Geo-arbitrage - am I tempted to Fat FIRE?

Renting out our apartment in France and then using geo-arbitrage (moving to a lower cost of living area/country), would increase our income and lower our costs, enabling us to have more of a Fat FIRE lifestyle.

Could this be something I’d be interested in doing?

That's the question I was asked a short while back. And it's particularly relevant as we’re currently visiting friends who have retired to the Philippines, somewhere that surely ticks the lower cost box.

But, at least for now, my answer to the geo-arbitrage question is no, because:

1. I don’t feel a need for Fat FIRE. The slightly chubby FIRE life that I already have works for me and I don’t believe Fat FIRE would make me happier.

2. It would most likely take us further from our (grown up) children. It's not a deal breaker, but for now we like being on the same continent as them.

3. I know that Sally wouldn’t want to rent out our current home.

That said, I’m not saying geo-arbitrage could never be an option. While I don’t see it as a route to Fat FIRE, I might consider it:

• If we wanted an adventure or to experience a different life for a while. While I’m saying no to this today, I’m not ruling this out for the future.

• As an insurance policy. If finances became a problem (fingers crossed they don’t), it’s good to know we have the option to relocate to a lower cost of living location.

I’m no stranger to relocating, having lived away from my home country for 22 years. My job took me to live in Jamaica, Hong Kong, United Arab Emirates and South Africa, and now in retirement we’re living in France. I feel fortunate that I had the opportunity to live in different countries, but also know how difficult relocating away from your home country can be, particularly the first time you do it.

I wish I had a penny or cent for each time someone’s said how lucky I am to be living in Jamaica, Hong Kong, United Arab Emirates, South Africa or France. But when I respond saying they could do it too, they’re quick to list reasons why they can’t. Of those who have an idea of moving to a new country, only a tiny fraction make the leap.

I do think I’m lucky, but it only happened because we said yes when the opportunities arose. We made our own luck by not finding a list of reasons to say no, even if sometimes it felt a little scary.

I posted about this topic before, in Retirement Relocation – would it work for you? In that post, I listed my most important criteria when considering a new location:

• Climate

• Cost of living

• Family and friends

• Language

• Your purpose

In hindsight, I’d have written that list a little differently:

• Safety, security, and healthcare should also have been on the list, and

• Facilities would have been a better criterion than purpose.

I wrote that post 5 years ago, before there was any idea of living in France. In fact, back then I said the ski apartment in France would be too small for full time living. Now we’re approaching four years living in that supposedly too small French apartment. I’m intrigued to see how life in France measures up to the relocation criteria that I set?

Climate – score 4 out of 5

It might not be for everyone, but I like that we have four distinct seasons. A warm (but not too hot) summer, a cold and snowy winter, the new beginnings that are found in spring and the beautiful colours of autumn. That said, I can understand the attraction of a more temperate climate, perhaps winters around 10-15°C (50-59°F) and summers of 25°C (77°F).

Cost of living – score 2 out of 5

We don’t live in a low cost of living area! As a tourist resort, the cost of real estate, as well as prices in restaurants, cafes and supermarkets are high. Plus, France has high tax and, in a few years, we’ll be liable for a real estate wealth tax – my score will likely go down to 1 out of 5 when that happens.

Family and friends – score 3 out of 5

While we don’t live in the same country as any of our family, we are closer than we were when we lived and worked on a different continent.

We’ve made a small number of good friends, but some are only seasonal residents. I’ve been surprised at the lack of clubs to join, reducing a good route to find friends with common interests, but I have got involved in starting a running group and found new friends through that. We don’t have any French friends, probably because of our poor language skills. Before this year, I’d have scored this 2/5, but it’s improved since being involved in the running group.

Language – score 1 out of 5

I really struggle with French. My spoken French is quite limited, and my listening/understanding is awful. I do try, but have surprisingly little opportunity to practice. Even after four years, France doesn’t feel completely like home, and I’m sure that's largely down to my lack of language skills.

Facilities – score 4 out of 5

We have the outdoors. Our location is fantastic for trail running, cycling, hiking and skiing. There are plenty of cafes (important to me) and restaurants (less important), tennis courts, gym and a pool should I ever want to use them. Shopping is a little limited but good enough for my requirements. It would be nice if we had a cosmopolitan city a little closer to us – Geneva is around 80 minutes drive. In terms of the thing (or things) that make me excited to get out of bed each morning, our location does pretty well, plus a number of my interests can be done irrespective of location.

Safety, security and healthcare – score 4 out of 5

We didn’t expect to have problems with safety and security in France, and we haven’t. The healthcare system is well regarded, although language could be a concern if we had any serious health issues.

Sally has similar criteria, and her scores are the same as mine for all but climate – she doesn’t enjoy winter sports and prefers warmer weather. Although she scores family and friends the same as me at a 3, I’m probably at 3+ and she’s closer to 3-. With 20/20 hindsight, it would have been better if we’d bought a property that could have had a workshop for Sally.

Scoring our retirement relocation

Our decision to live in France happened by accident rather than being a well-considered decision. It’s tempting to say that our scores reflect that, 17 or 18 out of 30 seems lower than we would have aimed for, with a couple of elements dragging the overall score down:

• Language – this is important and an area we need to improve if we want France to be a long-term home for us.

• Cost of living – this is less important because although the cost of living is relatively high, it is affordable for us (although we may want to revisit this once we become liable for the property wealth tax).

Friends gets a middle of the road 3, as does climate from Sally. Experience of previous relocations tells us that more friendships will be made as time goes by, so I don’t see this as a major concern (actually, it doesn’t concern me at all, but I know that it does worry Sally). As to climate, this is more of a challenge, although maybe we can identify more inside interests for Sally for those winter months.

While we’re visiting our friends, Mr & Mrs G, who have retired to the Philippines, I can’t help but check how it fares against my relocation check list. More interestingly, I want to discover what criteria they used when deciding on their early retirement relocation, and whether the reality of life in the Philippines corresponds with their expectations. That will be part of my next post when I ask the G’s about their early retirement.

Retirement relocation is an interesting topic. Geo-arbitrage, choosing to move to a lower cost of living area/country can make retiring early an option when it otherwise wouldn’t exist, or can turn a skinny FIRE into a more comfortable FIRE. Alternatively, it might be something that’s done for a lifestyle change, new experiences or adventure. It’s important to remember that the criteria for relocating is different from the criteria for choosing a vacation destination, they are two completely different things. Also, know that relocating, particularly to a new country, may not be as easy as you think. It’s not something to take lightly but, for some people, it might make early retirement possible when that wouldn’t otherwise be the case.