From bustling, cosmopolitan cities like Lisbon and Porto to sun-soaked beach towns like Costa Nova and Peniche to the verdant Douro Valley and Pico Island wine regions, Portugal is full of exciting destinations to live in and visit. And fortunately for Americans, the cost of living in Portugal is a fraction of what it is in the US — making it no surprise that more and more Americans are choosing to retire in Portugal.
Of course, there’s a lot of research to do and angles to consider before deciding to retire abroad. Read on to learn all about taxes, the cost of living, and healthcare in Portugal for expats.
Benefits of retiring in Portugal
Some of the things Portugal is most known for include:
- Beautiful sunny weather year-round
- Stunning geography (cliffsides, plains, beaches, mountains, forests)
- A variety of picturesque cities, towns, and villages
- Delicious food, like pastéis de nata (custard tarts), piri-piri chicken, and tons of fresh seafood
- World-famous Port and Madeira wines
- A rich culture, from fado music to azulejo tile art
Combine that with the affordable cost of living, high quality of life, and excellent healthcare system, and Portugal is a wonderful place to retire.
Read More: The 7 Best Places To Retire Outside The United States
Best places to retire in Portugal
Some of the more popular places for Americans to retire in Portugal include:
- Lisbon: The capital city, known for its colonial architecture, historic neighborhoods, scenic hilltop vistas, and bustling markets
- Madeira: An island chain known for its signature Madeira wine, mild weather, natural landscapes, and hiking trails
- Alentejo: A rural region known for its rolling hills, relaxed pace of life, sprawling villas, and olive groves
- The Algarve: The southernmost region in Portugal, known for its sandy beaches, fishing villages, golf courses, and thriving expat community
- Porto: The second-largest city, known for its signature Port wine, Baroque architecture, São João festival, and indulgent cuisine
Are there retirement communities in Portugal?
Yes, there are a number of different retirement communities and villages in Portugal, ranging from retirement homes, assisted living facilities, retirement villages, and more — many of which are concentrated in the Algarve.
Portugal retirement visa: options for US expats
Retirement in Portugal for US citizens does require a long-term stay visa. The most popular Portugal retirement visa for US citizens is the D7 visa,1 geared toward non-EU residents who have enough savings or passive income to sustain themselves financially in Portugal.
The Portugal retirement visa income requirement is €760 (~$840) per month in passive income for individuals, or 12 months’ worth of savings (€9,120, or ~$10,080 ). Applicants must also show proof of accommodation in Portugal and stay in the country for over 183 consecutive days per calendar year.
Previously, Portugal also offered the Golden Visa, geared toward investors; however, they recently shut the program down, citing rising housing costs.2
How long does it take to get a visa to live in Portugal?
The processing time for Portugal’s retirement visa is about four months. You’ll also need time to gather and complete the required documents:
- Visa application form
- Background check authorization
- Valid passport
- Two passport-sized photos
- Proof of travel & health insurance
- Six months’ worth of bank statements
- Proof of income
- Proof of accommodation
- A clean criminal record
Is it hard to get a visa to retire in Portugal?
As long as you meet all of the qualifications for Portugal’s D7 retirement visa and submit a complete and accurate application, it’s fairly easy to obtain.
Healthcare in Portugal for US expats
Many retirees wonder: Is healthcare free in Portugal? For citizens and permanent residents, it is effectively free (besides the taxes that fund the system).
However, holders of Portugal’s retirement visa aren’t entitled to Portugal’s healthcare system right away. After staying in the country for five years, however, they can apply for permanent residency — which, if granted, would allow them access.
The good news is that private healthcare for expats in Portugal is generally high-quality and more affordable than it is in the US. The cost of private healthcare in Portugal is typically between €20 and €50 per month,3 but it may be more depending on factors like your age and pre-existing conditions.
How much does it cost to retire in Portugal?
In smaller towns, the cost of living in Portugal for retirees is often about €1,400 to €1,800 (~$1,500 to $2,000) per month.4 In bigger cities, you’ll likely spend between €1,800 and €3,200 (~$2,000 to $3,500) per month.5 Of course, that estimate can vary greatly depending on your lifestyle.
What currency is used in Portugal?
As part of the European Union, Portugal uses the same currency as all other EU members: the euro.
What is the average income in Portugal?
A report by the publisher ECO6 found that the average salary in Portugal for 2021 was below €22,000 (~$24,300).
Retiring in Portugal on Social Security: Considerations
The average income in Portugal is actually lower than the average yearly Social Security benefit for 65-year-old Americans in 2023 ($30,708).7 Coming out to $2,559 a month, you could theoretically live off of Social Security alone in Portugal, although it would likely be pretty tight. Keep in mind, too, that some receive less in Social Security benefits than others, and benefits are often still taxable.
If you pad those Social Security payments out with some savings, however, you can live quite comfortably in Portugal.
Do Americans pay tax in Portugal?
Americans living in Portugal on the D7 retirement visa are subject to taxes by both the Portuguese and US governments, but don’t worry — that doesn’t necessarily mean you’ll be taxed on the same income twice.
Holders of the D7 visa are granted certain tax advantages by the Portuguese government. As part of the Non-Habitual Resident (NHR) tax scheme, D7 visa holders pay just a 20% tax on Portuguese-sourced income and a 10% tax on foreign-sourced income (which would include foreign retirement and social security payments).8
Considering that typical Portuguese income tax rates reach up to 48%, this can lead to significant savings through residency under the D7 visa. What’s more, the NHR tax scheme lasts for a full ten years — so even if you’re granted permanent residence in Portugal after five years of living there, you can continue to benefit from NHR status for five additional years.
Read More: Taxes In Portugal For US Expats: Everything You Need To Know
All US citizens and permanent residents — even those living abroad — are subject to taxation on their worldwide income, as long as they meet the minimum income thresholds. There are tax breaks that can offer relief for expat retirees, however, such as:
- The Foreign Tax Credit: The Foreign Tax Credit allows US expats to essentially subtract what they have paid in income taxes to a foreign government from what they owe to the US government (though as with all things US-tax related, it’s not quite that simple)
- The Foreign Housing Exclusion: Expats who meet either the Physical Presence Test or the Bona Fide Residence Test can use the Foreign Housing Exclusion to write off qualifying housing expenses like rent, utilities, property insurance, and more
Keep in mind, too, that:
- Withdrawals from post-tax retirement accounts, like Roth IRAs and Roth 401(k)s, are tax-free
- Only up to 85% of your social security payments are subject to taxation
Tax planning for American retirees in Portugal
Taxes are complicated enough as is — add in the additional complications that come with retirement and living abroad, and they can feel downright overwhelming. That’s where Bright!Tax comes in. Our team of expat tax professionals has helped thousands of clients in hundreds of countries get their taxes done on time and accurately, with a tax strategy specifically tailored to your circumstances.
Reach out today to schedule a free consultation with one of our CPAs!
- Portugal D7 Visa 2023: Ultimate Guide
- Portugal will no longer issue ‘golden’ EU visas
- Health Insurance and Healthcare in Portugal Explained
- The Complete Guide to Retiring in Portugal
- How to Retire in Portugal: A Complete Guide
- What is the average salary in Portugal?
- What Is the Average Social Security Benefit at 65?
- Guide to the Non-Habitual Resident (NHR) Tax Regime