You probably have heard that the cheapest place to retire is in some place that you have never heard off, or visited yet. Somewhere like Nicaragua, Malaysia or even Colombia. But in fact Portugal is probably the cheapest country to retire to.
Although the cost of living is lower in places like Lisbon and Porto, and even cheaper in central Portugal, the Algarve when compared with other retirement destinations still competes hands down, and remains a very good choice.
A couple can rent a two-bedroom fully furnished apartment for as little as 400 euros per month – although you will have to spend some time searching; and for between 600 and 1000 euros per month you could rent something really nice and more upmarket.
For a reasonable standard of life for two people, you can live on as little as 600 euros per month in addition to whatever you’re spending on rent. In other words, you could live or retire in the Algarve with a budget of 1,000 euros per month or less.
Even if were to live on a very limited pension, there’s plenty to keep your hours occupied with, without spending money, or spending little. For example, you can buy a plate of soup for around 1 euro, a main meal (prato do dia) for about 3,50 euros, a sandwich for about 1,50 euro. (You just have to find where the local Portuguese go and stay away from the touristy hot-spots)
One practical advantage of life in the Algarve is that you can get by without either heat or air conditioning for most months of the year, although you may invest in some fans during the summer months, and a few heaters during the winter. But in total we are talking about 4 to 5 months for both. (Some homes have built in fireplaces, and some even have air-conditioning units.)
At the end of the day, where you going to live (town), type of accommodation and your monthly budget will determine what you will spend on utilities.
Myself, I spend on average about 60 euros per month (two people, a dog and a cat), although in winter it can go up to 90 euros and in the very hot summer months.
In addition, budget about 70 euros per month for the combined expenses of phone, Internet, and cable TV if you buy it from a Portuguese telecom company and which can be purchased as a bundle. Personally I just have telephone and Internet costing me around 45 euros per month, and I spend another 15 euros per month on Filmon to watch cable TV in English.
If you want to eat out at a low price, look for pratos do dia (dish of the day) signs scribbled on blackboards or papers taped near restaurant entrances, priced from as little as 3.50 euros. Staff in these places can be an exception to the rule that nearly everyone in this region speaks English, but you can get by with sign language, a phrasebook, and a friendly smile.
Of course, you could spend much more than 3.50 euros for a meal out, as the Algarve from West to East boasts some fantastic restaurants covering all types of food preferences.
If you like me, and love cooking at home, you can purchase your fresh vegetables, eggs, fish and even live chickens and rabbits at the local municipal markets. For shopping for other food, wine, beer and household commodities I like to use Aldi and Lidl for most things, although I like to buy my meat at a local butcher or at a push at the local Continent. But one lesson I learned from the local Portuguese is to look out for the specials in the supermarkets in your area and only buy when on offer. Buying like this for hubby, our pets, and myself we get away with spending less than 50 euros per week.
Depending how often you choose to dine out rather than cooking at home, 200 euros per month per person should be a comfortable food and household budget.
This is where the Algarve really shines, no matter how you like to spend your time. You could enjoy many pleasant days walking around cobblestone towns and villages, window-shopping then stopping at outdoor cafés for a coffee or a glass of wine.
Castles, fortresses, museums, and small theatres charge between 2 and 3 euros per person entrance fee on average. Old harbours, medieval fountains, gardens, and historic churches are all accessible at no cost as are our beautiful beaches and natural walking trails. We rarely spend more than 100 euros a month on entertainment. Guess it depends on what you want to do and what you enjoy doing. But a 100 euros goes quite far.
You can use public transport for most places if you reside in its covering areas and as a result will not need to have a car. During our first year we had no car as we lived in the centre of Lagos. During that time if we really wanted to go out into areas not covered by public transport, we just rented a car for a few days. That changed when we moved to the countryside and got involved with the creation and running of the association. We then looked for a cheap car as a local run around. We found one for about 1500 euros (which we still using 6 years on)
If you have decided to purchase a car you need to add to your budget, annual insurance, MOT and license fees. Depending on what you buy can start at around 250 euros per year. You will also need to make provision for car maintenance, tyre replacements and fuel costs. We budget about 1000 euros a year for that.
So let’s recap:
Beyond the basic expenses (utilities, food, travelling and entertainment) described above, you’ll have the cost of health care (which can be zero if you’re a legal resident and register in the public health system).
If you want to have private medical cover, you just have to shop around for the services that you need cover for. We ourselves use a local clinic with very good doctors in Lagos and pay an annual membership fee of 70 euros per person, which gives us up to 50% rebates on most doctor visits and small surgeries.
For us being South Africans, our exchange rate at the moment is not very favourable as the Rand has taken a beating in the past three years, but if you are retiring with Dollars, Pounds or Yen you will be smiling all the way. But how do you cope with exchange rates fluctuations? You do like we do, you adapt to the circumstances. While the exchange rate is favourable, save some of the funds to cover dips in exchange.
If your joint income is around 1000 to 1200 euros per month you can have a very comfortable and safe living in the Algarve. If you decide to purchase your own home, of course your monthly living expenses are drastically reduced, although you will need to budget for insurances, maintenance, and annual rates and taxes.