Blogs | August 31, 2012

Where should I retire?

Elio asks: I am retired after having worked in several European capitals. I can settle wherever suits me best but because my experience living in Geneva, Milano, Manchester, Luxembourg, London and Brussels didn’t happen in the same year (actually over 30 years), it is hard to compare them on cost of living and other factors. What do you suggest?

Ian answers: Elio, your working life sounds very adventurous. The question is, what do you see your life being like during your retirement? Of course choosing where to live is a big part of this and comparing the cost of living in the different destinations is a good idea – but remember financial factors are not the only issue to consider. Emotional elements, such as distance from family and friends can be just as important.

Where’s best? Melbourne? Zurich? Vienna?
First, let’s do a quick survey of the types of liveability indices that already exist. These rankings examine not only the cost of living but also different aspects of life in a range of cities and – as such – often produce different results.
The Economist Intelligence Unit’s (EIU) latest liveability rankings put Melbourne in Australia at number one. The EIU ranks 140 cities from 0-100 on 30 factors spread across the five areas of stability, healthcare, culture and environment, education and infrastructure.A report in The Economist Gulliver blog explains further.
Monocle’s Quality of Life Survey 2012  named Zurich in Switzerland top. Monocle, a media company that focusses on global affairs, culture and design, goes for a more subjective approach using 13 categories.
Mercer’s Quality of Living ranking for 2011, the latest available,  has Vienna in Austria at number one. It asks expatriates about their quality of life in 221 cities using 39 criteria grouped into 10 key categories. These include the economic environment, recreation and public services and transport.
Some of the rankings weight different criteria while others don’t. Some use qualitative rather than quantitative analysis. It’s a good idea to look at the methodology, see which one suits you best and use the information when picking your own number one place to live.
If you want to compare countries using your own view of what’s important (and what’s not), the OECD Better Life Index is a fun tool. Users can put their own weightings on 11 topics including housing, the environment and education.

Low cost countries can come with hidden charges
I don’t know if your retirement nest egg is in British pounds, euros or another currency – but it might be worth weighing up where your money will last the longest.
The eZonomics article 10 tips for an early retirement makes the point that countries with low living costs might offer a higher standard of living for a lower price. But there can be hidden traps here.
If the country uses a currency different to the one your savings are in, exchange rate fluctuations can hurt. Think back to the pain of Britons living in Spain when the pound fell dramatically against the euro amid the most recent global financial crisis.
Healthcare is another important factor and one that might become more important as you age. Certain low cost countries may have less generous public healthcare provision than you are used to.

Remember friends and family
Although sun, healthcare or plenty of museums and outdoor space may be important, remember friends and family are too. Economist Chris Dillow blogged for eZonomics in Gross National Happiness  that academic Nattavudh Powdthavee estimated that, for the average English person, seeing friends or family on most days rather than once or twice a week increases happiness by as much as a pay rise of £15,000 (€18,000) a year. This sounds a lot – but this is because higher incomes increase our happiness only slightly.
Add in the costs of travelling to see friends and family and the idea of living close to them might become even more attractive.

Home is where the mortgage is
Finally, congratulations on being in the fortunate position of being able to choose your retirement lifestyle. I know this is not entirely down to luck. I am guessing you planned for this over many years.
It might be that you don’t actually need to make the choice immediately and have the luxury of time to try a few options before making a final decision. If this is the case, renting for a time rather than buying a property can be a wise choice.
Once you are sure you have found your favoured place, perhaps take steps to settle more permanently. I am interested to hear where you choose where to live and wish you a long and happy retirement. Good luck.


Ian Bright
Ian Bright

Senior economist at ING
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