What Is Geo-Arbitrage FIRE?

Retiring or achieving financial freedom in your 30s or 40s sounds excellent, but not everyone can slash their expenses or work overtime to achieve it. Geo-Arbitrage FIRE could be ideal for those who dream of early retirement or financial freedom.

Geo-Arbitrage FIRE is slightly different from other FIRE strategies. Here, instead of focusing on how much you're saving, you divert your attention to where you live. By relocating to a place with a lower cost of living, your current savings can stretch further.

This approach helps you achieve your financial goals more efficiently and gives you the freedom and control to retire on your terms.

How Can One Retire Early with Geo-Arbitrage FIRE?

When you follow the geo-arbitrage FIRE strategy, you choose to live in an area—whether in another state or even a different country—where your money goes much further. This means you can leverage the low cost of living in the desired location to maximize your savings. 

But before you pack your bags, you must spend a lot of time researching the areas. It is about more than just the cheapest place to live. It would help to choose a spot where you would enjoy your standard of living—a beach, a bustling city, or a quiet town. 

There are plenty of places within the U.S. and outside of the U.S. where you can live comfortably by spending much less. In states like Mississippi or Arkansas, the cost of living is about 15% lower than the national average. And if you're open to moving abroad, in countries like Mexico or Portugal, you can get a much higher quality of lifestyle at a fraction of the cost in the U.S.

What are the potential savings you could have with Geo-Arbitrage FIRE?

Imagine living in a high-cost city in the U.S. and spending $5,000 per month on living expenses, including rent, utilities, groceries, transportation, and entertainment. Let's assume your annual expenses total $60,000.

Adopting a Geo-Arbitrage FiRE strategy enables you to relocate to a lower-cost country or state. Doing so might reduce your monthly expenses to $2,500. By selecting a new location that provides a similar quality of life but at half the cost, your money will have greater purchasing power. With lower housing prices, cheaper food, and reduced transportation costs, your new annual expenses would amount to $30,000.

Savings Calculation:

• Original Annual Expenses: $60,000
• New Annual Expenses (Geographic FIRE location): $30,000
• Annual Savings: $60,000 - $30,000 = $30,000

Moving to a lower-cost location could save $30,000 per year. Over a decade, that's a potential savings of $300,000. These savings could accelerate your journey to financial independence, allowing you to save more aggressively or retire earlier than planned.

Additionally, if your investment portfolio already provides sufficient returns to cover these reduced expenses, you could achieve financial independence much sooner by leveraging the cost savings of living in a lower-cost area.

Is Geo-Arbitrage FIRE the Right Fit for You?

While the geo-arbitrage FIRE strategy sounds appealing, it might not be a good fit for everyone. It could be a great option if you're open to change, enjoy meeting new people, and aren't too attached to your current city.

However, it's essential to consider potential downsides, like being far away from family and friends. Moving to a different location might mean missing out on important events or everyday moments with loved ones, which can impact your emotional well-being if you're used to having a solid support network nearby.

Additionally, if you have specific healthcare needs, relocating to a place with lower healthcare costs might only sometimes meet your expectations. The quality and availability of healthcare might differ from what you're accustomed to, which could be a significant factor to consider.

Before deciding to pack up and move, weigh the pros and cons, considering the financial and personal aspects to ensure you make a responsible and well-thought-out decision.

So, What Do You Need to Sacrifice to Achieve Geo-Arbitrage FIRE?

Relocating to a different location may help you retire early, but it has some trade-offs. You'll live far from friends and family and must adjust to an entirely new culture (especially if you're moving to a different country).  If you decide to move to a non-English-speaking country, like Portugal, language barriers can complicate your daily life.

However, if you're up for an adventure and want to relax and explore someplace new, these trade-offs can be easier to manage, offering you a world of new experiences and excitement.

Achieving Geo-Arbitrage FIRE with ReachFI

With ReachFI's retirement calculator, you can input your expenses and income scenarios to plan for a financially secure future, no matter where you live. Start planning with ReachFI today, and take the first step toward achieving financial independence in the location that suits your lifestyle.