Retire in Tanzania with 255K

Retire in Tanzania

In the Post Covid world, inflation has made it more difficult for people all over the world to live. Nowadays retiring with anything less than a million seems absurd.  What if you could do something called Geoarbitrage to retire in a fraction of time ? For so many people this seems impossible, but the low cost of living in Tanzania can make this possible !

Using the 4% Rule to your advantage and Geoarbitrage 

The 4% rule is a popular financial guideline that states that you can spend 4% of your investments annually and in theory it should never run out.  A simple example is that if you had 1M you should be able to withdraw 4% of that amount assuming it is invested in stocks or bonds. Using this rule you could spend 40k per year without eating away at your principle

Geoarbitrage in this sense means to earn money in a stronger currency and spend it in a weaker one. This is because the same investment portfolio could make you live like a king in Africa and lower class in the United States

Assumptions 

For this exercise I will need to assume the following

• You are single with no kids 

• You stay in Tanzania year round 

• You never have any immigration issues that cause you to leave the country 

• You never have any desire to go to a western restaurant , hotel or bar. You live a simple life comparable with local Tanzanians.

• You do not give any money away 

"Monthly Cost Breakdown"

Here is an estimate of your monthly expenses 

• Housing- At first you can stay at a very nice guest house. They will provide cleaning and security to you. After you are familiar with the community I recommend befriending a family who has extra space they can share with you and you can financially contribute to their household. You can conservatively estimate to spend $10 per day or $300 per month. Again if you want to live close to foreigners and do foreigner things this expenses will be much higher. 

• Food- Having the most affordable food in East Africa you will be able to eat a lot on a little budget. For a single person you may find it easier and more affordable to eat at restaurants than cooking for yourself. Making friends and cooking together will also reduce your cooking costs and give you an activity. For breakfast, lunch, and dinner and snacks again $10 per day will be more than enough. Many locals could eat on one dollar per day, but penny pinching your way through retirement with your food budget is not how I would like to spend retirement $300 per month would be more than enough 

• Health Care Assuming you have no major health issues most people in Tanzania just self insure. Assuming normal health issues like Malaria and other sicknesses I could budget $100 per month for health care.

• Entertainment - Perhaps the most subjective topic. To me, cooking and eating with people is a big source of my entertainment. If you like to drink and eat it is even possible to go out alone with a budget of less than $5. You can also buy WIFI,TVs,Phones, and Computers just like we do in the west, though I recommend you arrive with your technology. $100 per month would be enough to have more fun than one grand could get you in the U.S

• Transportation unlike the US we will not need to own our own vehicle in Tanzania. We can allocate $50 per month for motorcycle rides and busses

Housing $300

Food $ 300

Health Care $100

Entertainment $100

Transportation $50

Our Budget is $850 per month.

$850 x 12Months = $10,200 Yearly expenses. 

Using the 4% rule it would look something like this

10,200 x 25 (This will give us 4% of annual budget) = $255,000

This means in theory we could retire in Tanzania for just a little more than a quarter of a million dollars.

Take Aways

I am writing this exercise to show that using Geoarbitrage we can make our money go so much further. Reality is always more difficult than theory. Family emergencies, immigration issues, and health problems can make this budget irrelevant. Given that an average single family home in the US can sell for half a million dollars you need to make a decision - Buy an expensive depreciating asset or buy your freedom and then some in Tanzania. Obviously people need to find a balance. I own a house in the United States and would not give it up for all the shillings in the world.

Also Remember that $800 per month in Tanzania would pay you much more than the average local. People survive off $50 per month or less.

Learn Swahili which will improve your lifestyle and help you save money.