ARCHIVED - How much money do I need to retire in Spain? Blacktower Financial Management

The burning question facing many who can’t wait to enjoy the good life in the Costas

There is so much to recommend retirement life in Spain. However, the many opportunities inherent in a move to the country also bring a great many challenges. As such, if you want to join the approximately 250,000 British expats who currently live here, you will need to consider a number of important questions, not least how much money you will need to retire in Spain.

Some of the important issues that make up the answer to this question are the following:

How much will my lifestyle cost?

According to the American Association of Retired Persons (AARP) a "frugal" retirement lifestyle in Spain will set you back around £15,200 (€18,000) a year, while a "comfortable" retirement lifestyle will cost you £19,000 (€22,500) a year.**

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.

How much will the pound be worth?

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.

Against this background, 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 my 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, the Costa Blanca, the Costa Cálida and the Costa del Sol 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 for 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* – but generally far less in, for example, the Costa Cálida, than in the Balearics or the Costa de Sol. There is enormous variation from place to place, but generally, property prices are down by around 40% from their 2007 peak.**

Despite this variation, it is fair to say that cheaper property costs are one reason the cost of living in Spain is generally lower than in the UK.

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, as long as you establish residency before the end of the Brexit transition period. However, many British expats choose the benefits of private cover. 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.

Our free-to-download Spain Tax Guide has more information about your tax obligations as an expat.

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 your unique cross-border financial situation. 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