FIRE to Sweden from Switzerland on 1M euro?

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eurobogle
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FIRE to Sweden from Switzerland on 1M euro?

Post by eurobogle » Wed Jun 13, 2018 1:43 am

We live in Switzerland (HCOL) and are thinking about retiring to Sweden (LCOL). We have a young family and 1M Euro in taxable accounts. We should be able to safely withdraw close to the median income in LCOL areas of Sweden (e.g. Lund) from our portfolio if we invest in a tax-efficient "ISK" account.

The motivation to move from Switzerland is that our living costs here are double compared with Sweden and the tax advantages would not apply in FIRE. (The Swedish taxes on *salary* are punitive but the tax on capital is much more reasonable.)

We are Swedish expats so we already appreciate the culture, speak the language, understand the climate, etc. We have plenty of interests to keep us occupied, many of them commercial/entrepreneurial, but none that generate a reliable monthly income.

What should we think about before we pull the trigger at "FIRE to Sweden before 40"?

AlohaJoe
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Re: FIRE to Sweden from Switzerland on 1M euro?

Post by AlohaJoe » Wed Jun 13, 2018 2:01 am

The usual things: taxes, housing, healthcare (discretionary in addition to the usual things), university for children, travel plans, new hobbies, what you're retiring to, house maintenance, property taxes, vehicle replacement, what your Plan B might be if equity returns are especially poor for an extended period of time, etc. And, of course, most of all: do you want to live a median lifestyle in a LCOL area? Not everyone does.

FireProof
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Re: FIRE to Sweden from Switzerland on 1M euro?

Post by FireProof » Wed Jun 13, 2018 3:55 am

AlohaJoe wrote:
Wed Jun 13, 2018 2:01 am
The usual things: taxes, housing, healthcare (discretionary in addition to the usual things), university for children, travel plans, new hobbies, what you're retiring to, house maintenance, property taxes, vehicle replacement, what your Plan B might be if equity returns are especially poor for an extended period of time, etc. And, of course, most of all: do you want to live a median lifestyle in a LCOL area? Not everyone does.
Not quite the usual things from the US, though. University is free, health care should be free, or close to it.

Are you from this low-cost area of Sweden? Do you have friend and relatives there? GIven the way you phrase it, it doesn't really seem like it, which to me is maybe a little strange. If not, maybe you are choosing things from too strictly a financial perspective. My guess is that even non-central Stockholm wouldn't be too much more expensive overall, given the amount you'd save by having good public transport.

Valuethinker
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Re: FIRE to Sweden from Switzerland on 1M euro?

Post by Valuethinker » Wed Jun 13, 2018 7:47 am

Perhaps the biggest cost savings in Sweden is "no keep up the Joneses"? Ie it is not a culture which prioritizes conspicuous consumption?

AlohaJoe
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Re: FIRE to Sweden from Switzerland on 1M euro?

Post by AlohaJoe » Wed Jun 13, 2018 7:56 am

FireProof wrote:
Wed Jun 13, 2018 3:55 am
AlohaJoe wrote:
Wed Jun 13, 2018 2:01 am
The usual things: taxes, housing, healthcare (discretionary in addition to the usual things), university for children, travel plans, new hobbies, what you're retiring to, house maintenance, property taxes, vehicle replacement, what your Plan B might be if equity returns are especially poor for an extended period of time, etc. And, of course, most of all: do you want to live a median lifestyle in a LCOL area? Not everyone does.
Not quite the usual things from the US, though. University is free, health care should be free, or close to it.

Are you from this low-cost area of Sweden? Do you have friend and relatives there? GIven the way you phrase it, it doesn't really seem like it, which to me is maybe a little strange. If not, maybe you are choosing things from too strictly a financial perspective. My guess is that even non-central Stockholm wouldn't be too much more expensive overall, given the amount you'd save by having good public transport.
I'm not American and don't live in America, so I wasn't assuming an American perspective. I actually do have family in Åkarp and have been a few times.

eurobogle
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Re: FIRE to Sweden from Switzerland on 1M euro?

Post by eurobogle » Wed Jun 13, 2018 10:19 am

AlohaJoe wrote:
Wed Jun 13, 2018 2:01 am
The usual things: taxes, housing, healthcare (discretionary in addition to the usual things), university for children, travel plans, new hobbies, what you're retiring to, house maintenance, property taxes, vehicle replacement, what your Plan B might be if equity returns are especially poor for an extended period of time, etc. And, of course, most of all: do you want to live a median lifestyle in a LCOL area? Not everyone does.
That is a great list. I think that we have this covered. We are already happy living the median lifestyle in a LCOL area of a different (much more expensive) country.

eurobogle
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Re: FIRE to Sweden from Switzerland on 1M euro?

Post by eurobogle » Wed Jun 13, 2018 10:27 am

FireProof wrote:
Wed Jun 13, 2018 3:55 am
Are you from this low-cost area of Sweden? Do you have friend and relatives there? GIven the way you phrase it, it doesn't really seem like it, which to me is maybe a little strange. If not, maybe you are choosing things from too strictly a financial perspective. My guess is that even non-central Stockholm wouldn't be too much more expensive overall, given the amount you'd save by having good public transport.
Good pointed question. We do have family and friends in Sweden but they are spread out and mostly in parts of the country that are too far north (cold/dark) for our taste. So we would be choosing a location based on climate, quality of life, and value for money.

Stockholm would be colder and darker and we would be paying a premium for access to employment that we wouldn't need.

bloom2708
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Re: FIRE to Sweden from Switzerland on 1M euro?

Post by bloom2708 » Wed Jun 13, 2018 3:07 pm

In the US, $1 million dollars isn't what it used to be. I don't know if the same applies for 1 million Euro.

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eurobogle
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Re: FIRE to Sweden from Switzerland on 1M euro?

Post by eurobogle » Thu Jun 14, 2018 7:22 am

bloom2708 wrote:
Wed Jun 13, 2018 3:07 pm
In the US, $1 million dollars isn't what it used to be. I don't know if the same applies for 1 million Euro.
My calculation is that with 1M in an ISK account and a 4% SWR you could expect 3K/month after taxes. This seems fairly comfortable for a family with frugal habits. Taxes could increase significantly in the future though.

Jags4186
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Re: FIRE to Sweden from Switzerland on 1M euro?

Post by Jags4186 » Thu Jun 14, 2018 7:29 am

E3000/mo may or may not be enough for you, long term. You say you have a young family and live frugally. Everyone who has means can say they live frugally but every so often you want a toy or want to go somewhere. I’d say this is especially true in Sweden where the weather stinks much of the year. Are you ready to commit to a E3000 lifestyle for 50+ years?

Valuethinker
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Re: FIRE to Sweden from Switzerland on 1M euro?

Post by Valuethinker » Thu Jun 14, 2018 7:36 am

eurobogle wrote:
Wed Jun 13, 2018 10:27 am
FireProof wrote:
Wed Jun 13, 2018 3:55 am
Are you from this low-cost area of Sweden? Do you have friend and relatives there? GIven the way you phrase it, it doesn't really seem like it, which to me is maybe a little strange. If not, maybe you are choosing things from too strictly a financial perspective. My guess is that even non-central Stockholm wouldn't be too much more expensive overall, given the amount you'd save by having good public transport.
Good pointed question. We do have family and friends in Sweden but they are spread out and mostly in parts of the country that are too far north (cold/dark) for our taste. So we would be choosing a location based on climate, quality of life, and value for money.

Stockholm would be colder and darker and we would be paying a premium for access to employment that we wouldn't need.
At the risk of a very troubled pot (British ) calling a Swedish kettle dirty*, Sweden has undergone quite sweeping social and economic changes in the last 20 years. I am assuming that you keep in touch with the country on a regular basis, but you might find "you can't go home again".

There is, as I understand it, nowhere cheap in the vicinity of Stockholm that anyone would want to live there. And I can sympathize with the "too northern" comment ;-).

I probably read too much Henning Mankell (Inspector Kurt Wallender ;-)).

* xenophobia has become a very real part of British politics of late, literally "fear of foreigners" and, thus, I am avoiding a more conventional rendering of that phrase in English which would imply things I do not want it to.

Valuethinker
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Re: FIRE to Sweden from Switzerland on 1M euro?

Post by Valuethinker » Thu Jun 14, 2018 7:48 am

eurobogle wrote:
Wed Jun 13, 2018 1:43 am
We live in Switzerland (HCOL) and are thinking about retiring to Sweden (LCOL). We have a young family and 1M Euro in taxable accounts. We should be able to safely withdraw close to the median income in LCOL areas of Sweden (e.g. Lund) from our portfolio if we invest in a tax-efficient "ISK" account.

The motivation to move from Switzerland is that our living costs here are double compared with Sweden and the tax advantages would not apply in FIRE. (The Swedish taxes on *salary* are punitive but the tax on capital is much more reasonable.)

We are Swedish expats so we already appreciate the culture, speak the language, understand the climate, etc. We have plenty of interests to keep us occupied, many of them commercial/entrepreneurial, but none that generate a reliable monthly income.

What should we think about before we pull the trigger at "FIRE to Sweden before 40"?
Unfortunately the only guaranteed income is a risk-free one.

And in Euros right now, that is more or less zero - that's what risk free government bonds yield. From memory Sweden has inflation linked bonds, what are the yields right now?

Thus, you have to have enough to:

- ride down a bear market in equities, which could be 50% down, but in fact could be worse

I would suggest something like:

- cash and risk free bonds of 5 years of expenses
- a stock portfolio which is 50% of your total portfolio because of longer term inflation risks

Thus if you have a Japan (down 70% say, and then flat for 2 decades) you won't starve (but you might have to start regular work again).

Your big risks are:

- longevity risk - for the female partner, planning to live to 100 which is a realistic risk for a middle class woman in Europe right now
- fiscal risk - changes in Sweden's tax policy, privatisation of higher education, need for private health services, state pension etc.
- return risk - a long period of poor or even negative asset returns
- inflation risk - a return to say 3%+ inflation in the long run

Given how much Sweden has changed in the last 25 years I think these are all reasonable risks. Has Sweden also restored military conscription? (not an issue for you, but for children)

A very British-centric guess is that you need a minimum of GBP 1 million plus debt free ownership of your own home. Somewhere north of say 1.4 million EUR.

That £1m could generate an income of around £30k pa, which is more than adequate (to do so though would require owning stocks, which brings in capital risk to the equation).

Annuitization, the low risk option, doesn't usually work very well if you have a long life expectancy. Once you get into your 70s, the mortality credit starts to be a significant addition to returns.

But these numbers have a way of getting away from one. The numbers become the driver, rather than money simply being a means to an end.

You can make this work with 1m Euros (free assets) -- if returns are poor, you will just have to downsize your life-- fewer or no foreign holidays, no new car etc. We take these things for granted, now, but in the 1960s people did not, and working class people don't still (although budget air travel has meant only the poorest or the unwell seem to forgo 2 weeks in Spain, Greece or Turkey every year).

stan1
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Re: FIRE to Sweden from Switzerland on 1M euro?

Post by stan1 » Thu Jun 14, 2018 7:53 am

I think my advice for under 40 FIRE would be the same in Sweden as it is in the US. A lot can change in 50 years let alone 5 years. I think semi-FIRE works best for people under 60. You can tell everyone you are "retired" from your stressful city job but you actually are working doing something you enjoy more or at your own pace or location of your choosing so work is less onerous. Some income helps offset any longevity risks around things you have no control over.

eurobogle
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Re: FIRE to Sweden from Switzerland on 1M euro?

Post by eurobogle » Thu Jun 14, 2018 7:59 am

Jags4186 wrote:
Thu Jun 14, 2018 7:29 am
Are you ready to commit to a E3000 lifestyle for 50+ years?
Honestly, no, or at least not in such absolute terms.

I do have a reasonable expectation that this lifestyle will suit me well. It is not so unlike the life I am already accustomed to and I have not felt tempted by lifestyle creep even while earning a large income.

I am also confident that the personal interests I will pursue in FIRE will make it easy to earn supplementary income if/when required. So I expect to be able to "unretire" temporarily/permanently if that would make sense.

So this approach is not without risks, since there is a lot of life left to live and cards yet to be dealt, but it does seem like the most attractive option.

eurobogle
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Re: FIRE to Sweden from Switzerland on 1M euro?

Post by eurobogle » Thu Jun 14, 2018 8:04 am

stan1 wrote:
Thu Jun 14, 2018 7:53 am
I think semi-FIRE works best for people under 60. You can tell everyone you are "retired" from your stressful city job but you actually are working doing something you enjoy more or at your own pace or location of your choosing so work is less onerous. Some income helps offset any longevity risks around things you have no control over.
This is indeed my intention. I don't want to be compelled to earn a salary, and I don't want to feel bad if I don't earn one for years at a time, but I do anticipate keeping up with my profession and working on "too good to resist" projects.

I have a reasonable expectation that my skills will become more marketable in FIRE since I will be free to practice specialities. There is also the risk that I will enjoy tending my garden too much and lose my edge, but you have to take some risks...

eurobogle
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Re: FIRE to Sweden from Switzerland on 1M euro?

Post by eurobogle » Thu Jun 14, 2018 8:10 am

Valuethinker wrote:
Thu Jun 14, 2018 7:36 am
At the risk of a very troubled pot (British ) calling a Swedish kettle dirty*, Sweden has undergone quite sweeping social and economic changes in the last 20 years. I am assuming that you keep in touch with the country on a regular basis, but you might find "you can't go home again".
This is a bit of an unknown for me. The parts of Sweden that I am most familiar with, like central Stockholm and smaller towns, don't seem to have changed so dramatically over the past 20 years to my eye. I have heard stories of gang warfare, etc, but my impression is that the problems are relatively isolated and are exaggerated in the international press. I anticipate a mixture of traditional Swedish culture and modern multiculturalism in places like Lund.

If this view is mistaken I'd appreciate some objective information to the contrary.

Valuethinker
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Re: FIRE to Sweden from Switzerland on 1M euro?

Post by Valuethinker » Thu Jun 14, 2018 9:10 am

eurobogle wrote:
Thu Jun 14, 2018 8:10 am
Valuethinker wrote:
Thu Jun 14, 2018 7:36 am
At the risk of a very troubled pot (British ) calling a Swedish kettle dirty*, Sweden has undergone quite sweeping social and economic changes in the last 20 years. I am assuming that you keep in touch with the country on a regular basis, but you might find "you can't go home again".
This is a bit of an unknown for me. The parts of Sweden that I am most familiar with, like central Stockholm and smaller towns, don't seem to have changed so dramatically over the past 20 years to my eye. I have heard stories of gang warfare, etc, but my impression is that the problems are relatively isolated and are exaggerated in the international press. I anticipate a mixture of traditional Swedish culture and modern multiculturalism in places like Lund.

If this view is mistaken I'd appreciate some objective information to the contrary.
You need to get on the ground, talk to Swedes, talk to friends, family, read more thoughtful pieces in local press, etc.

Sweden strikes me as being like Canada. Generally the downtowns are very clean, well developed with few evident signs of poverty and undoubted signs of huge affluence and conspicuous consumption (the chronic homelessness problem in Canadian cities notwithstanding; a recent case had a man who lived in a 24/7 Tim Horton's donut store in Vancouver, and died of cancer - he was a 50 year old white guy, not a First Peoples, not any of your usual suspects; just someone who had fallen off the train of life 20 years ago).

London is like that, too, but American cities, and most other British cities, tend to have more outright poverty and (apparent) threat concentrated in the core.

Whereas Canadian cities have these concrete jungles out on the fringes of the urban area, where social problems and poor people are housed. You also have a lot of drug and alcohol related substance abuse problems, which cuts across both affluent and poor, rural and urban.

I would suggest actually holidaying in Sweden - renting a place where you hope to live for a couple of weeks (and not in July ;-)), see how it feels, how it works. Not, in other words, committing whole hog to a return until you are sure that's going to work for you.

It's absolutely true that "you can't go home again" because what you think of as "Home" was a time as well as a place. Everywhere changes. Even the language changes, the usage and the words. How kids relate to their mobile phones is very different (we did not have the internet when I was growing up) and their attitudes are very different (the desire to violate the norms of previous generations is a constant, though ;-)).

This is as important as the money. But I'd stick with my £1m (GBP) + house as my baseline for this, but that has the air of "first world problems". Your eligibility for healthcare and state pension in Sweden will also matter (the former I am assuming you can qualify by residency & citizenship; the latter is important to retirement in Sweden, and I imagine much less so in Switzerland where pension arrangements tend to be private? The UK state pension is one of the lowest in Europe).

You need to work out what your budget would be living full time in Sweden. Don't forget to budget for repairs to home, property taxes etc (if owned), new car every 10-15 years, annual holiday to somewhere warm and sunny, etc. i.e. things which will reoccur, but not necessarily on an annual basis.

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