I’ve noticed my blog getting some hits from the following type of search term:
Can I retire somewhere cheap with $200k?
After living in Chiang Mai, Thailand for about four months now, I’ve had an opportunity to get a good sense of costs in one of the best cities in the world for value-minded people who also appreciate a relatively high quality of life.
It’s been a tremendous experience for me thus far, exceeding my expectations in just about every manner conceivable.
Whether or not someone else would be happy living here is another question completely, but one has to decide that for themselves. Because of this, I’ll be looking almost purely at the logistics of this, staying as close to the quantitative side of things as possible.
Also, keep in mind that no two people are the same. What that means is, whether or not you could live here on the kind of passive investment income $200,000 can generate is largely up to you. One person’s idea(s) of acceptable lifestyle choices may vary quite a bit from another person’s.
Of course, this is all presuming we’re talking about an asset base of $200,000 per person. Coming over here as a couple or family on that kind of asset base, with the idea of retirement, would not be advisable.
That said, I’m going to answer this question to the best of my ability.
Let’s dig in.
First, let’s talk about the income side of the equation.
If you have a $200,000 portfolio that you’re using for your retirement, you’ll have to generate passive investment income that could, theoretically, last you for the rest of your life.
However, this is just theory.
The real-world practicality of this idea is probably limited, as one’s income sources will probably be more extensive. Pensions and Social Security (for US readers) may very well come into play (at some point). And that’s before factoring in any online income, which isn’t that hard to generate.
If one is young, they should have the resources (time, energy, knowledge, etc.) to earn an active income beyond passive investment income.
If one is older, they’re likely staring down some kind of state-sponsored retirement income.
But if we’re using just the $200,000, let’s make some assumptions.
You can see my real-life and real-money dividend growth stock portfolio. It’s currently (as of this writing) valued at over $360,000. And it generates almost $12,000 in passive and growing dividend income per year.
The portfolio has an effective yield of 3.24% right now.
Now, I haven’t been overly aggressive with my investments. Even though I’m 100% allocated to equities, I mostly stick to investing in blue-chip dividend growth stocks that provide equity in exceptional businesses that can afford to pay me growing dividends for many years to come.
But if I had to make do on a much smaller portfolio, I would personally be a bit more proactive in terms of maintaining a higher yield across the portfolio. Said another way, I would invest in higher-yielding securities, while still attempting to minimize my long-term risk.
How this would look in real life is, I would probably be more heavily allocated toward utilities, pipeline companies, REITs, and telecoms. I would thus be less exposed to a lot of consumer, healthcare, and technology companies. This would be a more concentrated (and less diversified) portfolio as a result.
In doing so, I don’t think it would be unreasonable at all (using current equity valuations and yields) to achieve a yield across the portfolio closer to somewhere around 5%.
That would then mean that one could expect passive dividend income on the order of $10,000 annually, which isn’t terribly far away from the passive income I’m generating (before factoring in my other passive income, like book royalties).
Moreover, this isn’t that far off from what many professional Thai workers earn.
Some high-quality dividend growth stocks I’d be more heavily exposed to in this situation would include:
AT&T Inc. (T), yielding 5.46%.
National Retail Properties Inc. (NNN), yielding 4.53%.
Enbridge Inc. (ENB), yielding 5.52%.
Now that we have the income side of the equation figured out, we have to determine whether or not that would be enough to live on here in Thailand.
First, I’ll note that Chiang Mai isn’t even the cheapest option in the area, let alone the entire country of Thailand. And Thailand is arguably not the cheapest country in Southeast Asia, let alone the entire world. However, I think that Thailand generally, and Chiang Mai specifically, offers the best bang for your buck, simultaneously maximizing quality of life and value. This is especially true if one enjoys vibrant urbanity.
So assuming that someone were to come here to Chiang Mai, could they get by on $10,000 per year?
I think the answer to that question is: absolutely.
Using myself as an example, I spent a bit over $1,200 in my first full month here in Chiang Mai.
However, that was a full-on life. I wasn’t throttling things in any way.
I’m living in a luxury apartment. I’m at coffee shops constantly. I’m attending meetups regularly, visiting tourist attractions, and staying very active. And I’m paying a second person’s way (my girlfriend) at least 25% of the time.
Simply factoring out the extra spending that’s allocated toward my wonderful company, I’m spending somewhere between $900 and $1,000 per month on myself alone. And I’m not even trying to keep expenses particularly low.
If I had to get by on just $10,000 per year ($833 per month), that could easily be done.
The first thing I’d do is downgrade the apartment.
I’ve toured cheaper apartments firsthand. One could get a pretty decent one-bedroom apartment for about $250/month. And that would still be right in the city, allowing one to walk around and/or use cheap public transportation. One could go cheaper, but adjustments may have to be made. Getting to the $100 to $150 mark would likely mean the place is quite small, quite old, and/or located outside the core city.
But even just a minor change in living arrangements would drop my personal expenses down to about $800/month.
And I haven’t even tackled the occasional visits to Western restaurants, the tourist attractions, and constant presence at coffee shops. Of course, I’d probably be single on this kind of income. And I rarely drink. Plus, I insure myself.
If I absolutely had to, I believe I could live a comfortable life over here on about $750 per month.
That would allow for a $200,000 portfolio to cover my expenses, building in a minor margin of safety. And seeing as how these are dividend growth stocks we’re talking about, I’d have a buffer that’s probably increasing annually (as dividends increase), allowing for inflation, flexibility, and even some minor lifestyle creep.
This lifestyle would initially include a furnished apartment, daily visits to Thai kitchens, regular hanging out at coffee shops (or occasionally bars/pubs), plenty of free entertainment (markets with live music almost every day), and an otherwise carefree predisposition.
If one were open to or preferred living in a more rural area, the lifestyle would likely have very little limitation.
As the passive income grows, so would one’s options.
An example of a Chiang Mai budget at $750 per month would look something like this:
- $250 – Rent
- $200 – Food
- $100 – Coffee/Bars/Entertainment
- $100 – Visa
- $60 – Miscellaneous/Incidentals/Toiletries
- $25 – Transportation
- $15 – Mobile Phone
If the question is whether or not one could retire in Thailand with $200,000, my answer would be yes.
But one would have to structure the portfolio/capital in a way that maximizes passive income now, likely at the expense of potential growth of that passive income over time (one would be choosing more yield over more growth).
And one would have to make some tough lifestyle choices in regard to whether or not they live in the city, whether or not they want to be single, and whether or not they truly enjoy eating Thai food regularly.
However, much of this math is moot, as I don’t think it’s realistic that someone who has access to that kind of capital would all of the sudden find it impossible to generate some kind of additional income. Even just $100 or $200 per month (seeing as how my purchasing power has been tripled over here) would go a long way, which wouldn’t be difficult to come up with.
I believe a value-conscious, mindful, flexible, pragmatic, single person in the city, eating/enjoying Thai food daily, could actually live a fairly decent life in Chiang Mai on the kind of passive dividend income a $200,000 portfolio could generate.
No, the lifestyle isn’t going to be glamorous. But there would be a great deal of autonomy, which is my favorite luxury of all.
Alternatively, one could move to a more rural area (out in a province) and face very little limitations in terms of lifestyle.
Furthermore, meeting and building a relationship with someone who also generated some income of their own (such as meeting a local professional) would open up one’s options rather immensely, assuming one would eventually split at least some expenses with this person.
In the end, I think the upside to this idea vastly exceeds the downside, especially if it’s an individual who’s interested in Thai culture, enjoys the local food, and genuinely wants to make it work. If that’s the person approaching this idea/lifestyle, I think the odds of failure are low.
(This article was only designed to provide food for thought, not to be an all-encompassing and customized plan for anyone specifically. But if you’re interested in a more custom long-term solution, I do offer a one-on-one coaching service.)
Full disclosure: I’m long T, NNN, and ENB.
What do you think? Ever thought of retiring abroad on $200,000? Why or why not?
Thanks for reading.
Image courtesy of: Stuart Miles at FreeDigitalPhotos.net.
P.S. If you’re interested in financial independence, domestically or abroad, I’ve put together a great list of resources that could help you toward that end. I’ve personally used these resources to help me quit my day job at 32 years old and become financially free at 33. Check them out!