How Geoarbitrage Can Help With Early Retirement

A while ago I talked about being a digital nomad in Da Nang, and the whole concept of “geographic arbitrage” has become something I have become increasingly keen in. It’s quite a mouthful, but those two words simply mean living in a place that is cheaper than your home country while still maintaining your income.

With a decreased cost of living, not only can we save more money during our financially productive years, it also means that we need less retirement funds. This allows us reach retirement much sooner.

Things can be significantly cheaper

The cost savings geoarbitrage can bring is perhaps its most obvious advantage. Living expenses, like housing and services, can be significantly cheaper in other places such as Da Nang or Bali, especially because we live in an expensive city like Singapore.

For instance, food and services are also very affordable from my experiences in lower-cost countries, with local fare costing anywhere from a dollar, and even fancier cafe and restaurant food are quite affordable. I could get a meal delivered to my place of residence at a price that may not even pay for the delivery fee in Singapore.

A night out, from the dining and drinks to the cab ride home, doesn’t break the bank like it can in Singapore, and I found that not having to watch my pursestrings as tightly actually made having fun, well, more fun.

Seth
Seth

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Difference in rents

The price difference in rental cost is perhaps one of the biggest cost advantages in living in a cheaper place. A relatively nice place could cost a fraction of what it would in Singapore on the exact city/country, and how luxurious you want your living conditions to be. That’s probably not enough to rent a room in many parts of Singapore.

If you own residential property in Singapore, renting it out while you live overseas can represent a huge arbitrage opportunity. Based on a cursory check online, my apartment can fetch around S$3,000 a month owing to how crazy rents are in Singapore these days. With this amount of money, I could rent a place in somewhere like Vietnam, Indonesia, or Malaysia and still have leftover funds for living expenses. This is a very attractive option for someone who wants to retire early, with one of our biggest expenses – housing – reduced very dramatically and even generating some positive cashflow.

Seeing the world and enjoying a slower pace of life

Costs aside, living abroad also comes with the benefit of seeing the world… something I suspect ranks quite highly on most people’s list of retirement activities. Rather than being a costly activity, geoarbitrage makes travelling part of the journey toward retirement, in some sense killing two birds with one stone. By living in a new country, we can immerse ourselves in a different way of life which may not even be possible if we just take short vacations to the place.

Embarking on geoarbitrage also comes with the added advantage of travelling at a younger age, with theoretically more energy and bandwidth to see and do more, be it hiking up a mountain or exploring a city on foot. It enables one to experience different lifestyles while still in the prime of one’s life.

Speaking of lifestyles, the pace of life is also remarkably different depending on the place you choose to be in. My experiences in Da Nang and Bali were nothing short of idyllic, with cheap cocktails, massages, and long walks down beaches. It already feels like I’m semi-retired even as I work on building up my resources and assets.

It’s not perfect

Undoubtedly, there are numerous factors to take into account when contemplating geographic arbitrage. These can range from pragmatic concerns like acquiring visas, securing income sources, and attending to dependents, to more abstract considerations such as cultural compatibility and ethical dilemmas pertaining to gentrification. 2023 is a year I explore geoarbitrage in much greater detail, so be sure to subscribe to my Telegram for further insights, as well as a summary of my recent workcation in Bali.

While far from a perfect solution, geographic arbitrage remains an attractive option for people who are looking to retire early, achieve a better work-life balance, or simply experience different lifestyles. If you’re sick of the rat race in your home country or just looking for a change, consider exploring doing this in small doses. The experience is something that you need to see for yourself to truly understand.

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