What we learned from our mini-retirement

The main purpose of the mini-retirement was to recuperate from sleep deprivation more cheaply than at home. Unexpectedly, we actually realised a number of other things about our future early retirement goals. This post covers all the things we learned from our mini-retirement.

Our early retirement plan

We were leaning towards the option of reaching FI, selling our Irish home, and becoming tax residents in Portugal, after looking at all the shortcuts to FI which I outlined in a previous post. We would then live part-time in Ireland, part-time in Portugal and possibly part-time in Canada. The reasons for this were:

• Portugal had a tax regime where foreign income would be tax free for 10 years. This meant that my ETF portfolio would not incur the 41% exit tax on gains or dividends. We would also need 115,000€ less in our portfolio to reach FI if all our investments were Irish ETFs. This is due to needing 28 times our annual expenses vs 25 times. Or a withdrawal rate of 3% instead of 4% due to the higher tax
• Portugal’s cost of living is lower than Ireland’s according to Numbeo. It shows that our current cost of living of 38,500€/year would only cost 27,504€ in Lisbon. Meaning we would need 275,000€ less in investments to reach FI (in addition to the 115,000€ above)
• The weather is preferable in winter
• It is accessible via direct flights to both Dublin, Cork and Montreal. Making it easy for friends and family to visit

What changed our minds?

So what changed our minds in the span of one month?

Adaptability

This might be down to lack of sleep but as we’ve gotten older, we are less adaptable than we once were.

Initially the idea of living in Portugal for 2 months was exciting. We thought we’d like experiencing new places and nicer weather. And we are, but at what cost?

In terms of energy, the effort required to: get the house ready, get packed up for Christmas, travel up and down the country (twice, including a 2nd trip to bring up the cat), get packed for Portugal, fly over, unpack, get familiar with new surroundings, accommodation and appliances, one of us fly home for a funeral (catching a cold in the process and getting us all sick upon return) while the other stayed alone with the baby, pack up, get settled in a another new location, figure out how to use new appliances and where everything is stored, pack up again and fly home again left us a lot more tired than if we had just stayed home (or so we think).

The idea of having to live between two homes on a continual basis in order to retire early and avail of tax breaks seems less and less appealing.

I also don’t like the idea of HAVING to live in a certain place for a minimum amount of days per year in order to be considered tax resident there.

Plus, if we wanted to own only one home and rent in the other location we would have to live half of the year without certain comforts like a full spice drawer, nice cook ware, potentially a comfortable bed, nice shower and so on.

Cost of Living

It may be hard to judge but so far, we have not found the cost of living to be much less than Ireland.

Food

We’ve tried doing groceries at Lidl/Aldi as well as local shops. We still seem to be spending more on food here than at home.

Part of this may be because we have no staples. We are spending more to get things like spices and condiments which add to our shopping. We’ve been eating more meat since veggie meals usually need a variety of spices which we don’t want to buy and waste as we won’t get through them in time.

Another reason may be because gluten free foods are more expensive. Mr. MH is coeliac. We were also buying more than usual as we were excluding gluten from Baby MH’s diet in an attempt to clear up an eczema outbreak so that may also be a contributing factor.

Dinner’s at restaurants are cheaper but we don’t eat out that much. Though we have been eating out more since we’ve been here. It’s hard to pass up 10€ 3 course meals.

Accommodation

Though we’ve been staying in holiday rentals, I’ve been looking up apartments to rent and you’d be hard pressed to find a similar standard of housing in the city as we currently have in Ireland.

Our current housing costs are 940€/month for a 3 bed house within walking distance to the city centre. We have the house finished the way we like it. We have a yard and off street parking.

I haven’t been able to find similar standard of accommodation at that price point in the Algarve or Lisbon. There are definitely rentals for that price point but not with the same finish and features we’d have in Ireland.

Transport

Since I’ve been in Portugal, I’ve been getting Quora (an online discussion forum) updates on Portuguese based questions. Gotta love big data and location tracking. Anyway, one of the questions was why second hand cars are so expensive in Portugal. Mainly because new cars are taxed twice resulting in older cars costing more too. Cars last longer too due to the weather I’d imagine so a 6 year old car here would cost almost 10,000€ more than elsewhere. And they’ve clamped down on any imports with high import taxes and ongoing annual registration taxes so that’s not an option either.

All that to say, owning a car might cost more than in Ireland, even for a really old one.

Public transport may be better so if you live in a major city you might be able to do away with having a car all together, but we don’t think we want to live in a city in Portugal anyway.

Isolation

Even though we had family come to visit us for almost a third of the trip we still felt isolated. We missed being able to pop over to visit family and friends on weekends. We missed our community.

If we lived here longer term I’m sure we’d settle in and make friends here too but we struggle to keep up with our already vastly dispersed family and friends so not overly looking to make new ones.

Also in the one month we were here, a close friend of the family passed away and there was an illness in the family resulting in a last minute trip home, highlighting the fact that even though flights are accessible, it’s more of a struggle to be there for family in times of need.

Tax changes

The government passed a change to the foreign income tax exemption in the month while we were in Portugal. I will do a more detailed post on what the changes mean for Irish investors but ultimately it makes the tax benefit far less favourable.

Child benefit

Becoming tax resident in another country for tax purposes would mean giving up the child benefit we get in Ireland. For one child this is 1,680€/year meaning we’d need 47,000€ more invested to make up that loss.

If you have 2 kids, you’d need almost 95,000€ invested to make up that loss.

Long term illness cover

Mr. MH is diabetic and in Ireland there is a long term illness scheme which covers all costs related to diabetes. If we were tax residents somewhere else we would no longer have access to this benefit. We haven’t figured out what that would mean in terms of insulin and other costs but I’m sure it would be prohibitive and negate any tax benefits we may make elsewhere. He also has an excellent team of specialists in Ireland which is not something we’d like to give up.

Stability

The idea of living in two places would also cause issues for our son and schooling. I’ve looked into the option of worldschooling/homeschooling in order to facilitate this lifestyle but being part of a worldschooling Facebook group, I see a lot of posts where families have had to settle for longer periods of time as their kids crave stability.

Even if we managed to get our son enrolled in school in Ireland for part of the year and homeschooled the rest of the year, it doesn’t feel fair to impose that on him and seems like a more complicated option when the whole point of retiring early is to live a simpler life.

Pets

We love having pets. Moving between two places would make this hard to manage. Our cat has had two homes in the this last year between Cork and Mayo due to all of our travel. This isn’t fair to our pet and we miss him when we’re gone. I know people travel with their pets but getting pets into Ireland is quite expensive. When we moved to Ireland back in 2014 we figured it would have cost us almost 5,000$ to bring in our two cats due to all the anti-rabies precautions and protocols.

Food

An unexpected find is that we miss the food in Ireland. When we moved over from Canada I remember finding that the food in Ireland was more fresh and flavourful, perhaps as it has less distance to travel or is closer to in season foods year round? In fact I find the food better in Ireland than most places we have lived and visited.

Obviously beef and dairy are unrivalled in Ireland but even fruit and veg were fresher, despite them being imported.

Things like pastries, breads and local citrus fruits in Portugal are on par but so far that’s all we have found.

Even though the food in restaurants is cheaper, the quality is nowhere near what you’d get in a restaurant in Ireland. I’m sure there are exceptions but has not been our experience so far.

In terms of groceries it seems Lidl is similar to what Lidl was in Ireland 6 years ago. The food isn’t as fresh, the displays are disheveled, and you can’t get a full shop there. It seems the grocery shops go as below in terms of price and selection from most expensive to least:

• Corner stores
• Lidl
• Continente
• Pingo dolce

One tip we got was that foods are marked down at the end of the day if you can go in then.

Respect of Women

This was not even on my radar until I was reminded with an unfortunate incident.

I was walking to the grocery store with my 16 month old son during the week that Mr. MH was back in Ireland and I was on my own.

In Portugal all drugs are legal and there are many dealers trying to sell drugs as you walk about. There seems to be an unwritten rule that they do not offer to young mothers out with their babies but that night one guy didn’t seem to get that memo. First I was offered smokes, then hash and when I refused that I was offered sex. I laughed it off and continued walking but as the night went on I got more and more upset.

I felt like I should have spoken up, but was alone and didn’t want to put myself or my son at risk of retribution. If my son was any older I would have wanted to set an example and stand up for myself to say that was not acceptable especially in the presence of my son.

And while this was just one comment in the whole month, I struggled to think of the last time something like that happened to me in Ireland.

I even thought back to when I lived in Canada. In my college days when sexual harassment was a normal part of going out in public. Being grabbed, groped and grinded against in night clubs was the norm. I would be cat called and called names when the cat calls didn’t result in a response. We would go to gay bars just so we could dance in peace. I thought that was normal.

Then I moved to Ireland and all of that was gone. At first I struggled with the lack of response, thinking that the men of Ireland did not find me attractive, when actually they were just respectful.

Anyway, all that to say, that is the culture I’d like to raise my son in. Where women are respected far more often than not.

Not all bad

I don’t want you to think I had a horrible time in Portugal. I’m very grateful that we were able to have this experience. It’s not wasted on me that most other people returned to work after Christmas as usual and struggled through sick houses and the usual daily struggle of rushing kids to and from creche or school and working full time.

Our first days in Portimao were relaxed with two leisurely walks a day including stunning views of the ocean and time at the beach with our son.

The people are extremely friendly, especially to people with babies.

We then went onto Lisbon and had a nice time catching up with my sister and brother in law. Our walks were a little laboured with a buggy but a really cool city.

What does this mean for FI?

So what does this all mean for our financial independence plans?

Basically, taking a mini-retirement helped us confirm that we love where we live. We’re happy to work a few more years in order to fund a retirement there.

We will live a simpler life as we will have one set home base.

And we can still travel to new places in winter for a few weeks at a time if we wish. Or to my family in Canada without having to worry about tax residency limitations.

It also means I will spend more money on our home as we now know we want to be there longer. This may slow our savings rate but life is for living and you have to enjoy the journey.

All of these realisations would not have happened if we hadn’t done a mini-retirement. We have confirmed the grass in in fact not greener (at least for us).

Although it was costly to take the time off work, it would have been far more costly to reach a certain FI number, sell our home, quit jobs and move to Portugal only to realise then that we would have preferred to work a few more years and kept our home.

I feel like, although our FI date has been pushed out, I’m actually far happier with the approach. I’m not striving to get to FI as soon as possible. I’m less obsessed with tax breaks. Instead I am focusing on making sure our lives are as simple and happy as possible along the journey.