Over the past decade, the traditional idea of working until the official retirement age has been increasingly challenged. In its place, a growing number of people are embracing the FIRE movement, which is short for Financial Independence, Retire Early.
Instead of following the conventional path, FIRE followers aim to retire earlier by saving aggressively, investing consistently and keeping their living expenses low. The goal is to reach a point where they no longer need a paycheck to cover their living costs.
Over time, different versions of FIRE have evolved. These include Barista FIRE, where individuals achieve partial financial independence and take on part-time or lower-stress jobs that they enjoy to supplement their income while enjoying more freedom. There’s also Lean FIRE, where individuals retire early by living on a minimalist budget and keeping their expenses very low to maintain financial independence.
In recent years, a new financial strategy known as geoarbitrage has gained popularity. The concept is simple. You relocate to a city or country with a lower cost of living so that your money goes further.
There are various ways geoarbitrage can be practised. During the COVID-19 years, when remote work became the norm, many professionals realised they could live in a lower-cost city or country while keeping their high-paying jobs based in more expensive locations.
Take Silicon Valley, for example. Entry-level software engineers can easily earn salaries of US$150,000 or more. While that’s considered an excellent income in most parts of the world, it doesn’t stretch very far if you’re living in the Bay Area, where housing and daily expenses are among the highest in the U.S.
To accelerate their path to early retirement, some workers turn to geoarbitrage, choosing to live in a more affordable city while keeping their higher-paying remote job. By significantly reducing their cost of living, they are able to save and invest a larger portion of their income.
This approach directly supports the principles of the FIRE (Financial Independence, Retire Early) movement, which aims to build wealth quickly by cutting expenses and boosting savings. By leveraging geoarbitrage, individuals can fast-track their journey towards financial independence without necessarily needing to build a large investment portfolio.
Retirees Can Geoarbitrage for Early Retirement Too
Geoarbitrage is a strategy that some remote workers can take advantage of, but it’s also relevant for those pursuing FIRE.
Let’s say you want to enjoy early retirement. For the sake of this discussion, we’ll assume a relatively simple scenario: a married couple in their 40s with no children (since kids and education tend to complicate retirement planning). They own a fully-paid 3-room HDB flat and have built up an investment portfolio of $600,000. They have also hit the CPF Full Retirement Sum.
To keep things straightforward, we will ignore any visa or immigration issues.
Based on the 4% withdrawal rule, the couple can withdraw around $2,000 a month from their $500,000 investment portfolio, an amount that could last them for 30 years or more. After that, their CPF LIFE payouts could kick in to support them through their later retirement years.
However, when we compare this to the Full Retirement Sum (FRS), which provides a monthly CPF LIFE payout of $1,730 per person (or $3,460 per couple), it becomes clear that their current portfolio ($2,000 per month based on the 4% withdrawal rule) may not be enough to sustain even a basic retirement lifestyle in Singapore.
As we all know, Singapore is an expensive place to retire. But what if the couple chose a different path? What if they stopped working, rented out their fully paid HDB flat, and moved to a lower-cost country like Malaysia or Thailand? (To reiterate, for this thought experiment, we’re ignoring any visa or residency requirements.)
Staying In Malaysia Or Thailand Will Be Cheaper For Retirement
If we assume the couple rents out their fully paid HDB flat and receives a net rental income of $2,000 a month, and combines it with their $2,000 monthly withdrawal from their investment portfolio, they will have a total monthly income of $4,000.
That amount can go a long way in countries like Thailand, where retirees have a wide range of options — from bustling cities like Bangkok to more laid-back areas such as Chiang Mai or Koh Samui.
Closer to home, retiring across the Causeway in places like Johor Bahru or Kuala Lumpur is also a feasible option. The estimated monthly cost of living for a single person in Malaysia is between RM2,400 to RM2,800, or roughly S$727 to S$848. Even if we assume higher expenses of S$1,000 per person (or S$2,000 per couple), their S$4,000 monthly budget would still be more than enough to cover living costs comfortably, including rent. This would allow them to afford a nice condo or a 1-bedroom villa, depending on the location.
The key takeaway here is this: while the couple’s current assets — a fully paid 3-room HDB flat and a $600,000 investment portfolio — may be insufficient for them to achieve FIRE in Singapore, they could still achieve FIRE through geoarbitrage and choosing to retire in a lower-cost country.
It’s unlikely that they would be able to (or should) seek full-time or part-time employment in these overseas cities. If they wanted to continue working, staying in Singapore makes the most sense. But if their main goal is early retirement, relocating to more affordable countries like Malaysia or Thailand could make that financially viable. After all, thousands of Singaporeans travel to these destinations every year for their holidays.
Of course, there are other important factors to consider, such as being close to family, access to quality healthcare, and personal safety. But if your main goal is to retire early and enjoy a slower, more fulfilling lifestyle, and you don’t need to live in Singapore, then geoarbitraging your retirement might be a feasible plan.
Read Also: How Realistic Is FIRE For the Average Singaporean?
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