how much money you’re currently spending. If you’ve never made a budget, now is the time to try. 

You need a baseline reference point to compare different geoarbitrage opportunities. 

Lastly, realize that geoarbitrage is a strategy you can adapt to different stages of your life. If you decide to move and you don’t like the change, you can always move back. 

Calculating Your New Cost of Living Domestically 

There’s no shortage of cost of living calculators you can find on Google. But two we like are bestplaces.net and numbeo

Type in the city you live now, where you want to move, and your current salary (this step is optional) and the calculator will spit out the difference in total cost of living. 

What factors are these calculators considering? 

The main factors considered are housing cost, food, transportation, taxes, utilities, and healthcare.

Like we said, it’s important to spend some time thinking about what stage of life you’re in and what matters the most to you. 

Taxes for instance are a topic we could spend an entire day talking about. You need to consider state and local income tax, property tax, and sales tax. Ultimately it’s up to you to decide what taxes most affect your situation and choose a location accordingly. 

Calculating Your Cost of Living Abroad

If the thought of moving overseas interests you, then there are some helpful tools to weigh your options as well. 

The Earth Awaits is an international cost of living calculator that tracks tons of statistics from over 600 cities around the world. 

You can quickly find out which cities your dollar will go furthest in and which cities are safest for your family. Moving abroad obviously requires a bit more research but it can be well worth the time invested. 

Some people also recommend changing your residence to a state with no income tax before moving internationally. 

You should read up on Foreign Earned Income Exclusion (FEIE), which may allow you to exclude over $100,000 in income earned in a foreign country from income reported on your U.S. federal income tax return. 

In Summary… 

Hopping on a plane and moving somewhere forgeign might sound counterintuitive right now but it could also be your ticket to an early retirement. 

Geoarbitrage is an opportunity available to everyone that could dramatically accelerate your rate of savings, improve your quality of life, and lengthen your dollar in one move. 

To a richer life,

The Rich Life Roadmap Team

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