Here, we take a look at some of the important issues that make up the answer to this question:
How much will my lifestyle cost?
According to the American Association of Retired Persons (AARP) retiring to Spain “frugally” will set you back around £15,200 (€18,000) a year, while being able to “comfortably” retire to Spain will cost you £19,000 (€22,500) annually.**
However, this should only ever serve as a guide. In order to work out how much your lifestyle will cost, you should sit down with your financial adviser to work out how much you spend now, how much you intend to spend and how much cashflow you will have available to fund your retirement.
Making regular savings can be vital in keeping on top of the cost of retiring to Spain. To make your savings go further, it’s important to book a meeting with a experienced financial advisor with a strong understanding of the expat experience in Spain.
How much for your pound?
Sterling has been on the decline ever since the Brexit referendum result of 2016. In a way, continued uncertainties regarding the future of Brexit make it impossible to predict just how much you will get for your pound when you retire to Spain.
With this in mind, it may be safer to ensure that at least some of your income comes to you directly in Euros – a SIPPs or QROPS pension transfer is one way to achieve this.
How much for property?
Compared to most UK property prices – or at least those in locations that are considered upmarket and attractive – prices in popular destinations such as Mallorca, Costa Blanca, Costa Calida and Costa del Sol amongst the best places to retire in Spain, remain relatively inexpensive. This is true regardless of whether you wish to rent or buy.
Of course, it all depends on your specifications and location, but as a general rule, the average rental cost of retiring in Spain in a one bedroom property is £490 (€580) per month, with a three bedroom property costing, on average, €930 per month. If you wish to buy, you will pay an average of £2,200 (€2,650) per square metre.* Generally, property prices are down by around 40% on their 2007 peak.**
Cheaper property is one reason that the cost of retiring in Spain is generally lower than in the UK.
Best places to retire in Spain
There are a range of great places you can retire to in Spain.
Mallorca
The largest island in the Balearic archipelago, Mallorca is golden haven for expats retiring to Spain. Rich in culture and natural beauty, the island is the perfect paradise for retiring Brits, with the beach, city, and sights all within driving distance, wherever you are.
Costa Blanca
Stretching well over 100 miles across the glorious Spanish coastline, the Costa Blanca (named for its prominent white beaches) is favoured by expats retiring to Spain for the warm climate and affordability. The popular city of Alicante is set within the region, while being positioned on the mainland makes accessing the likes of Barcelona and Madrid a straightforward proposition.
Costa Calida
Directly translated into English as ‘the warm cost’, Murcia’s Costa Calida doesn’t disappoint. Retiring to Spain’s Costa Calida means enjoying year-round sun, golden beaches, and warm waters. The area is also perfect for sports fans, with some of the country’s top golf resorts situated within the region.
Costa del Sol
Positioned as Spain’s southernmost coastline, expect constant sunshine as you enjoy your retirement in one of Andalusia’s best-loved regions. The cost of retiring in Spain is less when moving here compared to major inland metropolis Madrid, while the Costa del Sol’s coastline location allows you to enjoy popular beachside city Marbella.
A Spanish job on the side?
Unless you have some invaluable skills or a failsafe connection, do not rely on the prospect of Spanish employment in order to supplement your retirement income. The 2008 banking crisis resulted in serious economic ramifications and since then native Spaniards and expats alike have struggled to find sufficient employment.
How much will healthcare cost
If you live in Spain you will be entitled to its public healthcare. However, many British expats choose the benefits of private cover when retiring to Spain. The amount you pay for such cover will largely depend on your age, health and other circumstances. However, the AARP says you should expect to pay at least £170 (€200) per month for full coverage healthcare insurance**.
What about tax?
The UK and Spain share a double-taxation agreement ensuring that you do not pay tax twice on the same income. If you are a Spanish resident, you should declare all your global income to the Spanish authorities. If you are a non-resident in Spain, you will only pay tax on Spanish-derived income.
This also applies to your pension. When retiring to Spain, make sure you’ve restructured your pension efficiently to give you freedom as you begin your next adventure. It’s important that you consult an expert advisor ahead of retiring in Spain to make sure your pension pot has room to grow and thrive.
Our free-to-download Spain Tax Guide has more information about your tax obligations as an expat retiring to Spain.
Blacktower FM in Spain
Blacktower Financial Management has more than 30 years’ experience helping its clients achieve their financial and retirement goals.
The expat financial advisers at our offices in Spain can help you make the most of your unique cross-border financial situation, throughout your personal journey as you retire to Spain. If you would like to speak to an adviser, without obligation, contact your local office today.
Disclaimer: Blacktower Financial Management is not a tax adviser and independent tax advice should be sought. The above does not constitute advice and Blacktower makes no recommendation as to the suitability of any products or transactions mentioned.
* https://www.comparemymove.com/blog/your-move/cost-living-in-spain Accessed 12-12-19
** https://www.investopedia.com/articles/personal-finance/111315/how-much-money-do-you-need-retire-spain.asp Accessed 12-12-19
This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.
Time may be running out for British retirees to move to Portugal in order to take advantage of its valuable Non-Habitual Resident tax programme. Currently, talk abounds that the scheme will come to an end in 2018 and be replaced with a 10% net expat tax regime from the first day of the New Year. Luckily, for those who feel they may be tempted by a move to Portugal, any move before this cut-off date will ensure that they are able to enjoy the benefits of NHR status as they currently stand.
SIPPs (Self-Invested Personal Pensions) are a