Taking Stock After One Year

Relative affordability of different cities in 2021 and 2023. Indexed to Paris 2021 costs = 100. Metro-area inflation data from the US Department of Labor and Eurostat were applied to Numbeo's Cost of Living Index, averaged over 2019-2021. Affordability 2023 data are also weighted to reflect the (downward) performance of US and international stock indices since June 2021.

The other night, as I was watching the replay of a Warriors-Kings game on NBA's International League Pass, it occurred to me that I might not be doing Paris correctly. I get the same feeling sometimes when I'm at the American Library, when listening to English-language podcasts or sitting on the couch reading the New York Times.

Did we really sell, give away, or junk almost all our belongings and move to a different continent just to do the same things we did in San Francisco?

This is a ridiculous, fleeting thought. We did not move to Paris to avoid basketball or NPR. A number of push- and pull-factors led us to the decision to try living in another country.

The factors pulling us to Paris were fairly straightforward. We're pretty risk averse, and having visited Paris in the past, it seemed like a safe bet in terms of quality of life. The great food, culture, and architecture speak for themselves. But it also has a great transportation system that allows us to get around easily and is centrally located for traveling around the rest of Europe. Having said that, Barcelona was in fact our first choice, for some of the same reasons. But the Spanish immigration services were basically unresponsive to our requests for visa appointments, whereas France had a very efficient system for processing paperwork. So we followed the path of least resistance.

The factors pushing us away from the US were more numerous and much more intense. But clearly, financial considerations were at the top of the list. 

Like a lot of people, we started daydreaming about going abroad during the depths of the pandemic. But even before that, I had no intention of working one day beyond the age when I could start making penalty-free withdrawals from my 401k--which at the time was still about eight years off. There is no shortage of websites and online guides to the "Best Places for Americans to Retire Overseas," and reading through these seemed like a good way to pass my dwindling non-working hours (like many white-collar types who were able to keep their jobs, my regular working hours became consumed by video calls, leaving only what used to be personal time to complete my actual work) while laying the groundwork for making an informed decision about a future move. As I mentioned, we are risk-averse.  

These "best places" lists take a variety of factors into account--costs of living, climate, health care quality, safety, stability--but even without saying much about how these are weighted (or giving you the opportunity to weight these factors based on your own preferences), they tended to coalesce around tropical destinations such as Thailand, Costa Rica and Panama, with a smattering of southern European countries with mediterranean climates, e.g., Greece and Portugal.

I certainly take these lists with a grain of salt. Some of the criteria the sites claim to use don't seem to align with their description of the real expat experience. For example, maybe American retirees in their 60s and 70s make great use of Lisbon's "buzzing nightlife" if they happen to still go nightclubbing or speak enough Portuguese to take in the theater. And if you describe Mexico's advantages with reference to Walmart and McDonald's but make no mention of narco-terrorism, I just don't know how to take your recommendation seriously.

In any case, I found it curious that France routinely made it onto these lists. I understood that cities such as Marseilles and Nice along the Mediterranean would have an attractive mix of sun and sea, and that a lot of people might envision their retirement as an endless wine-tasting tour through the Rhône Valley and Bordeaux regions. But as one of the wealthiest nations in Europe (by GDP), my assumption was that France would basically get priced off of these lists.

Digging deeper, I discovered that several sites got their cost of living numbers from Numbeo, which "crowd-sources" and compiles costs of everyday items in different cities and countries. You can criticize Numbeo's data collection method of asking site visitors to reveal how much they paid for a liter of milk, internet service or a meal at McDonald's (see, Mexico may not be so special after all). By necessity, this is nothing near as rigorous as what the US Department of Labor uses to create its own cost comparison data. But as long as you don't place too much stock in the point estimates of costs (Numbeo helpfully provides range estimates as well), the data probably provide a good rule of thumb for different places' relative costs.

It was this latter point that really set in motion our escape plan. Because about mid-year 2021, the same time as we were hitting the depths what we used to think of as our careers, in terms of costs of living and rent, both Milwaukee, Wisconsin and Cleveland, Ohio were running neck and neck with Rome, Italy. Each of these would have cost roughly 59% of the expense of living in New York, NY (the index city), or about $5,000 a month by my back of the envelope estimates (using Numbeo's weighting methods).

Now, I have nothing against Milwaukee or Cleveland. I passed through Cleveland about 20 years ago. It had a nice little restaurant scene in the warehouse district. They should have renamed their baseball team the Rockers. I hear nice things about Milwaukee and the Bucks should do well this season with the addition of Damien Lillard. But under what criteria besides reportable costs could these two cities be considered even remotely comparable to Roma, the eternal capital of Italia?

Even considering my previous caution to pay attention to Numbeo's range of costs rather than the point estimates, these cities should not have even been anywhere near each other if we think of costs as an indicator of quality of life, or of the attractiveness of a city as a means to a way of life. This is not simply my opinion. Depending on the data source and the year, Rome is among the top 20 most visited cities in the world. Neither Milwaukee nor Cleveland break the top 100. I'm not a big proponent of the "wisdom of crowds" thesis, but it says something that each year, more people are interested (for any reason) in making a trip to Sofia, Bulgaria or Lagos, Nigeria (and I've never been to either) than to Milwaukee or Cleveland.

But there they were, right next to Rome. We knew that given our liquid assets and 401k savings, we could not afford to stay in San Francisco (or anywhere in the Bay Area, really) for very long without working--and would probably need to work in positions that were just as time-consuming, mentally draining and stultifying as we what were trying to get away from. And for what it would cost us to retire to Milwaukee or Cleveland, we could instead retire to Rome (in principle--at the time we had not settled on a new city abroad, despite all the lists tempting us with the prospects of cheap Big Macs).

Income levels partly explain why cities like Milwaukee and Cleveland have similar living costs as a city with a much richer cultural heritage, lower crime, better health care and (frankly) better cuisine. According to Numbeo, average monthly after-tax income in 2021 was about $1,800 in Rome compared to $3,700 in Cleveland and $5,700 in Milwaukee. But that gap just proves how out of wack the costs of living in the US are relative to the quality: you would have to believe that Milwaukee's intangibles were three times better than Rome's to make living there a good value proposition. And while by definition intangibles are intangible, there was no conceivable calculation that could make that true.

So that was the epiphany that convinced us to live abroad, and to do it soon, rather than continue to work and make 401k contributions for another eight years. And as the chart at the beginning of this long explanation reminds me, that is looking like a better decision with each passing day.

As our escape plan was coming together when we quit our jobs in mid-2021, we could identify twelve core cities in US major major metro areas that were more expensive than Paris, which itself was just within our budget (that is, any city in the chart above with an affordability score higher than 100 is more expensive than we were comfortable with in mid-2021). We had, in fact, lived in five of these cities at one time or another (San Francisco, Oakland, New York, San Jose, and Los Angeles), and were not particularly saddened by the loss of the chance to experience Boston (bad weather, Celtics fans) or Irvine (sprawl, LA-like traffic). Seattle, Honolulu, and San Diego have oceans going for them (as does Miami, but Florida was never a consideration), but we weren't charmed enough to stretch our budget or to continue working and saving in order to afford them. So off we went.

Since then, inflation in 16 out of 23 US metro areas reported by the Department of Labor has exceeded France's inflation (about 11% since 2021). Basically, the US became less affordable slightly faster than France, while US and international index funds have not recovered their values--leaving St. Louis, Missouri as the last "affordable" American place on the initial list. Even Rome, where we never considered moving but which nonetheless kicked off the entire escape plan, is now out of reach by the conventional wisdom of retirement financial management.

I'm not too bothered by that. There's nothing we can do to stop inflation from outpacing market returns. But I'd much rather watch whatever happens from Paris than from St. Louis just because it's less expensive. Relocating to somewhere more "affordable" in the US would not slow down the epidemic of gun violence there, or lower the risk of medical bankruptcy from the bad luck of getting emergency surgery from an out-of-network provider. It would not quiet the crazies making death threats to librarians and election workers, or slow the ascension to power of a Taliban with a White Christian Nationalist agenda. It would not address widespread homelessness, deaths of despair, and diminishing life expectancy.

There is racism, anti-semitism, poverty and inequality in France. There are authentically right-wing reactionaries here who trace their political lineage through Vichy and reaching further back to royalists. They seem to get just a little more support with every new arrival of desperate immigrants driven from their home countries by war, famine, climate disaster, and political chaos. The French national police make the LAPD look like the Peace Corps. But at least people over here have the collective sense not to use these issues as a reason to deprive themselves of modern infrastructure, good health care, and public education for their kids.

Americans certainly want these things, too--just look at how many people tax themselves with high health care premiums (often for care that is of very little clinical value), HOAs in gated communities, home security systems, and neighborhood shopping for "good schools." But I just don't see any signs that the collective will to provide these public goods broadly will ever emerge, even though in the long run it makes more economic sense than letting things worsen year after year.

So for the foreseeable future, with luck, we're watching the Warriors win from France. They've beaten the Kings twice, but still look pretty shaky at this early point in the season.

And if the money gets tight, there's always Portugal just in case Spain won't respond to our emails.