Portugal Retirement Guide for US Citizens

Country Population: 10,228,301

Portugal offers a diverse climate that ranges from the maritime north to the warm Mediterranean south. The northern regions, like Porto, experience a maritime climate with cooler temperatures and significant rainfall, particularly in winter, leading to an average annual temperature around 15°C (59°F). This climate is ideal for those who prefer a cooler, more temperate weather pattern.

In the central region, Lisbon boasts a Mediterranean climate characterized by mild, rainy winters and warm, dry summers. The city’s average annual temperature hovers around 18°C (64°F), offering a balanced climate that many find appealing for its mild winters and not overly hot summers.

The Algarve, Portugal’s southern gem, enjoys a warm Mediterranean climate, with cities like Faro showcasing mild winters and hot, dry summers. Faro’s average annual temperature is also around 18°C (64°F), attracting many for its sunny days and inviting beaches, reminiscent of typical Mediterranean coastal climates.

When compared to the US, Lisbon’s climate might remind one of San Francisco’s milder Mediterranean weather, while the Algarve resonates more with Southern California’s warmth, particularly appealing to those accustomed to sunny skies and mild winters.

The archipelagos of the Azores and Madeira offer unique climatic conditions. The Azores have a subtropical oceanic climate with an average temperature around 17°C (63°F), offering stability and mildness throughout the year. Madeira, particularly its capital Funchal, enjoys a mild climate with average temperatures around 19°C (66°F), known for its eternal spring-like weather, making it a popular destination for those seeking a consistently mild and pleasant climate.

In Portugal, expatriates have the option to use the public healthcare system, Serviço Nacional de Saúde (SNS), or opt for private healthcare services. Those contributing to the Portuguese social security system can access public healthcare, which is known for its high standards, though wait times and service availability can vary regionally.

Alternatively, private health insurance in Portugal offers quicker access to a broader range of healthcare facilities and specialists. This option is particularly appealing due to generally shorter waiting times and the availability of English-speaking medical professionals, especially in regions with significant international communities. Private healthcare facilities, predominantly located in major cities like Lisbon and Porto, provide a wide array of medical services with modern infrastructure.

For retirees, Portugal presents several insurance options through companies like Médis, Multicare, and AdvanceCare, offering plans that range from basic to comprehensive coverage. These plans are tailored to various needs, covering hospitalization, outpatient care, specialist consultations, and sometimes even international coverage. The cost of these plans varies based on age, coverage level, existing health conditions, and the expat’s location within Portugal. In private healthcare settings, especially in regions with a significant international community, it’s relatively easier to find English-speaking medical professionals. This aspect makes private healthcare particularly appealing to expatriates who may not be fluent in Portuguese.

Insurance premiums for individuals over 65 vary widely but generally fall within the following ranges: basic plans can cost between U$50 to U$100 per month, while more comprehensive plans may exceed U$200, potentially reaching U$300 or more monthly. These premiums reflect the level of coverage, from emergency care and basic medical services to more extensive plans that include specialist visits, hospitalization, and preventive care.

Private healthcare is particularly popular for dental services and specialist care, where the public system might have longer waiting times. Many residents prefer private dental care for its promptness and advanced treatment options.

Multiple daily flights connect Portuguese cities like Lisbon and Porto to major US destinations, including New York and San Francisco, facilitated by various airlines. For instance, TAP Air Portugal offers direct flights from Lisbon to New York, with the journey to John F Kennedy International Airport (JFK) taking around eight hours. Similarly, direct flights from Lisbon to San Francisco are available, with flight times averaging around 13 hours. Porto also maintains connectivity with New York through direct flights, ensuring efficient travel between these cities.

Direct flights from Lisbon to other principal cities in the US are consistently available, with durations varying based on the destination. Flight times can range from 8 to 14 hours, depending on the specific US city. Porto, while having fewer options than Lisbon, also offers direct connections to key US destinations, enhancing the accessibility between Portugal and the US.

Flight costs from Portugal to the US vary significantly due to factors like seasonality, airline selection, and specific departure and arrival cities. In the off-peak season, which typically includes late fall to winter (excluding holiday periods), economy round-trip fares from budget airlines can range from $300 to $600, while traditional carriers may charge between $600 and $1,000. During peak travel times, such as summer and holidays, fares can increase, with budget airlines pricing tickets between $500 and $800 and major carriers ranging from $1,000 to over $2,000, especially for last-minute bookings or direct flights.

Portugal is considered one of the safest countries in the world. Portugal’s excellent ranking as the 7th safest country globally and 5th in Europe is increasingly appealing to US expats, many of whom seek a more stable and secure living environment amidst growing feelings of insecurity in the United States. The nation’s low crime rates and efficient law enforcement offer a stark contrast to the increasing concerns about safety many expats experience in their home country.

According to the US Department of State’s travel advisory, as of July 2023, travelers are advised to exercise normal precautions when visiting Portugal (Level 1), which indicates the lowest level of concern for safety risks.

When considering moving to or visiting Portugal, it’s beneficial to acknowledge the specific safety tips and advice provided for various regions within the country. For example, areas like the Azores, Madeira, Sintra, Cascais, Aveiro, Lisbon, and Porto are highlighted for their safety, low crime rates, and high standards of living, making them attractive destinations for both short-term visits and longer stays.

According to Gallup’s research, Portugal is recognized for its welcoming stance toward migrants, standing out in Europe for its inclusive and supportive approach. Positioned 12th in Europe and 36th globally in migrants’ acceptance, Portugal demonstrates a commitment to creating a friendly and open environment for expatriates and other migrants. For expatriates, Portugal represents an appealing destination, offering a harmonious blend of cultural richness, economic opportunities, and a sense of community, making it a sought-after location for those looking to relocate within Europe.

In a broader European context, as detailed by Gallup’s research, the European Union exhibits a generally positive attitude towards migrants, with an average acceptance score of 5.92, which is above the global average of 5.67.

In the latest EF English Proficiency Index, Portugal demonstrates a strong command of English, ranking 8th out of 113 countries globally with an EF EPI score of 607, significantly above the global average score of 493. Within Europe, Portugal holds the 7th position out of 34 countries, showcasing its high proficiency in English. The country’s regions and cities show varied proficiency levels, with Coimbra leading at a score of 636, indicating an effective English language education system and a population adept at communicating in English. This high proficiency level reflects Portugal’s focus on English in its educational system and its citizens’ engagement with global commerce and culture.

Portugal’s high ranking in the EF English Proficiency Index has significant implications for expatriates, especially in critical areas like healthcare, public services, and general services. This high level of English proficiency means that expats in Portugal can expect a relatively smooth transition when accessing various services.

In healthcare, for instance, the ability to communicate effectively in English can greatly reduce the stress and confusion that often accompany medical consultations and treatments in a foreign country. Healthcare professionals in Portugal, particularly in urban areas and major hospitals, are likely to have a good command of English, facilitating clearer communication and a better understanding of medical advice, procedures, and paperwork for English-speaking expats.

Overall, the high English proficiency in Portugal not only eases the day-to-day life of expatriates but also contributes to a smoother integration into the community, enhancing their experience and satisfaction while living in Portugal.

A striking difference is evident in the overall cost of living and rent between New York and Lisbon. To maintain a lifestyle in New York that costs $4,451.4 in Lisbon, one would need approximately $10,243.5. Specifically, consumer prices in New York are 98.9% higher than in Lisbon without rent, and including rent, they soar to 130.1% higher. This substantial difference underlines the substantial price differences between New York and Lisbon. The disparity extends significantly to the housing sector, with New York’s rent prices being 179.1% higher than Lisbon’s. For a one-bedroom apartment, you would pay $4,109.07 in New York compared to $1,441.13 in Lisbon.

In New York, restaurant prices are 119.8% higher than in Lisbon. A meal at an inexpensive restaurant in New York costs $30, compared to $14.39 in Lisbon. For a mid-range restaurant, the price in New York jumps to $130 for two, while Lisbon offers a similar experience for $48.86.  The grocery prices in New York are substantially higher compared to Lisbon across various items. For example, milk is 51% more expensive, bread is over twice as costly, and chicken fillets show a 104.9% price increase in New York. Even basic items like apples and potatoes are significantly more expensive, with apples costing 199.5% more in New York. This discrepancy affects daily living costs significantly, making Lisbon an attractive locale for retirees looking to enjoy a diverse culinary scene without the hefty price tag.

The comparative analysis of living costs between New York and Lisbon presents a clear picture: Lisbon stands out as a more financially viable option for expat retirees. With lower costs in housing, food, transportation, and leisure activities, Lisbon not only offers an affordable lifestyle but also allows retirees to maximize their enjoyment and quality of life. For those considering where to retire abroad, understanding these cost differences is crucial in making an informed decision that aligns with their financial goals and lifestyle preferences.

The cost of living comparison between New York and cities like Porto is even more striking when it comes to maximizing the value the money. Consumer prices in New York stand 121.3% higher than in Porto when excluding rent, and this disparity widens to 180.1% when rent is included. Specifically, rent prices in New York are almost four times higher than those in Porto, with a 298.5% increase. Dining out in New York will cost 179.1% more than in Porto, reflecting the significant difference in restaurant prices. Grocery shopping also presents a considerable cost increase, with prices 130.8% higher in New York compared to Porto. Despite these higher costs, New York offers a 52.2% greater local purchasing power than Porto, which may offset some of the financial burdens, yet the overall cost of living remains substantially higher in New York, presenting crucial budgetary considerations for those deciding between these two diverse locations.

Portugal’s previous Non-Habitual Resident (NHR) program offered a tax reduction for ten years to new foreign residents and Portuguese citizens returning after five years abroad, with the intent to attract skilled professionals and foreign pension recipients. This program allowed for a 20% flat tax rate on certain professional income and exemptions on foreign-sourced income, such as dividends and capital gains. There was also a preferential 10% tax rate on pensions, with full exemptions for those who registered before 2021. However, the NHR was phased out in 2023 and replaced by the Tax Incentive for Scientific Research and Innovation within the Tax Benefits Code (EBF). Transitional provisions have been included in the 2024 budget to safeguard current beneficiaries.

To qualify for the new tax incentive, individuals must earn income from high-value activities like teaching, scientific research, or working in specific sectors and startups, or by being a resident in the Azores or Madeira. Eligible individuals benefit from a 20% flat tax rate for ten years, contingent upon being tax residents in Portugal and maintaining relevant annual income.

For US expats, this shift retains favorable tax rates on professional income and maintains exemptions for certain foreign-sourced incomes, thus preserving Portugal’s status as a desirable location for skilled professionals and helping to prevent double taxation—benefits reinforced by the tax treaty between Portugal and the US.

Starting from 2024, for pensioners, the general tax regime takes effect. Unlike the NHR program’s fixed rate, pensions are taxed progressively according to standard Portuguese tax rates. This progressive taxation aligns pension taxation with the broader tax regime applied to residents, impacting those newly registering from 2024 onwards.

In any case, Portugal and the United States have a Double Taxation Treaty (DTT) in place. This agreement helps to prevent the issue of double taxation and to avoid tax evasion. The treaty covers various types of income and capital and stipulates the limits of taxation that a country can impose on taxpayers of the other country, promoting economic cooperation and investment between the two nations.