The answer is yes, you can retire in comfort with a modest nest egg – say, $200,000 – in Spain. Just follow the long line of British expats to the lively towns along the Costa del Sol, Spain's Mediterranean coastline.
For many years, Americans have been looking to Mexico, and more recently to its neighbors in Central America, for an ideal retirement spot on a less-than-lavish income. (See How Much Money Do You Need To Retire In Mexico?) But the current favorable exchange rate for the U.S. dollar against the euro has made Spain an attractive alternative for Americans. Even more, the bursting of Spain's property bubble is a big advantage for today's buyers, who will find prices still down about 41% from their peak at the end of 2007.
The Costa del Sol is by no means the least expensive choice for expat retirees in Spain. But it is the most popular, given its temperate year-round climate, laid-back lifestyle and coastal attractions. It's also a relatively easy place to settle in, given the large English-speaking population already in place.
The Costa del Sol has at least one big advantage over Central America. It's a perfect base for weekend trips to any number of other great places. Since Málaga, the capital of the region, is a popular vacation destination, the European discount airlines like EasyJet offer frequent flights from there. Search for round-trip flights from Málaga to Paris and you'll find flights for as little as $100 for June 2016 dates, for example.
AARP estimates that a frugal lifestyle in Spain will cost about $20,000 a year, while a comfortable retirement would cost about $25,000. Based on the numbers below, that seems to hold true for the Costa del Sol as for most of Spain. (The exceptions are Madrid and Barcelona, both of which are world-class cities with living expenses to match.)
Running the NumbersFirst, consider that $200,000 probably won't be your only of income. Nine out of 10 Americans age 65 and over receive Social Security, with an average yearly payment of about $15,900 in 2015 ($26,100 for a couple). You should also consider any other of income, such as a pension. You may also choose to work after age 65. Getting a job in a foreign country is difficult or impossible, but internet-based freelance work is now an option for almost anyone with a skill to sell.
That average Social Security income for a single person is $4,100 short of the $20,000 AARP estimate for a frugal lifestyle, and $9,100 less than the estimate for a comfortable lifestyle. By making up the difference with your nest egg, it would take almost 49 years to exhaust your $200,000, and almost 22 years at a comfortable lifestyle.
So, retirement in Spain is clearly doable, if you're not expecting to wallow in luxury. But you won't have to live rough, either. Consider these options that could be within your budget:
You should know that Málaga is more expensive, more developed and more touristy than most of the Costa del Sol. Kathleen Peddicord, founder of the Live and Invest Overseas publishing group, recommends looking east of Málaga to towns like Torrox, for lower prices and a more laid-back style.
And, of course, there is the rest of Spain to consider, especially if you prefer city living. Segovia, Granada and Córdoba all are featured on this list of 10 beautiful Spanish cities that offer a lot of bang for your lifestyle buck. (See also The Top 3 Regions to Retire in Spain and Top 5 Retirement Cities In Spain.)
The Bottom LineOnly a few years ago, it might have made sense to look only at neighboring countries of the United States as potential retirement locations. But these cost-of-living numbers, and today's ease of international travel, show that a new life in the Old World is open to you, too. Retiring on $200,000 in savings is certainly doable in Spain.
For more on on making a budget for retiring in Spain, see How Much Money Do You Need to Retire in Spain? and What Does Retirement Abroad Cost?