The Long Game: Why We're Sticking with Portugal (Even with the 10-Year Rule)
- itllbefunretiremen
- 7 minutes ago
- 8 min read
By Leslie – It'll Be Fun
Bom dia It’ll be Fun Crew.
We’ve been seeing the headlines, and we’ve been reading the comments. It feels like every week there’s a new policy change in Portugal that has people asking us: "Is it still worth it? Are you guys staying?"
First, we had the end of the real estate Golden Visa. Then, the NHR (Non-Habitual Resident) tax regime—the "holy grail" for retirees—closed its doors to new applicants. And now, the big one that hit the news in late 2025: the change to the citizenship requirement, bumping the wait time from 5 years to 10 years for countries like the US. (we may still see something different on this one, fingers crossed)
That sounds like a lot of bad news. If you’re just looking at the paperwork, you might think the door is closing.
But here’s the reality: We are staying. In fact, we’re more convinced than ever that this is the right place for us—and for our 25-year-old son, Wolf. Unless something we don't know comes along.
Here is exactly how we are navigating the new landscape, our "secret" financial plan to handle the end of NHR, and why Portugal still beats the alternatives.
1. The "Bad" News: Dealing with Policy Changes
Let’s address the elephant in the room.
The 10-Year Citizenship Rule
Yes, the government has extended the residency requirement for naturalization (the passport) to 10 years for non-EU citizens.
The Reaction: It’s frustrating. Five years felt like a light at the end of the tunnel. Ten years feels like a lifetime.
Our Take: Are we here just for a passport, or are we here for a life? If we plan to live here forever anyway, having a temporary residency card for an extra five years is a bureaucratic annoyance, not a dealbreaker. We are legal, we are safe, and we are home. The passport is just the cherry on top—we’re willing to wait for the cherry.
The End of NHR (For Newbies) & The "Cliff"
The NHR regime was amazing—a flat 10% tax on our pension and IRA withdrawals for 10 years. For those of you trying to move now without it, the math is harder. But for those of us on it, the clock is ticking. We have a 10-year window, and then we fall off the "NHR Cliff" into standard Portuguese progressive tax rates, which can go up to 48%.
That sounds scary. But we have a plan.
2. Our "Tax Hack": The IRA Front-Load Strategy
We aren't financial advisors, but this is the scenario we’ve built to make the numbers work long-term. The goal is to avoid paying 48% tax on our retirement savings when our NHR status expires.
Phase 1: The "NHR Window" (Years 1–10)
The Strategy: Live on Alan's SS, Pull the IRA, & Reinvest. Because we bought our house outright, our monthly overhead is low. We are actually living comfortably right now just on Alan's Social Security. We don't need the IRA money to buy groceries.
The Aggressive Withdrawal: We are still pulling as much as possible from the IRA now to lock in that flat 10% tax rate while we have NHR.
The Reinvestment: Instead of spending that cash, we are moving it into a regular trading account. Yes, we will pay capital gains tax on the trades we make there (currently 28%), but the principal is now ours, free and clear of future income tax. It can sit there and grow.
Wolf's Reward: Wolf has been the one managing our financial accounts, and he’s done an incredible job. Because of that success, our plan is to use a portion of these "liberated" funds to buy a second property specifically for him. It gives him a hard asset and a start in life that would be impossible in the US.
Delaying Leslie's SS: Since we live on Alan's check and the house is paid for, we can afford to let Leslie's Social Security sit and grow. This guarantees a higher monthly payout later (roughly an 8% increase for every year she waits past full retirement age).
Phase 2: The "Post-NHR Life" (Year 11+)
The Strategy: Live on Social Security + Savings. Once our 10 years of NHR are up, we stop touching the original IRA (or what’s left of it). Why? Because withdrawals would now be taxed as regular income at those high Portuguese rates. Instead, our income stream shifts:
Maximized Social Security: Under the tax treaty, the US taxes this, and we get a credit in Portugal. Because we waited, Leslie's check is now much larger.
The "Survivor" Safety Net: This is the crucial part of the plan. By delaying Leslie's claim, we’ve built a massive safety buffer. If one of us passes away, the survivor generally steps up to the higher benefit amount. Because we let it grow, that single check will be large enough for the survivor to literally live on their own Social Security without needing any other income sources.
The "Nest Egg": That money we pulled out in Phase 1? That is now just "savings." We can spend it tax-free if we want a luxury, but the basics are covered by the SS check.
By draining the some of the IRA during the low-tax years, we avoid the high-tax years. By delaying SS, we ensure that neither of us will ever be left financially vulnerable, even if we are alone.
3. The "Doomsday" Scenario: If the US Bans Dual Citizenship
There is a proposed bill floating around Washington (The Exclusive Citizenship Act of 2025) that would force US citizens to choose: keep your US passport OR get a foreign one. You can't have both.
If that freak event happens, our plan changes, but we are still fine.
The Plan: Permanent Residency (PR) at Year 5
If we can't get the Portuguese passport without giving up our US one, we will simply apply for Portuguese Permanent Residency at the 5-year mark.
What it means: We get a residence card valid for 5 or 10 years (renewable). We have the right to live, work, and access healthcare/social security in Portugal indefinitely. It is nearly identical to citizenship, except we can't vote in national elections and we don't get a Portuguese passport.
Can we live somewhere else?
Outside the EU: Yes. With Permanent Residency, you can generally be absent from Portugal for up to 24 consecutive months (or 30 months in a 3-year period) without losing your status. This gives us massive flexibility. We could go live in the US or Asia for a year and still keep our Portuguese rights.
Inside the EU: It is not as seamless as a passport. We can't just move to France tomorrow and work. However, holding Portuguese Permanent Residency makes it easier to apply for residence in other EU countries under "Long-Term Resident - EU" status rules.
Do we have to be Tax Residents?
Technically, no. You can hold Permanent Residency and not be a tax resident if you spend less than 183 days a year here and don't have your "habitual abode" here. This means if we wanted to become global nomads later, we could keep the Portuguese "Plan B" card active by visiting every year or two, without necessarily paying Portuguese taxes on our worldwide income.
4. The Legacy Plan: What About Wolf?
We get asked a lot about inheritance. "If you die in Portugal, does the government take everything?"
Actually, for our son Wolf, the situation is fantastic.
No Inheritance Tax for Family
Portugal has a concept called "Stamp Duty" instead of inheritance tax. The standard rate is 10%. However, spouses and children (descendants) are exempt.
If we pass away, Wolf pays 0% tax to Portugal on our Portuguese assets (bank accounts, cash).
If we own a house, he pays a tiny 0.8% stamp duty. That’s it.
Forced Heirship vs. US Will
Portugal has "Forced Heirship" laws, which means the law guarantees that children (Wolf) get a portion of the estate (usually 50-60%). You can't write them out of the will easily.
If we want this: Great, the law protects Wolf automatically.
If we want US Rules: Because of an EU rule called Brussels IV, we can write a will stating that we want the Law of our Nationality (US Law) to apply to our estate. This lets us bypass the Portuguese forced heirship rules if we needed to.
Bottom line: Wolf inherits our Portuguese life tax-free, and we have total control over how it happens.
5. Why Not Elsewhere? (The Comparison)
We looked at the map. We looked at the numbers. Portugal still wins.
Portugal vs. The USA
Cost: Even with inflation, our cost of living here is 30-40% lower than in the US. We don't worry about being one medical emergency away from bankruptcy. Private health insurance for the three of us costs less than a single person's deductible in the States.
Safety: This is huge for us. We walk around at night. We don't worry about gun violence. The psychological weight that lifts off your shoulders when you leave the US is indescribable.
Portugal vs. France, Italy & Spain (The Euro-Comparison)
We see it whenever we travel: Portugal is simply friendlier to the wallet. We looked up the latest data to confirm what we felt at the checkout counter, and here is how it breaks down:
Groceries:
France & Italy: Expect to pay 20–30% more for a standard grocery basket. Meat, dairy, and packaged goods are significantly pricier there.
Spain: Spain is the closest competitor. While their produce is cheap, we find that Portugal wins on the "daily essentials" that matter to us: coffee, wine, and fish. A bottle of wine that costs €4 here is often €7–8 across the border.
Dining Out: This is the biggest shocker.
In Lisbon or Porto, a nice dinner for two is often €50–€60. In France or Italy, you are looking at €60–€80 for the same quality meal.
And the coffee? An espresso here is still around €0.80–€1.20. Try finding that in Paris or Rome without standing at the bar.
Utilities (We Checked the Rates):
Electricity: Portugal's rates have stabilized nicely (around €0.22/kWh). Spain is slightly higher (€0.23+/kWh), and while France has historically had lower rates due to nuclear power, their "final bill" is often higher because of the massive heating needs in older, colder French homes.
Water & Gas: Water bills in Portugal are generally very low compared to the neighbors. Gas is pricier here than in Spain, but because our climate is milder, we simply use less of it.
The Bottom Line: Running a modern home here (like ours) costs about 15–20% less in total utility bills compared to a similar setup in Spain or Italy.
The Vibe & Culture
Spain: We love visiting, but the energy is frantic. Portugal fits our "chill" retirement pace. Also, the Wealth Tax in Spain (which applies to worldwide assets) is a dealbreaker for retirees with savings.
France & Italy: The bureaucracy is legendary (and not in a good way). Plus, we find the English proficiency in Portugal—especially for Wolf's generation—is drastically higher, making daily life and integration so much smoother.
6. The "Wolf" Factor: Why It's Great for a 25-Year-Old
People ask, "What about Wolf? Isn't he bored?" Actually, he loves it.
Safety & Freedom: He can go out in Lisbon or Porto at 3 AM and be safe. That freedom is rare in many US cities now.
Cost of Living: In the US, at 25, he’d be struggling to pay rent with three roommates. Here, the quality of life he gets for his budget is incredible.
The Community: The digital nomad and expat community here is young. He’s made friends from Germany, Brazil, the UK, and the US. He’s becoming a global citizen in a way he never would have in the suburbs of America.
The Future: Even with the 10-year citizenship wait, he is on a path to an EU passport. That opens up 27 countries for him to live and work in for the rest of his life. That is the greatest gift we could give him.
The Bottom Line
The rules are changing. The "Gold Rush" era of easy visas and 0% tax is over. Now, it requires strategy.
But when we sit on our fantastic patio, looking out at the mountains from our dream outdoor kitchen, knowing we are safe and our healthcare is covered... the paperwork feels like a small price to pay.
You can create your version of an It'll Be Fun Life!
It’ll be fun. We Should Have done This Sooner
We invite you to connect with us:
Join us for a our Monthly Online meetups
On patreon at www.patreon.com/itllbefun
On our website at www.itllbefunretirement.com
Sign up for our FREE Newsletter
We saved the best for last: Subscribe to our Youtube Channel It'll Be Fun
Comments