on $30,000 a year.” In 2013, they spent roughly $3,900 on housing, $5,400 on transportation, $6,600 on food and entertainment, $6,900 on medical expenses, and the rest on miscellaneous costs.11
The Kaderlis are the authors of The Adventurer's Guide to Early Retirement (CD-ROM, 2005). They also maintain a helpful blog, Retire Early Lifestyle, at www.retireearlylifestyle.com, where they share their stories and tips for living well on less.
Suzan Haskins and Dan Prescher, authors of The International Living Guide to Retiring Overseas on a Budget (John Wiley & Sons, 2014), live much like the Kaderlis. Located in a small town in Ecuador, they spend roughly $25,000 a year. “We live well… We go out to lunch and dinner once a week.. we enjoy the occasional martini or scotch, and every evening with dinner we polish off a bottle of wine.” Their costs include at least one annual trip to the United States, occasional fine dining, and a worldwide health care policy that costs roughly $5,800 a year, with a $5,000 deductible.12
Cooking Up the Road Less Traveled
Forty-eight-year-old chef Shane Brierly desires a more upscale retirement than he could afford in his home country. The New Zealand native left Australia in 2004 to work in Dubai. He explains, “I thought it would give me an edge, giving me a more comfortable financial position than previously.”
But instead of moving back to Australia, Shane moved to Vietnam, where he works as a chef at the Pullman Hotel in Ho Chi Minh City. Now he's planning to retire overseas. “The respect and community values in Asia really inspire me,” says Shane. “Not so many criminals, a culture of nonviolence and respect, plus awesome food.
“Costs of living are also lower,” he adds, “and these countries are far less materialistic.” Shane's views on materialism were altered by misfortune. “But it was a blessing in disguise,” he says.
A shipping company lost all of his household goods when he moved from Dubai to Vietnam. Initially forced to live with less, he warmed to its simplicity. “Owning a whole lot of stuff means maintaining, repairing, replacing, or running it.” He no longer buys what he doesn't need, preferring to spend his money on traveling instead. Gaining experiences, Shane explains, is more fulfilling than acquiring possessions. “The Western economy runs on unneeded goods and services, and everyone lives to consume. You need half your income just to sustain impulse buys and comfort purchases. The rest disappears on essentials and tax.”
Shane doesn't live like a monk. He lives simply, but doesn't mind paying a premium for quality. In a country where you can survive on a relative shoestring, he claims you can live well on $3,000 per month ($36,000 annually). “I love exploring. It's inexpensive to travel locally in Southeast Asia or in Vietnam, and you can splash out quite affordably and have a comfortable life.” He plans to retire in central Vietnam, Laos, Cambodia, or Chile. But he'll be keeping his hands in the hospitality business. “I’ll probably set up a restaurant or guesthouse to run. To be financially free at 60 would rock, but retiring at age 65 is more likely.”13
If Shane wants to retire with an income of $36,000 a year, he'll need to make adjustments. Inflation is greedy, sometimes frighteningly so.
Inflation.eu compiles country inflation figures. In 1981, Canada's inflation rate recorded 12.12 percent; in 1975 Great Britain's peaked at 24.89 percent; and in 1979 the cost of living in the United States rose 13.29 percent.14 Those lamenting the good old days of the late 1970s and early 1980s, when savings accounts paid 10 percent a year, may have forgotten inflation's gluttony.
Lately, inflation's appetite has slowed. The decade ending 2012 saw Canada's annual inflation average 1.83 percent, Great Britain recorded 2.64 percent, and the United States averaged 2.41 percent per year.15
But past decade levels are rarely repeated in the future. Caution is prudent. In this case, let's assume inflation will average 3.5 percent each year – which is slightly higher than the developed world's 100-year average.
Shane plans to retire in 17 years, when he turns 65. If inflation averages 3.5 percent, he'll spend $64,608 annually 17 years from now to give himself and his wife the same buying power that $36,000 would provide today. In other words, if $36,000 can buy a certain number of goods and services now, it would require $64,608 to purchase those same goods and services in 17 years.
To make the postinflation adjustment, Shane went to www.moneychimp.com and clicked Calculator. Figure 1.1 shows how he used the website to estimate his postinflation income equivalency.
Figure 1.1 Shane Brierly's Postinflation Adjustment
SOURCE: www.moneychimp.com.
The Earthquake and the Epiphany
When figuring out how much money you'll need, focus on your own lifestyle and needs, not somebody else's. Thirty-five-year-old Ben Shearon, a British professor living in Sendai, Japan, shares his retirement expense projections.
He and his wife, Chiho, lost their home to the Japanese earthquake in 2011. “That turned me into a pretty hardcore minimalist,” Ben says. “I have seen how fragile life can be.” The experience strengthened his desire for earlier financial freedom. Rather than working, he'd rather travel, read, keep fit, and spend time with his wife.
Ben and Chiho seek financial freedom when Ben turns 45. They save 50 percent of their household income, now that their three children are “mostly grown up and more or less independent.” Ben hopes that he and Chiho can live off dividend and interest income from their stock and bond market portfolio. They're considering retiring in Malaysia or Thailand where the weather is better and the costs of living lower.
Working full-time as a teacher trainer at a university in Sendai, Ben also consults on English as a foreign language (EFL) textbooks and writes a blog. Chiho runs a small private school, which also absorbs a lot of Ben's time. “Right now it's all work, work, work, but we are hoping to gradually scale that back as we hire more people to help us with the school.”16
Currently, they don't own property.
Ben and Chiho estimate their annual retirement costs at $47,100 (U.S. dollars). Because they're hoping to retire in 10 years, this sum will need to be adjusted for inflation. If inflation averages 3.5 percent, they'll require $66,439 each year (a decade from now) to give them the equivalent buying power of $47,100 today.
Figure 1.2 illustrates how their numbers look when plugged into the compound interest calculator at www.moneychimp.com.
Figure 1.2 Ben and Chiho's Postinflation Adjustment
SOURCE: www.moneychimp.com.
Jujitsu Junkie Taps Out for Home
Despite his 44 years, school psychologist Jeff Devens strikes an imposing figure against younger fighters on the
Interview with Billy and Akaisha Kaderli. Telephone interview by author, February 2, 2014.
Interview with Shane Brierly. E-mail interview by author, June 30, 2013.
“Inflation – Current and Historic Inflation by Country,” Inflation.eu. Accessed April 30, 2014. www.inflation.eu/.
Ibid.
