Does the idea of spending your retirement years in a sunny location with a pristine natural environment, friendly people, and vibrant culture sound good? Portugal could be the answer!
Portugal is a popular destination for retirees because of its low cost of living, low taxation rates, and inexpensive property market. The affordability of Portugal makes it the ideal destination if you want to make the most of your retirement savings while still living in a European country.
Portugal is one of the safest countries in the EU, with low crime rates and a great health care system. Many residents speak English and there are thousands of expats in the country, making it easy to meet new people and socialize.
On top of all of these benefits, you can enjoy outstanding restaurants, a thriving cultural and arts scene, and access to many different social clubs. It really is one of the best retirement locations for U.S. retirees.
In this comprehensive guide, I am going to share everything you need to know about retiring in Portugal. It will help you decide if Portugal is the right place to spend your golden years.
Cost Of Living In Portugal
Although the cost of living in Portugal has increased slightly in recent years, it is still significantly cheaper than the United States.
The U.S. dollar has remained relatively strong against both the Portuguese Escudo and the Euro in recent years. This means that retirees with a nest egg or income that is in USD can live very comfortably.
In general terms, the cost of living in Portugal is about 30% lower than it is in the United States. Here are a few figures which will give you a sense of what that means for your hip pocket (Source: Nation Master):
|Average Monthly Disposable Income||$1,081.73||$3,258.85|
|Real estate prices (Rent 3 Bed in City)||$1,063.57||$1,685.98|
|Basic utilities (electricity, water, heating)||$119.46||$162.08|
|Cinema ticket price||$8.19||$10.00|
|Milk (1 litre)||$0.83||$1.00|
|Loaf of bread||$1.38||$2.37|
|Three drinks in a bar||$17||$24|
Note: Some of these prices can vary greatly depending on where in Portugal you are settling. For example, renting a 3 bedroom apartment just outside of Lagos could be as low as $750 while renting one in the middle of Lisbon’s city centre could be $1,900.
Most retired couples living in Portugal report that they can live comfortably on half the income they would need in a major U.S. city. Of course this will vary based on where you are living and your lifestyle. If you eat out every night and regularly purchase imported goods, your expenses may be higher.
How Much Do You Need To Retire in Portugal?
Portugal is in the eurozone, so you will be using the euro (EUR) while living there. This currency uses the € symbol. The great thing about using the Euro is that the currency is valid in any European country, which makes traveling simple. In late 2020, when this guide was written, 1 EUR is around 1.17 USD.
In most cases, a retired couple can live very comfortably in Portugal on €2,000 euros per month, which is about $2,300 USD. This includes:
- Monthly rent on an apartment ($500 to $1,200+)
- Utilities (water, electricity, and gas)
- Internet and phone
- Money for eating out a few times a week and going to the movies
Single retirees could live on as little as €1,250 per month (€15,000 per year), if they budget well. For €2,500 per month (€30,000 per year) you would enjoy a fairly luxurious lifestyle.
Many retirees choose to purchase a property in Portugal, as it makes their month-to-month costs much lower. There are comfortable units in older buildings in major cities which cost as little as €125,000.
Retirees moving to Portugal should set aside 4 months of living expenses (about €8,000 for a couple), in case the dollar to euro exchange rate changes and devalues your U.S. income.
If you are relying on your savings and investments, you will need to ensure that you have enough capital to spend €2,000 a month during your time in Portugal.
It’s important to note that the €2,000 figure is for a couple enjoying a comfortable lifestyle in Portugal, which includes eating out and traveling. Given that the average social security benefit is about $1,400 USD, it’s easy to see why Portugal is such an attractive destination for retirees.
Residence And Visa Requirements
Portugal is welcoming of foreigners, which is highlighted by the fact that there are over half a million documented immigrants in Portugal. Many of these new immigrants are retirees from the UK, USA, and various parts of Europe.
U.S. citizens will not need a visa to enter Portugal for short trips (90 days within a six-month period). This makes it easier to visit the country and get a feel for what it has to offer. However, if you intend to retire in Portugal and wish to spend most of your time there, you will need to obtain a visa.
Although the Portuguese government has made applying for a visa as simple as possible, it is still a good idea to let an expert handle the process on your behalf. This ensures that no mistakes are made which may delay your application. A lawyer or an immigration assistance service will be able to help you with any paperwork.
The two most common methods for retiring in Portugal and eventually becoming a permanent resident are:
1. Retiring In Portugal From The United States Via A Temporary Permit
The simplest way to gain entry to Portugal is to apply for a temporary residence permit, then transition to permanent resident status.
In most cases, the best option for U.S. retirees is to start by obtaining a 120-day stay visa. This gives you time to settle in Portugal and decide if it is for you.
Once your visa has been approved, you can begin to look for a place to stay in Portugal. There are many affordable properties to rent or purchase, so you will be spoilt for choice.
If you are enjoying your stay in Portugal, you can then apply for a temporary residence permit which lets you stay in Portugal for one year. To obtain this permit, you must demonstrate that you have a subsistence income, which is typically more than €1,200 a month.
You will also need to show other supporting documents, including your:
- A recent photograph
- Details of your private health coverage.
Applicants also need to undergo a criminal background check. The documentation can be submitted online, in-person, or be posted. Your temporary residence permit can then be renewed for two-year periods.
After you have been in the country for five years, you can apply for your permanent residency permit. To obtain this permit, you will need a place of abode in Portugal, have a basic understanding of Portuguese and have sufficient means of subsistence.
Once you have received a permanent residence permit you will no longer be subject to minimum stay requirements. However, the permit can be cancelled if you, without an acceptable justification, leave Portugal for more than 2 years consecutively, or for a non-consecutive period of 30 months over 3 years.
After 6 years, you may be eligible for naturalization. If you wish to become a Portuguese citizen, you will need to be interviewed, show proficiency in Portuguese, and demonstrate ties to Portugal. You will also need to show that you have good knowledge of Portugal’s history and culture.
2. Retiring In Portugal From The United States With A Golden Visa
Portugal’s Golden Visa program is an excellent path of entry for retirees with some savings behind them. It is designed to attract wealthy individuals who are willing to invest in Portugal. It offers the most favorable tax conditions and easiest path to permanent residency.
To obtain a Golden Visa, you must make a significant investment in Portugal. As of 2020, the available investment options include:
- Buy real estate with a minimum value of 500,000 Euro or above (400,000 Euro if in a low density area)
- Buying real estate with a minimum value of 350,000 Euro or above, provided that the property in question is at least 30 years old and will be renovated (280,000 Euro if the property is in a low-density area)
- Make a capital transfer of 1,000,000 Euro or above
- Create a minimum of 10 full time jobs to Portuguese citizens
- Make a capital investment of 350,000 Euro or more towards a qualifying research and development activity in Portugal
- Donate a capital investment of 250,000 Euro to arts, culture, or national heritage in Portugal
- Invest a minimum of 350,000 Euro in a qualifying investment fund in Portugal
In addition to investing in Portugal, recipients of a Golden Visa must spend at least seven days per year in Portugal. In return for your investment, you will receive the right to live and work in Portugal, travel in the EU Schengen Area without a visa, and apply for Portuguese citizenship after 5 years.
As a legal resident, you will have access to local public schools and health care. Additionally, you can also include your spouse, dependent children, and dependent parents to the program.
The Golden Visa program lasts for two years. At this point, you can register for a temporary residency permit which needs to be renewed every two years. After 5 years, both a permanent residency permit or full citizenship may be requested. If you choose not to become a permanent resident, your Golden Visa will need to be renewed in year 6.
Taxes In Portugal
One of the reasons why so many people retire in Portugal is the country’s low rate of taxation. It is one of the 10 lowest taxing countries in the EU and offers some generous retirement tax arrangements for foreigners.
If you live in Portugal for more than 183 days per tax year, you will be considered a ‘tax resident’ and must pay tax on your worldwide income to the Portuguese government.
Fortunately, Portugal has a progressive taxation system which starts at a very low rate. As of late 2020, the tax rates are as follows:
|Annual Taxable Income||Portugal Income Tax Rate|
|up to €7,112||14.5%|
|€7,113 to €10,732||23%|
|€10,733 to €20,322||28.5%|
|€20,323 to €25,075||35%|
|€25,076 to €39,967||37%|
|€39,968 to €80,882||45%|
Portugal has tax treaties with all EU countries along with several non-EU countries. These treaties will help you avoid double taxation on your income. Visit the Portuguese Tax Authority’s online portal to learn more about income tax.
In addition to federal income taxes, there will be:
- Local taxes
The most significant local tax you may face is the IMI (Imposto Municipal sobre Imóveis), which is a local council tax.
- Goods and services taxes
Portugal has a three tiered consumption tax. The general rate is 23% for goods and services, 13% for food and drink, and 6% on essential items (fruit, meat, vegetables, books, medicines, transportation, accommodation etc)
Portugal Retirement Tax
In 2009, Portugal made their taxation laws even more beneficial for foreign retirees by legislating the non-habitual tax resident regime (NHR). This tax regime can be used by any retirees who are eligible for a Golden Visa. Some of the key benefits associated with the NHR include:
- Income generated in Portugal will be taxed at a 20% flat rate, compared to the income tax rate, which can reach a maximum of 48%
- Almost all sources of foreign income are tax exempt for 10 years. This includes salaries, dividends, capital gains, pensions, and rental income.
- No wealth tax
- Free cash remittance to Portugal (no fees on money transfers)
The Servico Nacional de Saude (SNS) is Portugal’s nation health service. It provides healthcare to all Portuguese citizens and permanent residents. The standard of healthcare provided is quite high, with modern medical facilities and well trained doctors.
Most doctors in private and public health institutions can speak English, which is important if you need to discuss your condition in detail. Although major hospitals are well equipped, institutions in rural or suburban areas may have limited equipment available. This is an important consideration if you are currently dealing with health problems.
Portuguese pharmacies are able to dispense drugs directly to patients, with prescriptions only required for potentially dangerous or addictive drugs. The cost of generic medications is very is about 10% to 25% of what they would cost in the United States.
U.S. retirees will only receive free healthcare when they become permanent residents. Until then, they must pay for private health insurance. As mentioned earlier, health insurance will be required to be eligible for a temporary residence permit. Once you are living in Portugal, you can change from an international insurance plan to a Portuguese health insurance plan, which will be substantially cheaper.
Transportation in Portugal
Portugal has an excellent public transportation system. Most cities have extensive train and bus networks which run frequently and are affordable. In a city, you can expect to pay about €1,50 for a metro ticket and €2 for a bus ride. Taxis are everywhere in major cities, along with Uber and other ride sharing businesses.
If you want to venture into other parts of Portugal or explore Europe, traveling by train is the best option. You can expect to pay about €30 to travel between major cities in Portugal and more to go to other EU countries.
Portugal’s prime location makes it easy to travel into Spain or France for a weekend away, allowing retires to enjoy the best of what the EU has to offer.
For retirees that are living outside of a major city, it may be worth investing in a car. Although new cars are quite expensive compared to the United States, you will be able to pickup an affordable second hand car easily.
If you choose to drive, you will need:
- A Portuguese drivers license
- Vehicle registration and vehicle inspection certificate
- Glass or contact lenses if your vision is impaired
- Safety equipment including a reflective jacket and first aid kit
Price of Real Estate In Portugal
Many retirees living in Portugal choose to rent as it allows them to live in several locations and explore what country has to offer. The cost of renting is significantly cheaper than it is in the United States. However, you can still expect to pay a premium if you want to live in a large home in the middle of a major city.
A one bedroom apartment location in the centre of a major city like Lisbon might cost €750 a month, while a modern 3 bedroom family home might be over €2,000. Other cities can be significantly cheaper, like Algarve, where a single family unit can be rented for between €600 to €1,000.
Retirees who love Portugal will often buy a new home. Housing is much more affordable than it is in the United States and there are some gorgeous properties available.
In 2018, average prices were €1,187 a square meter (€1,243 for flats and €1,090 for houses). That is substantially less than the average prices for the UK and France, which are €2,649 and €2,300 respectively. In terms of the major cities, average prices were:
|Region||Price Per Square Meter|
Best Communities For Expats In Portugal
Retirees are really spoiled for choice when choosing where to live in Portugal. There are dozens of beautiful cities and towns across the country with friendly residents and excellent amenities. Some of the best options include:
Lisbon (Population 500,000+)
The most populous city in Portugal, Lisbon is a financially, culturally, and historically important metropolis. It is home to a diverse range of people from dozens of different countries and attracts many U.S. retirees each year.
It is a great city for socializing, thanks to the many bars, clubs, cafes, art galleries, and musical venues it contains. It’s a foodies paradise with restaurants serving cuisine from around the world. The many historic sites and spectacular nature reserves are also wonderful for retirees.
Cascais (Population 200,000+)
Located about 30 west of Lisbon is the stunning city of Cascais. With pristine beaches dozens of fantastic restaurants, and charming narrow streets, it is a relaxing location which many retirees have flocked to in recent years.
The Algarve (Population 400,000+)
The Algarve is Portugal’s southernmost region. It is best known for its many stunning beaches, warm weather, and golf resorts. There are dozens small fishing villages, bars, and restaurants dotted along the coast, which are stunning to look at and fun to explore. The only downside of this area is that its popularity with expats makes real estate slightly more expensive.
Tavira (Population 25,000+)
If you really want to get away from the hustle and bustle of a big city, you could move to Tavira. It is one of the most picturesque towns in all of Portugal. Located about 3 hours south of Lisbon, it has wonderful beaches and several excellent seafood restaurants. It’s close proximity to Spain makes it ideal for retirees who want to explore Spain as much as Portugal.
Inheritance Laws In Portugal
Portugal does not have inheritance tax on real estate. Although there is a 10% stamp duty associated with the sale of property, spouses, descendants, and ascendants are exempt. There may be several other minor administrative fees associated with inheritance, but nothing significant.
The Portuguese Civic Code, states that the inheritance process of foreign nationals will be governed by the laws of the home country of the deceased person. This means that US inheritance laws will apply. If two spouses are from different countries, Portuguese inheritance laws may apply if the surviving spouse has Portuguese permanent residence. However, this can be changed in the will.
Portugal is a vibrant country with a rich culture. The art, food, and music are all amazing. Cities in Portugal are home to dozens of exciting locations worth exploring, including art galleries, bookshops, music venues, restaurants, bars, and cafes. You could spend several days walking around the city and only see a fraction of its culture.
In terms of the lifestyle and the social behavior of residents, American retirees often say that the Portuguese are much more relaxed than the average U.S. citizen. Most residents enjoy meeting new people and are happy to stop and have a chat.
Residents aren’t constantly in a rush and place an emphasis on living a well balanced life. This typically includes extended lunches, days spent on a beach, eating out at restaurants, dancing, and socializing. They focus on spending time with their families and enjoying their personal hobbies.
The slower pace of life in Portugal means that you can expect to wait longer to receive a coffee and might stand in line at the bank a little longer as the teller chats with a customer. That’s the only downside of living in a country with friendly people.
Portuguese culture emphasizes respect and friendship towards people from other parts of the world. This is why they are so welcoming of American expatriates. You will find that people greet you with a smile and will be eager to have a chat.
Although many people speak English in Portugal, it is advisable to become fluent in Portuguese. This will help you make the most of your time in Portugal, as it will be easier to interact with the locals and form new social connections. You will also need to know Portuguese if you intend to apply for a permanent residency permit.
Portugal is a wonderful country that has become a popular destination for American retirees over the past decade. It’s worth giving Portugal a closer look if you want to make the most of your golden years.