Geographic Arbitrage: Lower Your FIRE Number

Geographic arbitrage means living in a lower-cost location while earning income typical of a higher-cost area. For FIRE seekers, this can cut years off your timeline.

How Geographic Arbitrage Works

If you can earn a San Francisco salary ($150,000) while living in Boise ($50,000 cost of living), you can save dramatically more than someone earning and spending in the same market.

Remote work has made this accessible to more people. You no longer need to be present in an expensive city to earn expensive-city wages.

Impact on FIRE Numbers

Your FIRE number is based on annual expenses. If you plan to live in a high-cost area in retirement, you need a high FIRE number. If you plan to live in a low-cost area, you need less.

Someone planning to retire in Manhattan needs roughly $3 million for a $120,000 annual budget. Someone planning to retire in Portugal might need $750,000 for a $30,000 budget.

Types of Geographic Arbitrage

Domestic arbitrage. Moving from a high-cost city to a lower-cost city within the same country. San Francisco to Austin, New York to Nashville.

International arbitrage. Moving to a country with lower cost of living. Popular destinations include Portugal, Mexico, Thailand, and Eastern Europe.

Temporary arbitrage. Spending several years in a low-cost location to accelerate saving, then moving to preferred location for retirement.

Considerations

Healthcare. Particularly relevant for Americans considering international moves. Research healthcare systems and costs in potential destinations.

Taxes. Tax obligations vary by country and can be complex for expatriates. Consult a tax professional.

Visa and residency. Living abroad long-term requires appropriate visa status. Research requirements before planning.

Social connections. Moving away from family and friends has real costs. Factor this into quality of life calculations.

Currency risk. Earning in one currency while spending in another creates exchange rate risk.

Calculating the Impact

Compare all-in costs between locations: housing, transportation, food, healthcare, taxes, entertainment. Many costs drop significantly; some may increase.

Consider one-time costs: moving expenses, housing deposits, visa fees, initial setup costs.