Cheapest Countries in the World to Live
In this article I take a look at the cheapest countries in the world to live in retirement. We’ll cover:
- Why you might want to retire abroad
- How much money you need in retirement
- The Rule of 25
- Burgernomics with the Big Mac Index
- The cheapest countries in the world to live vs the most expensive
Why you might want to retire abroad
As great as Britain is, there are many reasons why people choose to retire abroad. Well, in truth, I suspect for a lot of people there is probably just one: Weather! Swapping rain for sunshine, cold for warmth, and grey skies for blue skies is a simple trade to make for many I’m sure.
But, there’s another important reason to leave Britain and that’s money. There are a lot of good things about living in the UK, but being cheap really isn’t one of them.
The internet and convenient low cost air travel have made the world smaller, so moving abroad doesn’t have to mean saying goodbye to friends and family as it once did.
And there are plenty of countries where your money will go further.
How much money do you need in retirement?
How much money you actually need will depend on where you are and how much you spend. Somebody, with modest needs living in the North of England, isn’t likely to need as much, as somebody living in central London, who eats at Michelin Stared restaurants every night.
According to a UK study, on average Brits need £30,000 each to lead a comfortable life.
Most Brits will have a state pension to contribute, which is currently about £6,500 per year.
So subtracting £6,500 from £30,00 leaves us with £23,500 to aim for.
The question then becomes how much do we need in our pension pot to pay out £23,500 per year in retirement.
The Rule of 25
To estimate how much we need we can use the Rule of 25.
The rule of 25 gives a simple, accurate method of calculating how much money you are going to need in retirement.
It works like this. You decide how much you are going to need annually and then multiply that figure by 25.
So if you decide you need £23,500 a year to live off, you simply multiply £23,500 by 25, which gives you £587,500.
That’s it! The average Brit needs £587,500. With that they should be able to lead a happy retirement in the UK without ever running out of money.
And here lies a problem for a lot of people. They don’t have that kind of money, and more importantly they aren’t likely to have that kind of money saved up by the time they retire. So what can they do?
Well, one option is to retire somewhere where the money you do have will go further.
Burgernomics and the Big Mac Index
To find out where’s cheap, we can use Burgernomics! Let me explain.
The Big Mac Index is published by the Economist. It began lightheartedly by Pam Woodall as a way to illustrate purchasing power parity (PPP) between two currencies, but now finds its way into all kinds of serious economic writing.
And using Big Macs for economics isn’t as crazy as you might think. Big Mac prices are related to various economic factors. A Big Mac contains beef, cheese, lettuce, pickles, onions and bread which need to be bought.
They then need to be put together and cooked by somebody that needs paying, and they need to be advertised and sold. A simple product has a lot going on behind the scenes that can provide us with an idea of what things cost locally.
The cheapest countries in the world to live vs the most expensive
The table below shows the 14 cheapest countries in the world to live based on Big Mac prices and compares them against the 14 most expensive.
The 14 cheapest countries in the world to live vs the 14 most expensive
| Country | Price $ | Country | Price $ |
| Russia | 1.65 | Switzerland | 6.62 |
| Ukraine | 1.94 | Norway | 5.86 |
| Turkey | 2 | Sweden | 5.84 |
| Argentina | 2 | United States | 5.58 |
| Malasia | 2.2 | Canada | 5.08 |
| Egypt | 2.23 | Euro Area | 4.64 |
| South Africa | 2.24 | Denmark | 4.6 |
| Taiwan | 2.24 | Israel | 4.58 |
| Romania | 2.29 | Brazil | 4.55 |
| Moldova | 2.32 | Australia | 4.35 |
| Azerbaijan | 2.33 | Lebanon | 3.31 |
| Indonesia | 2.34 | Uruguay | 4.31 |
| Mexico | 2.54 | Singapore | 4.28 |
| Hong Kong | 2.55 | New Zealand | 4.19 |
At the time of writing they range from $1.65 in Russia to $6.62 in Switzerland. In Britain they cost $4.07 and in the US they’ll set you back $5.58.
Based on Big Mac prices, Britain is 2.47 times more expensive than Russia ($4.07/$1.65= 2.47). If we assume the cost of living follows this, then we could live on a lot less in Russia.
In fact, we don’t even need to exchange currencies. These Big Mac prices suggest we could live on about £9,500 (£23,500/2.47 = £9,514).
Multiplying £9,500 by the Rule of 25 implies you’d need just over £238,000 in your pension pot. That’s about a quarter of what you’d need if you retired in Switzerland, where you’d need about £1,000,000.
The table below uses this idea to see how much we’d need to live in each country covered in the index.
How much money an average Brit needs to retire in different countries based on burgers
| Country | Price $ | No. Big Macs you could eat for the price of one British Big Mac | Local equivalent of £23,500 based on Big Macs | What you need in your pension pot |
| Russia | 1.65 | 2.47 | £9,527.03 | £238,175.68 |
| Ukraine | 1.94 | 2.10 | £11,201.47 | £280,036.86 |
| Turkey | 2 | 2.04 | £11,547.91 | £288,697.79 |
| Argentina | 2 | 2.04 | £11,547.91 | £288,697.79 |
| Malasia | 2.2 | 1.85 | £12,702.70 | £317,567.57 |
| Egypt | 2.23 | 1.83 | £12,875.92 | £321,898.03 |
| South Africa | 2.24 | 1.82 | £12,933.66 | £323,341.52 |
| Taiwan | 2.24 | 1.82 | £12,933.66 | £323,341.52 |
| Romania | 2.29 | 1.78 | £13,222.36 | £330,558.97 |
| Moldova | 2.32 | 1.75 | £13,395.58 | £334,889.43 |
| Azerbaijan | 2.33 | 1.75 | £13,453.32 | £336,332.92 |
| Indonesia | 2.34 | 1.74 | £13,511.06 | £337,776.41 |
| Mexico | 2.54 | 1.60 | £14,665.85 | £366,646.19 |
| Hong Kong | 2.55 | 1.60 | £14,723.59 | £368,089.68 |
| India | 2.55 | 1.60 | £14,723.59 | £368,089.68 |
| Phillipines | 2.67 | 1.52 | £15,416.46 | £385,411.55 |
| Oman | 2.73 | 1.49 | £15,762.90 | £394,072.48 |
| Jordan | 2.75 | 1.48 | £15,878.38 | £396,959.46 |
| Poland | 2.8 | 1.45 | £16,167.08 | £404,176.90 |
| Vietnam | 2.8 | 1.45 | £16,167.08 | £404,176.90 |
| Hungry | 3.03 | 1.34 | £17,495.09 | £437,377.15 |
| China | 3.05 | 1.33 | £17,610.57 | £440,264.13 |
| Peru | 3.14 | 1.30 | £18,130.22 | £453,255.53 |
| Sri Lanka | 3.18 | 1.28 | £18,361.18 | £459,029.48 |
| Nicaragua | 3.18 | 1.28 | £18,361.18 | £459,029.48 |
| Bahrain | 3.18 | 1.28 | £18,361.18 | £459,029.48 |
| Sudi Arabia | 3.2 | 1.27 | £18,476.66 | £461,916.46 |
| Guatemala | 3.23 | 1.26 | £18,649.88 | £466,246.93 |
| Croatia | 3.24 | 1.26 | £18,707.62 | £467,690.42 |
| Quatar | 3.3 | 1.23 | £19,054.05 | £476,351.35 |
| Pakistan | 3.31 | 1.23 | £19,111.79 | £477,794.84 |
| Kuwait | 3.46 | 1.18 | £19,977.89 | £499,447.17 |
| Honduras | 3.49 | 1.17 | £20,151.11 | £503,777.64 |
| Japan | 3.6 | 1.13 | £20,786.24 | £519,656.02 |
| Thailand | 3.72 | 1.09 | £21,479.12 | £536,977.89 |
| Colombia | 3.73 | 1.09 | £21,536.86 | £538,421.38 |
| Costa Rica | 3.77 | 1.08 | £21,767.81 | £544,195.33 |
| Czech Republic | 3.81 | 1.07 | £21,998.77 | £549,969.29 |
| United Arab Emirates | 3.81 | 1.07 | £21,998.77 | £549,969.29 |
| Chile | 3.89 | 1.05 | £22,460.69 | £561,517.20 |
| South Korea | 4.02 | 1.01 | £23,211.30 | £580,282.56 |
| Britain | 4.07 | 1.00 | £23,500.00 | £587,500.00 |
| New Zealand | 4.19 | 0.97 | £24,192.87 | £604,821.87 |
| Singapore | 4.28 | 0.95 | £24,712.53 | £617,813.27 |
| Uruguay | 4.31 | 0.94 | £24,885.75 | £622,143.73 |
| Lebanon | 3.31 | 1.23 | £19,111.79 | £477,794.84 |
| Australia | 4.35 | 0.94 | £25,116.71 | £627,917.69 |
| Brazil | 4.55 | 0.89 | £26,271.50 | £656,787.47 |
| Israel | 4.58 | 0.89 | £26,444.72 | £661,117.94 |
| Denmark | 4.6 | 0.88 | £26,560.20 | £664,004.91 |
| Euro Area | 4.64 | 0.88 | £26,791.15 | £669,778.87 |
| Canada | 5.08 | 0.80 | £29,331.70 | £733,292.38 |
| United States | 5.58 | 0.73 | £32,218.67 | £805,466.83 |
| Sweden | 5.84 | 0.70 | £33,719.90 | £842,997.54 |
| Norway | 5.86 | 0.69 | £33,835.38 | £845,884.52 |
| Switzerland | 6.62 | 0.61 | £38,223.59 | £955,589.68 |
You can see the amount of money you’d need to be comfortable in some of the cheapest countries in the world to live is much less than some of the more expensive ones.
The bottom line
Using only the Big Mac Index to determine your retirement destination wouldn’t be advisable. There’s bound to be some anomalies where Big Macs are cheap but the cost of living is high and vice versa.
That said, it does give you an indication of which countries are worth researching in more detail.
If money is the only thing you are thinking about, Russia could be worth looking into, but if weather was a factor perhaps you’d start with Turkey.
Once you’ve narrowed down a few destinations, you can then delve into the details. Without doubt, there are plenty of things on top of weather and finances to think about before you make your move. Tax, Visas, Health, Languages, Houses and Culture to name but a few.
But there are lots of good sources of information out there now that enable you to research retirement destinations. I like Expatistan as it enables you to compare cities and countries in much more detail.
Unless money is no object you can probably do a lot worse than starting your retirement destination search with a bit of burgernomics.
