How to plan retirement in Portugal

retirement in Portugal
Updated 2021-09-24 13:14

Over the past few years, Portugal has become a popular destination for retirement. The country has much to offer for retirees, including a low tax rate, an affordable cost of living, and a modern and attractive lifestyle, along with a mild climate. As it's also an EU country, it is an attractive destination for EU residents looking to relocate. If you are considering retirement in Portugal, there are some important considerations before making your decision to relocate.

Why retire in Portugal?

Portugal is one of the most popular destinations for retirees in Europe — and there is a mix of factors contributing to this. Mild sunny climate, picturesque scenery, favorable taxation options and affordable living costs all make the country a friendly environment for retiring.

The weather. Those living in cold rainy climates see Portugal as the perfect escape into the land of constant sunshine. If you are looking for warmth, take a look at the southernmost region of Portugal or the country's center. Towns like Faro, Lagos, Tavira and others are especially popular with expats from the UK. Lisbon, Cascais and the Silver Coast have a more moderate climate and are known for their cozy beach communities. On the other hand, if you prefer to experience all four seasons, consider settling in Serra de Estrela, home to wonderful hiking routes and popular ski resorts.

Cost of living. Living in Portugal can be more affordable compared to many other European countries. It is generally estimated that Portugal is 32% less expensive compared to the UK and over 26% less expensive than living in the US. Naturally, it depends on where in Portugal you choose to settle. Things tend to cost more in big cities like Lisbon and Porto as well as in popular beach resorts and luxury coastal neighborhoods. If you plan to buy property in Portugal, you will also be able to take advantage of lower real estate prices (when compared to other countries in Europe).

Even though Portugal has a generally affordable cost of living, it is still important to consider the associated costs. It is a generally good idea to thoroughly plan out your retirement budget and assess the lifestyle you will be able to afford in Portugal before making the move.

Safety. Another important consideration to keep in mind when moving to a different country is safety. According to the World Population Review, Portugal is the 3rd safest country in the world (after Iceland and New Zealand). Portugal has a rather low crime rate — and violent crime is very rare. With that, there are instances of petty theft, pickpocketing and vehicle break-ins — mostly in big cities.

Different living options. Portugal has something for everyone. Whether you want to retire in a big city, a vineyard in the mountains or a luxury resort by the beach, you are sure to find what you are looking for. Plus, as it is a rather small country, you will be able to effortlessly change scenery: a drive from Porto to Lisbon, for instance, only takes 3 hours.

Language. In big cities like Porto and Lisbon, you should be okay getting about with just English. However, making an attempt to learn and speak Portuguese will be much appreciated by the locals — and they will gladly help you out if you are ever in trouble. What's more, Portuguese is the 8th spoken language in the world — and learning it in your free time can be a great adventure.

What you need to know before retiring in Portugal

Unless you are already very familiar with Portugal, you should consider making a short trip over to the country to learn more about it and see whether it meets your needs for retirement. Some factors to consider include:

  • Buying or renting accommodation within budget and deciding on which areas of the country you prefer
  • Language and cultural differences between Portugal and your home country
  • Obtaining an appropriate visa, if required
  • Required documents and any translations, often needed for visa and administrative purposes
  • Social Security access to your pension from your home country
  • Relocating with your pet
  • Moving with your car
  • Obtaining a local driver's license

A great way to start planning is by checking out the Portugal Expat Guide, as well as local newspapers which will give you a better idea of what life is all about in the country. This can also give you a feel for local real estate prices, important news issues for expats, and other considerations.

Best areas to retire in Portugal

You will have lots of options when settling in Portugal — and it all depends on what you are looking for. There are beautiful oceanfront neighborhoods, remote properties in the mountains and busy and sophisticated cities like Porto and Lisbon. However, some areas in Portugal are more popular with retirees (and expats in general). And if you think you might feel more comfortable in an expat community, here are the areas to consider.

The Algarve region is especially popular with retirees and English speaking expats in general.

It is famous for its beaches, surfing and affordable real estate. In fact, it was once even dubbed the most affordable location for retirees in Europe by Forbes magazine.

Madeira. Madeira is an island in the Atlantic Ocean that is located about 1,000km off the Portuguese mainland. It's a great choice for those who want to stay away from city noise and be one with nature. It is also a great destination for exploring what the island lifestyle is all about. Note that the cost of living in Madeira is a bit more expensive than Algarve.

Lisbon. Lisbon is the heart of Portugal with a thriving expat community. If you are looking for all the amenities of big city life, Lisbon won't leave you disappointed. Here, you will never be short of things to do and explore: from a variety of events and festivals to museums, restaurants, expat clubs and more. If you do want to be close to the city, but want to stay away from hustle and bustle, consider settling on the outskirts of Lisbon.

Northern Portugal and Porto. Northern Portugal is an area that is often overlooked by newcomers — except for Porto, which has a large expat population. However, even beyond Porto, this area has a lot to offer retirees. Northern Portugal is known for its beautiful countryside, picturesque mountains, vineyards — and some of the lowest real estate prices in the country.

Healthcare in Portugal

EU passport holders who move to Portugal will receive free GP appointments and vaccines, however, other medical specialist appointments will require a fee, and waitlists can be long under the public health care system. Expats will be glad to know that most general practitioners also speak English.

Non-EU passport holders should determine if there is a reciprocal healthcare agreement between Portugal and their home country. If not, you may have to pay to access medical services or consider purchasing private health insurance.

Private health care can be expensive in Portugal, but it offers shorter wait times and access to private hospitals and specialists.

All expats residing in Portugal must register for a user card to access the National Health Service.

Retirement visas to Portugal

If you are a citizen of an EU country, retiring in Portugal is very easy. All you will need to do is apply for a residence permit from any Portuguese Immigration Service (Servico de Estrangeiros e Fronteiras) office or SEF.

Non-EU residents will need to apply for a retirement-based residence permit in their home countries via a Portuguese consulate or embassy. The application process may take up to three months and you will need to provide the following documents:

  • Valid passport or other form of ID
  • Proof of income to support you during your stay in Portugal (you shouldn't see employment in Portugal during your stay or rely on the country's welfare system)
  • Proof of medical insurance
  • A copy of your criminal background check

You may also be asked to provide extra information and documents.

Residence permits for non-EU nationals are typically granted for a period of five years. At the end of the five year period, you will be able to apply for permanent residence in Portugal.

Who is eligible for Portugal's Golden Visa?

Non-EU citizens who want to retire in Portugal may also be eligible for the Golden Visa, which is designed to encourage investment in the country. To apply, you will need to accomplish one of the following:

  • Buy a real estate property valued at €500,000 or above
  • Purchase real estate property valued at at least €350,000 with the purpose of refurbishing it (there are also specific requirements regarding the age and location of the property)
  • Transfer capital in the amount of at €1 million or greater towards the country
  • Create 10 or more new jobs in the country
  • Make an investment in the amount of at least €350,000 or more into research activities
  • performed by public or private scientific research institutions in the country
  • Make an investment of €250,000 or more with the purpose of supporting the country's arts or national heritage sector
  • Invest a minimal amount of €500,000 into purchasing shares in investment funds intended to sponsor small and medium companies in Portugal

Note that more conditions may apply for receiving this type of visa. This is why it is recommended that you check with your local Portuguese embassy or consulate about the most up-to-date visa application procedures.

If you do qualify for the Golden Visa, obtaining it will give you the right to do the following:

  • Enter Portugal without applying for any additional visas
  • Live and work in Portugal — provided you stay in the country for at least seven days in the first year and two weeks or more in the years to follow
  • Travel visa-free within the Schengen Area
  • Apply for permanent residence and citizenship in the country under certain conditions

To learn about the Golden Visa, make sure to check Portugal's SEF (Servico De Estrangeiros E Fronteiras) website.

Retirement age and pension in Portugal

As of 2021, the retirement age in Portugal is set at 66 years and 5 months (which is said to increase to 66 years and 7 months in 2022). The pension in the county is contribution-based and becomes available to residents if they have been making social security payments for at least 15 years during their employment. Pensions organized by private companies are also an option.

If you are an EU citizen, you should be able to transfer your pension contributions to Portugal quite easily.

If you come from a country that is not a member state of the EU, you should check with the pension services in your country about the options for withdrawing your pension abroad. There are tax and social security agreements between Portugal and some non-EU countries — and this makes things much easier for relocating overseas.

Taxes for retirees in Portugal

It is recommended to enquire if there are non-double taxation agreements between Portugal and your home country before relocating. Otherwise, you may end up paying more tax than is required.

How much tax you pay depends on your residence type. You will be considered a habitual Portuguese resident for tax purposes if you spend more than 183 in the country during the tax year, which is from January 1st to December 31st. If you spend less than 183 days in the country but own property in Portugal, you may still be considered a resident for tax purposes.

Note that as residents in Portugal are taxed on their worldwide income, your private pension that you receive from abroad may also be liable to taxation. With that, in certain cases, you might be able to receive your pension from abroad without being taxed on it. To do this, you will most likely need to use an offshore pension scheme — like the Qualifying Recognised Overseas Pension Scheme (QROPS) available for citizens of the UK.

Another possibility is to apply for non-habitual residency (NHR). In this case, you will be entitled to favorable tax arrangements for ten years.

Inheritance laws for retiring in Portugal

When you choose to retire in a different country, it is important to be well aware of the inheritance implications of your move.

In Portugal, the inheritance law is derived from the Portuguese Civic Code and states that the inheritance process is dictated by the laws of the retiree's home country. This means that if you are retiring in Portugal but are a citizen of Germany, German inheritance laws will apply in your case. In a situation where a spouse is a citizen of another country, Portuguese laws may come into force — provided that Portugal is the country of permanent residence.

In Portuguese law, a part of the estate must go to legitimate heirs (spouse, biological and adopted children, etc. ). This can only be contested by the will.

Portugal doesn't have inheritance tax — but there are some administrative fees associated with the process.

Useful links:

Numbeo, cost of living index

The Portugal News

Golden Visa

Portugal Guide

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