Cost of retiring in Portugal

If 3,300 hours of sunshine a year, beautiful blue flag beaches and a slower pace of life sound like your kind of thing, you may want to consider retiring in Portugal. It’s considered to be one of the best places in the world to retire, and for a good reason. It’s peaceful, safe and has lots of opportunities to just kick back and relax. That’s why we’ve prepared an in-depth guide to the cost of retiring in Portugal.

A rather low cost of living is what makes Portugal even more attractive. You will definitely live a far more comfortable lifestyle than you would in another country, or even at home. If you want to make the most out of your pension by avoiding extra expenses, Wise can be a good solution.

Open a Wise multi-currency account and you can avoid high bank fees and currency conversion costs. It’s also a great solution for sending money back to the UK, if that’s something you plan on doing.

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Ready to buy your one way ticket? Read on to find out everything about the cost of retiring in Portugal, as well as the process. We’ve included the best places to retire along with the steps towards getting a visa.

How much money will I need to live comfortably in Portugal?

Life in Portugal is surprisingly cheap. Broadly speaking, the cost of living in Portugal is about 27% lower than it's in the UK¹ and about 25% lower than the US². Renting costs alone are more than 30% cheaper than the UK and US, making housing very affordable.

Let’s have a look at what a comfortable (but not overly luxurious) lifestyle in the Algarve would cost:

Average monthly expenses³	Cost in €
Rent - 3 bedroom apartment in city centre	1,112.50
Utilities (water, electricity, heating, refuse)	126.25
Internet	33.33
Dining out for 2 people(mid-range restaurant)	54
Fitness club Membership	40

While this is a conservative estimate, in general, the cost of living in Portugal won’t vary drastically from region to region.

However, as expected, rent is more expensive in Lisbon, Portugal’s capital city. A three-bedroom apartment in the city centre will set you back about €1,500.⁴

On average, the cost of living in Portugal is around €1,300 a month, but it does vary depending on the area. Either way, Portugal is one of the cheapest countries in Western Europe.⁵

Getting a retirement visa for Portugal

Since the UK is not a member of the EU anymore, British retirees have to apply for a visa to retire in Portugal. There are two options - the residency visa for retirement purposes or the Portugal Golden Visa.

According to the Withdrawal agreement, if you were legally resident in Portugal before January 1st 2021, you should exchange your EU resident document for a new biometric card. You can do this using the Portuguese Border and Immigration Service SEF’s Brexit portal.⁶

Here’s how to get a retirement visa for Portugal;

D7 visa

The D7 visa is popular among retirees since it’s made for those who have means of supporting themselves. It’ll allow you to enter and stay in Portugal for an initial period of four months, after which you’ll need to apply for permanent residency.⁷

You’ll need to apply for your Category D visa at your local Portuguese embassy. In order to apply, you’ll need to open a Portuguese bank account.

Once you do that, some of the other requirements vary. However, you’ll most likely have to present the following documents when applying for your visa:⁸

1. two recent passport photos
2. your valid passport
3. a letter explaining your reason for entering Portugal
4. a recent criminal record certificate
5. health insurance policy
6. proof of accommodation
7. proof of sufficient finances available to the applicant in Portugal
8. proof of reasonable net regular passive income

The D7 visa fee is between €45.90 and €276.80.⁸

Once you arrive in Portugal, you'll also need to obtain a temporary residence permit or the Autorização de Residência. You can apply for this permit by making an appointment and visiting your local immigration service office.

Depending on the reason for requesting the permit, you’ll need to bring some additional documents. The basic ones are usually the proof of sufficient funds and accommodation.⁹

A temporary residence permit is valid for one year, after which you can renew it for successive periods of two years. You can apply for a permanent residence permit once you’ve been in Portugal for five years.¹⁰

Portugal Golden Visa

As of January 1st 2021, British citizens can apply for Portugal’s Golden Visa, which is the most expensive one. This scheme allows you to get a visa if you invest €250,000 - €1,000,000 in Portugal. The investment options include properties, investment funds and companies. So, for example, you can choose between buying a €500,000 estate, creating a minimum of 10 jobs or making a capital transfer of €1,000,000 to Portugal.¹¹

You can find more details on the SEF website.

Even the application fees for the Golden Visa can be pricey. They include the €514.80 processing fee and the initial Golden Visa which is €5,147.80. Also, the Golden Visa renewal will set you back €2,573.90.¹²

Best places to retire in Portugal

We’ve briefly mentioned the Algarve region, but here are a couple more spots that are perfect for enjoying your retirement. Many even say these are the best places to retire in Portugal!

Cascais

This coastal gem is only a short train ride away from Portugal’s capital Lisbon. So, if you want to be close to the big city, but still have the peace of a beachside town, this is the place for you. Let’s take a look at the average costs of living here:

Average monthly expenses¹⁴	Cost in €
Rent - 3 bedroom apartment in city centre	2,250
Utilities (water, electricity, heating, refuse)	90.81
Internet	42.61
Dining out for 2 people(mid-range restaurant)	40
Fitness club Membership	53.83

Lagos

This picturesque town at the west of Algarve is one of the most popular among expats. From its vibrant nightlife to the wonderful climate, Lagos is a full package. A bonus is that living here won’t break the bank, check it out:

Average monthly expenses¹⁵	Cost in €
Rent - 3 bedroom apartment in city centre	1,112.50
Utilities (water, electricity, heating, refuse)	110
Internet	31.33
Dining out for 2 people(mid-range restaurant)	51
Fitness club Membership	46.67

Lisbon

If you want an active lifestyle even during your retirement, consider moving to the big city. Lisbon is not as crowded and chaotic as many European capitals, but it’s certainly among the most beautiful. Check out the average cost of living there:

Average monthly expenses¹⁶	Cost in €
Rent - 3 bedroom apartment in city centre	1,547.87
Utilities (water, electricity, heating, refuse)	117.80
Internet	33.45
Dining out for 2 people(mid-range restaurant)	40
Fitness club Membership	31.81

How will I be taxed in Portugal?

If you are liable to pay tax in Portugal, you should apply for a tax number (Número de Identificação Fiscal or NIF). You will also need a NIF if you intend to buy or sell property, open a bank account or sign long-term rental agreements.

Like many other countries, Portugal taxes people differently based on whether they’re residents or non-residents. In general, residents pay Portuguese tax on all their worldwide income, while non-residents only pay tax on their Portuguese income. The UK and Portugal have a double taxation agreement, so you won’t be paying tax on the same income twice.⁶

Here are the most common types of taxes;

Taxation as a resident

As a Portuguese resident, you have to pay Portuguese tax on all your income, even if it’s made outside of Portugal.

You’re considered a Portuguese resident if you’re physically present in Portugal for more than 183 days a year.

Current tax rates for residents are:¹⁷

Income (€)	Rate (%)
up to 7,112	14.5
7,113 to 10,732	23
10,733 to 20,322	28.5
20,323 to 25,075	35
25,076 to 36,967	37
36,968 to 80,882	45
80,883+	48

Taxation as a non-resident

Non-residents are taxed only on their Portuguese income at a flat rate, depending on the type of income¹⁸:

Type of Income	Rate (%)
Employment / Business / Pension	25
Interest and Dividends	28
Capital Gains	28
Rental Income	28

Non-habitual resident scheme (NHR)

In an effort to attract wealthy foreigners, Portugal has developed a non-habitual resident tax regime. The scheme allows you to receive all your foreign income tax free for up to ten years. This system makes Portugal one of the most tax-efficient countries in the world, especially for retirees.¹⁹

Becoming a non-habitual resident is easy. You’re automatically eligible as soon as you gain residency, provided you’ve spent the previous five years outside of Portugal.¹⁹

However, you’ll still need to pay tax on your Portuguese income (except your Portuguese pension, if you have one). Also, keep in mind that, as of March 2020, foreign pensions under NHR are taxed at 10%.¹⁹

Healthcare in Portugal

Healthcare in Portugal is available to all legal residents. It’s covered by the state, although patients pay some usual fees known as ‘taxas moderadoras’. When registering for healthcare, you’ll need to show a couple of documents and then you’ll get your health number (número de utente de saúde).²⁰

Most services are fairly affordable, so a visit to the GP will set you back €5 and going to A&E €15.²⁰

However, UK retirees can apply for a UK S1 form and receive healthcare funded by the UK. If you’re already in Portugal, you should contact the NHS Overseas Healthcare Services and ask for an application form.²⁰

Since Brexit brought quite a few differences in all areas of life, it’s best to check if there have been any additional changes to this in the meantime.

Private health insurance

Three major private health insurance providers in Portugal are:

1. Allianz
2. AXA PPP International
3. Multicare

All three providers offer a comprehensive level of cover, including specialist consultations, inpatient and outpatient care, the cost of hospital stays, diagnostic tests and even the cost of treatment (including medicines). However, while some providers may offer certain benefits as standard, others may only make them available as optional extras.

You should read through the fine print carefully before you commit to a policy. Make sure you’re fully aware of all your policy’s terms and conditions, so you’ll avoid nasty (and potentially very expensive) surprises.

The cost of a private health insurance policy can vary depending on the individual provider, your general state of health and the extent of cover you purchase. It usually starts at around €400 a year for a basic plan. ²¹

If you live in an area where there are a lot of expats, you may be able to find English-speaking brokers that will help you shop around and get the best deal.

How will the exchange rate affect my pension?

Portugal’s currency is the Euro. As the official currency of the Eurozone, it’s used by 19 EU member states. A number of other countries also use the Euro or have pegged their currency to it.

If you receive your pension from a Eurozone country, you don't have any exchange rate to deal with. And if you receive your pension from a country whose currency is pegged to the Euro, you’ll always get the same exchange rate.

The exchange rate also depends on current market circumstances. The Euro is a floating currency, so its value may go up or down.

When using your Wise debit card, currency is automatically converted at the mid-market rate whenever you spend. It’s quick and it saves you money! So, with Wise you can avoid unnecessary fees and bad exchange rates and make sure you get the best conversion.

Save on your relocation to Portugal with Wise

One thing you won't have to worry about when moving is managing your money. With Wise, you'll be able to easily handle your finances between the UK and Portugal, but also once you settle in your destination country.

Open a multi-currency account with Wise and you’ll have a safe, easy and low-cost way to cover your initial relocation expenses. This will come in handy if you need to pay for rental deposits, visa fees or literally anything else. Do it with Wise and you’re guaranteed the real, mid-market exchange rate and low fees.

Wise will also save you money when receiving your pension from the UK. Forget about high fees and unfair conversion rates. Instead, receive your pension in GBP and convert it to EUR using the mid-market exchange rate.

Finally, you can spend your UK pension directly, using your Wise debit card, since it automatically converts currency at the mid-market exchange rate. This means you won't ever have to carry lots of cash or worry about changing money. Just relax and enjoy your retirement!

Join Wise today

Sources:

1. Numbeo - cost of living comparison between UK and Portugal
2. Numbeo - cost of living comparison between US and Portugal
3. Numbeo - cost of living in Algarve
4. Numbeo - cost of living in Lisbon
5. Expatistan - cost of living in Portugal
6. Gov.uk - living in Portugal
7. Ministry of Foreign Affairs - type of visa
8. Belion Partners - D7 visa
9. Expatica - Portugal immigration guide
10. Lexidy Law Boutique - residency in Portugal
11. Expatica - retire in Portugal
12. Expatica - Golden Visa Portugal
13. Sef.pt - registration certificate for the citizens of the EU
14. Numbeo - cost of living in Cascais
15. Numbeo - cost of living in Lagos
16. Numbeo - cost of living in Lisbon
17. Expatica - the tax system in Portugal
18. KPMG - Portugal income tax
19. Portugalist - NHR Portugal
20. Gov.uk - healthcare for UK nationals living in Portugal
21. InterNations - guide to health insurance in Portugal

*All sources checked on May 30, 2021