FIRE in Cyprus? |
I’ve started to call the first the blogs that are selling a life and the second the blogs that are living a life. I’ve also pretty much stopped reading the former as they no longer resonate with me as my journey has and continues to be much more like the second type. If you however prefer the first type then I’d suggest you move onto your next piece of Saturday reading as this post will likely disappoint.
I’m now coming up on 3 months of financial independence (FI) and the one thing I’ve been trying to leave via FIRE (financially independent retired early), work, has already become a very different place. My workplace and the career I chose is one that is very focused on the financial top and bottom lines. This means that it’s no secret that as soon as my job can be done by somebody else cheaper or more efficiently in the world then I won’t have a job. It’s also one where if you perform well you can do well financially, and I have, but also one where even average performance will result in you quickly finding yourself without a job. For me this has helped with my rapid progress to FI (of course it’s taken a number of other choices as well) but it’s come with the sword of Damocles always in full view. 3 months ago that sword was taken away and it’s made a big difference. It’s firstly just simply removed a weight from my shoulders as out sourcing or average performance will now just result in a nice pay off, which I negotiated some time ago when I seriously looked to move on but was still a golden child, which will further bolster my wealth nicely and result in me simply sailing off into the FIRE sunshine. Additionally, to ensure continuous success one technique I’ve used over the years is to work very hard which gives me extra time to drive the risk out of every decision I make. The ramifications of this are pretty long days but it did help with surety of tenure. Since FI I’ve started to take now take more risk as there are now no downsides personally. So far this has me back to peak performance, having dipped for a few months following extra work load, but I’m also working slightly less hours and that 0.5 – 1 hour less work per day has put a spring back in my step. It’s still not the place I’d choose to be Monday to Friday and FIRE is still very much in view but it’s a lot better post FI then pre.
Over the summer we also continued our Mediterranean early retirement research with a few weeks in the Paphos area of Cyprus. All I can say is that for us it is a dream location although Mrs RIT still has an inkling for the Marbella area of Spain so some discussion still ensues. So many opportunities for a more outdoor lifestyle including ocean swimming, hiking and cycling. A much more relaxed way of life and financially my assumptions, in Euro’s, weren’t far off with the life we’d like to live likely costing EUR23k per annum. Within our control the only negative is that I think we may have become a little greedy home wise. Let me demonstrate with a simple example. This is the view EUR345,000 buys you plus you’re only a few minutes walk from restaurants, Coral Bay is just a few minutes drive away and Paphos is a beautiful coast road away.
Click to enlarge, sea views from a EUR345,000 Tala, Cyprus home
In contrast this is the view that EUR295,000 buys but it comes with restaurants that are a short car journey away and Paphos is at least 20 minutes on a motorway away.
Click to enlarge, sea glimpses from a EUR295,000 Secret Valley, Cyprus home
These are definitely first world problems but the way I’m weighing them up is that the difference is a few months of work versus a potential 40 years of living in homes like that.
Outside my control we also have the fallout from the Brexit vote starting to appear including talk from Theresa May about hard Brexit. At the point of FI our Med home purchase might have consumed 21% of my wealth. Today, with exchange rates falling resulting in my wealth essentially going nowhere in Euro terms (ok it’s up EUR28,000 since Brexit) and a bit more home it’s already creeping to 25% of current wealth. On top of that a hard Brexit and Med move could result in no State Pension triple lock and no free healthcare post State Pension age to name but two.
Let’s contrast that with our UK FIRE idea that includes a move from the South East. Day to day living costs between Cyprus and the UK will of course be different. For example ‘Council Tax’ in the UK could approach £1,800-£2,000 per annum where in Cyprus it could be as low as EUR140 but on the flip side in the UK we can use the NHS for ‘free’ while in Cyprus private healthcare would set us back EUR1,850 per annum and that will increase as we age. On the whole while there are differences I don’t believe the total annual costs will be that different with the UK around £21,000 and Cyprus as mentioned above at about EUR23,000.
Where there was a big difference was the cost of a home. Our UK dream consists of a self built modest low energy use oak framed home with a bit of land. We think that will cost us circa £400,000, with the land being a significant portion of that, which at the time of calling FI would have consumed 39% of our wealth making it a no go financially swinging everything in favour of Cyprus.
Click to enlarge, Oak framed home for anyone, this one’s from Border Oak
So what’s the answer I hear you ask? Unfortunately, we don’t yet know and it’s why I gave the switch off now warning as I started these musings. What I do know is that I feel incredibly fortunate to have the problems I now have and if given my time again to choose to race to FI in less than 9 years or live a more consumerist conventional life I’d do exactly the same thing again.
What would you do if you were me?
I'm interested that you're now thinking of Cyprus but believe you've mentioned Malta in the past. What are your thoughts on the latter, and is it now off the agenda?
ReplyDeleteI still have a soft spot for Malta. We love the history and architecture. We could spend years walking through the historic streets/paths of the historic towns/countryside.
DeleteFrom where we sit today though I think our standard of living would be worse than that of the UK or Cyprus. House prices are one thing. Since 2007 they are up some 21% where in contrast in Cyprus they are down 16%. Couple that with it being a small island and this would mean in Malta we could still buy a lovely House of Character but it would have little to no outside space. One concern we have also is that we might end up with 'island fever'.
It's also a pretty crowded place and having now lived in expensive and crowded London for many years we've had about enough of 'bijou'. With Cyprus our concern is more of the same where Cyprus provides the opposite.
Thanks. I'm familiar with Malta, but not Cyprus, and can attest to the fact that property prices have continued to rise in Malta and there are cranes everywhere. My guess is that the banking crisis that hit Cyprus later than most parts of the world is the reason why real estate there is cheaper than a decade ago. So yes, I appreciate the logic of preferring the cheaper and less crowded Cypriot option. Must go there and check it out for myself, as you've done.
DeleteWould highly recommend a visit to Cyprus. If you do go I'd also recommend spending some time both near the coast and in the mountains as I noticed two very different cultures/lifestyles.
Deleteisland fever is effectively treated by buying a boat. The Med suddenly becomes your garden to complement your house of character which may not have plenty of outdoor space attached. Worked for me!
DeleteWhat's your max house %age? You've been cautious in saying that £1m could provide £22k p/a and a house, if you are prepared to sell and rent later on, you could boost the house proportion.
ReplyDeleteIf you are uncertain about UK/abroad, why not rent a villa for 6 months and see how you find the lifestyle in reality.
I do detect One More Year in your posting, while I've got One More Week....
Many congratulations on the OMW!! It must be a great feeling.
DeleteI used percentages in this point to get the story across but the home price spend is actually the formula home price + expenses = wealth at time of purchase - planned annual spending/2.5%.
Good point on the renting and something we definitely plan to do whether it ends up the UK or the Continent. Probably 6 months and maybe a bit longer in the UK if we build rather than buy.
I've always said I hope I have the courage to FIRE soon after FI but I'm now starting to understand why people OMY.
Good to hear you have not totally ruled out the UK option. The sun and sea are great for holidays...and you could afford plenty of those.. but for me, it would be a no brainer - UK for permanent home.
ReplyDeleteThere are so may lovely places to choose from and property outside of the SE is more affordable but most of all I would miss family and friends as well as all the intangible aspects which have shaped me into what I have become.
The very best of luck with whatever decision you come to - its great to have options to ponder...take a little time!
Don't get me wrong for us Cyprus is a very beautiful place but the UK is also beautiful in a different way. A pint in a beer garden on a summers day, a walk through a wood during the orange leaves of autumn, waking up to a crisp sunny spring morning... It really doesn't get much better.
DeleteOne thing I've always struggled with in the UK is the long winters though. Waking up in the dark, driving to work in the dark, working all day indoors under artificial light and then driving home in the dark. However, in FIRE it's a very different story and instead could be a walk through a forest on a foggy crisp winters morning. Bliss!
We're currently concentrating on exploring Herefordshire but are not tied to it yet. It is beautiful though.
I can understand the struggle with the UK winters, even if you didnt have to work. The advantage of being based in the UK is that you have good flight connections everywhere so you could easily visit other places each year and get some variety...
DeleteI guess to a degree it also depends where you have locked your funds - if they are in taxable, ISA / SIPP etc...
Herefordshire is a beautiful area and you will also benefit from some really good food, if that helps :)
London Rob
I recall an early article featuring Maslows heirarchy of needs and I think the need to 'belong' is very important. I am throughand through English and feel I belong here and always will so its natural to want to live here rather than abroad.
DeleteHerefordshire is very good - I have fond memories of weekly trips to Ledbury to collect organic veg for my business in the 90s.
Sounds like two thumbs up for Herefordshire.
DeleteCurrent wrapper spread is:
- Pension 45.0%
- Taxable 33.9%
- ISA 11.4%
- NS&I ILSC's 9.7%
London Rob, what were you thinking when you mentioned depends where you have locked your funds?
> One thing I've always struggled with in the UK is the long winters though. Waking up in the dark, driving to work in the dark, working all day indoors under artificial light and then driving home in the dark.
DeleteBut you'll have gotten rid of work with FI? I love the dark time of the year, the crispness of the frosts, the far greater creativity of the winter months. The period February to March is a drag because the winter is outstaying its welcome by then.
But of course the loveliest thing is you have the choice now ;)
Too right ermine and I can't wait.
DeleteHi RIT,
DeleteThe thinking on where its locked is that with a lot in the Pension wrapper and I cant access it until I am past my preferred retirement age, hence the thinking.
I have the bulk in house and pension and so not easy to get at.
Cheers,
London Rob
Hi RIT,
ReplyDeleteInteresting to hear the difference pre and post being FI - have you found your motivation decreasing at all?
Its a really tough decision - moving from an area you know and where (I am assuming!) your friends are is difficult. If it were me I would probably hang on a little longer to try and get some clarity on what the implications are going to be from Brexit - the last thing you would want to do (I am guessing!) is to have bought somewhere say in Cyprus, and move there and then realise you can no longer afford it. Whilst I highly doubt you would get in that position, but would be my worry. I would probably keep working to build up some extra cash to make sure I had the choice of the two... but that also depends on the work situation and if you can cope with it!
Cheers,
London Rob
I'm good with maths and a bit awkward with emotions so it's a bit difficult to describe. I'd say I'm as motivated as I ever was (ie no drop off in work ethic) it's just that the outcome of those motivations have become far less important as the downside of something not ending up exceptional is far less severe. That makes work a far easier ride.
DeleteOne thing that does make us quite flexible is the family/friends situation. We are un/fortunate that our friends and family have really been a part of the globalisation story meaning they are really spread across the UK/the world and are now pretty multi-cultural. This means that FIRE in any part of the world will result in more time with friends/family than we get today. A big upside to FIRE and just one reason why the pull to go asap is strong.
I hear you on the Brexit implications. It is top of mind. The only problem is that waiting could be 2.5 years if the politicians sound bites are true...
Hi RIT,
DeleteGood to know the work ethic doesnt go - that has been a bit of my worry that I would lose the will to work if it was optional, although I do enjoy it!
It sounds like its a great option then with friends dotted around and also means you can spend time visiting them and touring the world....
You are spot on with the Brexit - and that assumes they actually do do it, rather than just talk about it- I guess to a degree it also depends on where your income comes from - for me I have mix of USD, EU and GBP so Brexit hasnt made too much of a difference... yet!
London Rob
I think a lot of work ethic is a result of upbringing. For me before I go into anything I know I'm always going to do it properly and I'm going to finish it. If I can't commit to that then I don't start and whether I'm paid for it or not makes no difference. An example that everyone who reads this blog will see of this is my journey to FI - started, learnt, adapted, stayed determined, stayed the course and finished.
DeleteYou are spot on its a mindset - but as I havent yet got to FI I wondered what difference it did make and how I would feel. Would I really cope or want to get up at 6am if I didnt need to? What would I fill my time doing etc. I guess I have quite a long wait before I have to worry about that yet though :)
DeleteInteresting post RIT. I’ve been thinking about your situation this week as I watched GBP take a further hit. I guess you have good diversification in assets which are fairly GBP neutral? But I do recall you saying you had stress tested against €1.12 which has now been breached (in the negative sense). What are your thoughts on this, are you adjusting your stress tests at all?
ReplyDeleteI have had vague plans of retiring on the continent somewhere (South of France is likely) but I do not have as much diversification of assets and the drop in Sterling has really put a damper on those plans. We are lucky in that we are also a household with an EU and a UK passport so more options available than regular Brits after Brexit.
You're right on the exchange rate stress test breach although to be fair I have also assumed that rate holds forever. How long until another 'wine drinking' Euro country blows up again? I've seen no changed behaviour from the EU so it must happen again. What do they say - doing the same thing again and expecting a different result is insanity - or similar.
DeleteI'm not adjusting yet but I still have my head down saving hard which will hopefully give options should they be needed in the months, hopefully not years, ahead.
Good luck with your plans. I hope they recover and pan out. It really is the most wonderful thing and I'd recommend it to everyone.
Agree with you on the EU passport. Having a collection of passports certainly does bring options.
Oh and another comment regarding your choice of houses. A house for me if one of the fundamental things in my life and ultimately I want to have the nicest one I can afford. If it were me and the choice was between an option you're going to be completely satisfied in, and an option that is quite a compromise, I'd work for a further six months or year in order to afford the one I would love waking up in every day, the place I would love coming back to every day.
ReplyDeleteVery much agreed. This is something stringvest and I have discussed in the recent past also. I'm quite introverted (not sure if that's because I have to be extroverted in my career, but that's for another day) so will very much like mooching around my own garden and home. It's one of the reasons Cyprus (and maybe the UK or Spain) has pushed Malta to one side.
DeleteI'm just also wary of being greedy as you're also a long time dead although hopefully at age 43 and with a fair wind I have some way to go yet.
I've always said your currency assumptions were a bit too rigid. The worst case figure taken out already!
ReplyDeleteHave you considered how many other people may now be questioning a move abroad due to sterling dropping? Although on the currency swap European property has increased in price, the demand could have fallen off a cliff. Therefore you should be able to negotiate a compensatory discount if buying there? Pensioners will be returning in droves?
Then when we cancel Brexit, sterling appreciates and you are better positioned.
Good point about prices possibly falling or at least being negotiable with time if demand falls further or supply increases.
DeleteAlready, I have noticed that one of the homes we quite liked has been lowered in price by 5%. During the viewing it became apparent the owners were pretty keen to return 'home' quickly and I actually felt there was a lot more than 5% on the table.
Also the real estate agents I was with made a deliberate point of pointing out that it was currently my market and everything was negotiable.
I suppose you want a distressed UK seller looking to return home, rather than a Cypriot developer or European hoping to sell to people who could already be Euro based.
DeleteHave any of the houses you were interested in sold since you were in Cyprus?
You could always ask the agents if they have any UK sellers and what lower prices they might accept.
We wouldn't buy from a developer as we want resale with title deeds to avoid any risk around that famous Cypriot palaver.
DeleteThe one's that we liked are all still for sale. Some of them were Brits who would have been happy for us to make the sale in £'s which would have been useful.
I won't waste any more of the agents or my time at this point. This trip was all about would we want live there and to validate our costings. That objective was met. The next step would be move and rent for at least 6 months then buy so at this point we're still tyre kickers.
Biggest risk I see is counting one's filthy lucre at the top of a bond bubble, after a 7 year equity bull market, currently the 3rd & soon to be 2nd longest in history & assuming past correlations can be counted on in future. Weighed against this where you buy a house is I would posit, a fairly minor calculation
ReplyDeleteThanks for the view. So how are you positioning yourself and what are you doing about it personally? What would you do with that knowledge if you were me?
DeleteMe again from Mid-west France. Lots of ex-pats buy houses that are just too big for their real needs just because they are cheaper than in the UK. They don't workout the extra costs of running and maintaining such properties (I know that will not apply to you).We have been here 10 years and think we got it pretty right.I think you need to close to a small town (20 min walk,10 min cycle) it is amazing how often you need supermarkets,Bars/clubs,Doctors,schools - a 20 min car ride each time would be a big no no for us...........
ReplyDeleteThe non UK climate is a very big plus.........
T
Very good point about buying more home than one needs. I call them McMansions and see/saw plenty of it out there. For me some of my criteria is quality, location, how much will it cost to heat/cool (so size, construction and insulation levels) and how difficult will it be to keep it clean/maintained. This naturally drives me towards only enough home.
DeleteIn Cyprus we were typically looking at homes in the 150 - 170m2 enclosed area. We were also looking for a pleasant covered terrace. We would have been happy with less size but it seems to be about the minimum if you also want a good location and some nice views. In the UK where we are looking to self build we actually want to step that down a little to 3 bedrooms and around 130m2.
The walkability factor that you mention is important for us as well and we're prepared to pay/wait for it. We'd like to get to 10 minutes walk to some 'civilisation'.
I'm interested in your continuing to work. It seems to me that if your employer is a hire 'em and fire 'em outfit, you owe them no loyalty whatever, save subject to law. Naturally you will have to answer to your own conscience, and there may be a boss, or colleagues, to whom you feel a personal debt of gratitude and whom you'd rather not leave in the lurch, but otherwise your loyalties should now be entirely to yourself and your family. Leave work when it suits you; no sooner, no later.
ReplyDeleteAs for location, ensure that you've tried a potential new country through all four seasons. We know (for example) that we can't bear a tropical/subtropical summer a.k.a. the wet season, but that we can easily bear a mediterranean climate's winter. Financially it's a pity that you don't fancy Portugal, but there we are.
"...your loyalties should now be entirely to yourself and your family." In all honesty that's actually been my approach since day 1. It's a great place for value add/contribution level = earnings level which has suited me given my plans. On of my pillars was Savings = Earnings - Spending and it's enabled me to live that. There are plenty of places out there where attendance = earnings meaning those that want to get on can reach an 'unfair' ceiling.
DeleteWhy do you think Portugal would be good financially?
Its tax treatment of foreign pensions.
DeleteI think the Portuguese tax break for new residents is 10 years only, whereas Cyprus is kind to retirees on an ongoing basis. I think there may also be no tax on foreign dividends, and possibly capital gains, but am unsure. Does anyone here know the definitive position?
DeleteMy understanding of the tax situation but please DYOR.
DeleteCyprus:
- Pension. You have a choice. You can be taxed at 0% on first EUR19,500, then next band is 20%, then 25%, 30% and 35%. Alternatively, you can pay a flat 5% for pension amounts above EUR3,420.
- Dividends and Interest. Provided you're not of Cypriot domicile then for first 17 years of residency neither are taxed or have to pay special contribution for defence.
- Capital gains. There is 20% tax on immovable property within Cyprus but there are some rules/exemptions around your principal private residence. No CGT on shares.
- Annual Immovable Property Tax (IPT) which is similar to UK Council Tax. EUR0 from next year.
Portugal:
- Not an expert here but I also understand the tax break is only for the first 10 years.
UK:
- Don't forget the UK is a great tax haven for the early retiree.
Thanks for the link to my blog, RIT.
ReplyDeleteAs someone who has no plans to live permanently abroad, I'd go for the UK house as main residence. As diy has mentioned, if you want the lovely weather, you will have the time and the funds to travel over there whenever you want (during the dark winter months?).
With possible uncertainty looming due to Brexit (hard/soft/whatever), I don't blame you for being tempted by 'one more year'.
No problem weenie. Always enjoy your posts.
DeleteIt'll be interesting to see how the Brexit story plays out over the coming months. At this point I'm not saying I'm on the 'one more year' road as I always intended to FIRE mid next year. It's just that FI snuck up on me :-)
RIT, its been so interesting to read your story over the years, and I am thrilled that you are now FI. I have just made it too (aged 43), and the big questions I have been working through are where we will live? and what to do with my time?. I can't see myself working for the man ever again, but I also have too much drive and energy to walk a dog and tend the garden for 30+ years. I am leaning towards working with Charities that I believe in, which in turn leads me to conclude that I need to stay in the UK. I'd be very interested to know more about how what you see yourself doing for the next 30 yrs?
ReplyDeleteFirstly, many congratulations on FI. So that's 2 UK FI'ees at age 43 (at least).
DeleteOnce FIRE'd I plan to not rush and allow at least 6 months decompression before rushing into anything. During that time (plus afterwards) I want to get back outdoors and really step up my fitness level as a first major priority - cycling, hiking and swimming (if the Med on the swimming). Prior to work taking over I was super fit and want that back.
If we head to the Med I can also see a lot of time going into learning the local language fluently. I'm also very tempted to write a book about my journey to maybe inspiring some others.
After that I'm not planning too far ahead. I could very easily see myself volunteering but could also see myself trying to start up a small hobby business (which may or may not be profitable but must be enjoyable).
Also 43, English and in a broadly similar position... The question is what to do with the days now? I guess that is my main concern/focus now. Congratulations RIT and thanks for sharing your journey!
DeleteCould you build the house in the UK, move to Cyprus and rent there? Would you earn more rent from the UK house than you would pay in Cyrpus? Then if you're not enjoying it as much as you thought you can move back. Likewise, if you're loving it on the continent you could sell up in a year or so and make the move permanent. Which might be a way to hedge your bets.
ReplyDeleteOn an absolute call either way I would say you should follow the heart rather than the head. You've been using your head to great effect in building your wealth, but where you live post FIRE is where you will be spending all your free time and if you choose it based on a spreadsheet, even if the numbers are right, you may end up regretting it.
Nice position to be in though! Kudos!
Have you considered buying a house in UK AND a small one in, say, Greece? (for obvious reasons property is cheap there, and there are beautiful islands).
ReplyDeleteOne advantage of FIRE is that you don't have to live in the same place all year round (although kids may constrain you for a few years). Winter in Greece, summer in UK? Added benefit: you can rent the Greece property during the summer.
@ThirdIncome and Federico
ReplyDeleteRe home in UK and abroad.
Mixed thoughts here. I really don't want to be a BTL landlord. I have some ethical problems with the whole BTL thing in the UK but it's probably just me. I can't help but feel that in a country that is so restrictive on planning permission that if I BTL a home I'm then depriving a family just like me who could buy it if I didn't 'hoard' it.
Buy/build one in the UK and have a small one on the Med. That is a distinct option but two things come to mind:
- it's not cost efficient as there will be duplicate costs; and
- if I'm going to go that far I'd probably be better off building in the UK and then renting somewhere different every year over the worst of the winter.
Many thanks for the thoughts. I'll keep chewing them over.
I don't mind repeating but you are an inspiration RIT! Best of luck on whatever path you decide.
ReplyDeleteYou could buy a van and a surf board - accomodation and pasttime sorted in one smooth movement?
ReplyDeleteI wonder if there aren't some implications of Brexit that you're not taking into account? The risk is not all about currency exchange; actually I'd say the political risks are much greater. As an EU citizen currently, whenever you're in another EU state you benefit from the EU's 'non-discrimation' provisions, which mean that (except in a few very narrow and specific circumstances) a member state cannot treat an EU citizen who is a national of another member state worse than it treats its own nationals. So, for example, the state can't in general impose bureaucratic hurdles, costs, taxes, etc, on foreign residents that are not faced by its own national residents. As EU citizens - which we currently are - we have rights of non-discrimination which we can enforce against non-complying states (through the European Court of Justice) Once we are out of the EU, non-discrimination will no longer apply - when in EU member states we will be 'third party nationals', and the host state will be able at its discretion (largely) to impose anything it wants on us. So you might well find that all your assumptions about legal and tax burdens and health costs etc in any of the countries you plan to live in are unreliable, because now you are a third party national resident, they can be altered by the vagaries of democracy (I'm tempted to say, 'at whim') at the various levels of government involved. I can well see the attractions of moving to the Med, but personally I would't risk it until the dust has settled and there's more visibility about how rules may change in respect of UK citizens living abroad. And actually even then I'd be a bit wary, simply because I'm cautious about having large amounts of capital tied up under arrangements that are purely discretionary and where I might have few, or uncertain, enforcible rights.
ReplyDeleteHi RIT,
ReplyDeleteInteresting developments for sure over the last few months for both the country and your plans!
The oak framed home does look lovely but if you have no other ties to the UK I'd scarper and chill in the med.
Thanks for the link btw. I try to put a positive spin on most things on my blog but hopefully it doesn't come across as over selling the FI life, I try to "keep it real" as they say, as you and the other blogs mentioned do. It's an obvious thing but most of the salesy "this is easy" type blogs are US based and most of the real (to me) ones are UK based, maybe it really is just much easier to do it over there?
Cheers