Go north, young man, go north.
Sam Dogen of the popular Financial Samurai blog has said his favorite arbitrage opportunity for the next 20 years is non-coastal city real estate, as technology accelerates and capital pours into these affordable areas of the country.
Now he’s got another multidecade “geoarbitrage” tip that should resonate nicely with adherents to the popular FIRE strategy (financial independence, retire early): Move to Canada, where the cost of health care alone could tip the scale for those looking to stretch every dollar. Or loonie.
“Their GDP per capita is a respectable $45,000. Few people go through medical bankruptcies because health care is heavily subsidized,” Dogen explained in a blog post. He pointed out that medical expenses, no real surprise, is the number one cause of bankruptcy in the United States.
“My family pays about $21,000 a year for health-care premiums plus co-pays and co-insurance. Does this sound reasonable to you for a healthy family who never sees the physician?” he wrote. “To generate $21,000 in retirement income at a 4% rate of return requires me to first amass $525,000 in capital.”
The 4% rule of thumb is the idea that retirees can withdraw that much each year without running out of money. So, in practice, with $1 million saved, retirees can pull out $40,000 a year and still realistically expect to maintain their nest egg.
Beyond the health-care issue, Dogen lays out the massive divide in the cost of education between the neighboring countries, which makes sending your children across the border an enticing option, for them AND for you. The average annual tuition for Canadian universities comes to a mere $6,571 this year.
“It is truly mind boggling that four years of Canadian university tuition costs $9,000 less than one year of private kindergarten in San Francisco!” he said.
Dogen, who coaches high school tennis, encourages all his students to apply to Canadian universities for the opportunity to get a great education, save on cost and lay a foundation for a potential move later in life, as having a Canadian degree makes the relocation process easier.
He figures that saving a total of $51,000 a year in health-care and college expenses just by moving to Canada means that those looking to live off their savings would need $1,275,000 less in capital at that 4% rate of return.
“Taking advantage of Canada truly is the best life hack for Americans,” he said.
According to a recent Gallup poll, Dogen’s idea is catching on, with 30% of younger Americans (40% of women under the age of 30) saying they’d like to move to another country — Canada, being the favorite destination.
Read: 6 reasons to think twice before moving to Canada
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