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Geoarbitrage: The Ultimate Guide & Resources

Geoarbitrage can be a great life hack in pursuit of Financial Independence/Retire Early (FIRE). 

Using this ultimate guide and resources will help identify if geoarbitrage is right for you!


What Is Geoarbitrage?

Geoarbitrage is best defined as working in a high-paying location while accumulating your assets, then moving to a lower cost of living area in the decumulation phase of your life.  This strategy takes advantage of the difference between the cost of living in different cities, states, and countries. 

Working in a high-paying area will allow you to save more during your working years and accumulate money faster.  This money can then be spent at a lower cost of living area in which it will last longer during your retirement years.  The ideal location to move to for geoarbitrage are areas with a high quality of life and low cost of living.

Geoarbitrage became popularized by Tim Ferriss in his book “The 4-Hour WorkWeek” in which he describes his “mini-retirements” in places like Argentina or Thailand.  He carefully chooses countries that have an ideal lifestyle and where his money has more purchasing power.  His strategies might seem extreme and therefore discourage some people from looking into geoarbitrage.  However, I would encourage everyone to at least consider the strategy for financial independence.

If moving to a different country is not something you ever want to do, you can still benefit from domestic geoarbitrage.


Domestic vs International Geoarbitrage

There are two ways of executing the geoarbitrage strategy, by relocating to another country or relocating within the same country.

International Geoarbitrage is when you take advantage of the difference in the cost of living between different countries.  So if someone worked their entire career in the United States and then retires in Vietnam, they would be taking advantage of international geoarbitrage.

Several factors go into choosing the right country including the cost of healthcare, quality of life, ability to return to see family, and cost of living.  Taking into account all of these factors is a lot of research and number crunching.

Luckily, we can leverage the work done by the Business Insider and their team.  They comprised a top 10 list having factored in a lot of the variables above.

Top 10 Countries To Retire In According To Expats

Domestic Geoarbitrage is when you take advantage of the difference in the cost of living between different cities or states within the same country.  So if someone worked their entire career in New York City and then retired in Florida, they would be taking advantage of domestic geoarbitrage.  This is not as drastic as a lifestyle change since the range of lifestyles is smaller within one country.  I would favor domestic geoarbitrage because I am already familiar with healthcare, taxes, and the way of life here in the states.

Again, we can leverage the hard work the Business Insider has already done in crunching the numbers (reminder to work smarter not harder).  Here is their list of best cities to retire in the United States.

17 Most Affordable Cities To Retire In The United States


Geoarbitrage In The United States

I live in the state of Florida which has an amazing 6 out of 17 cities from the list, most likely because there is no state tax.  One of the easiest ways to identify if a location is a candidate for geoarbitrage is to look at their local and state taxes.

That single factor can have a big impact on how far your money will go there.

States With No Income Tax:

  • Alaska
  • Florida
  • Nevada
  • New Hampshire
  • South Dakota
  • Tennessee
  • Texas
  • Washington
  • Wyoming

Starting your search for cities in these states can be a great start.  Then you can mix in other factors like weather, housing, education, transportation, proximity to family, and healthcare costs.


Benefits Of Geoarbitrage

There are several benefits to using the geoarbitrage strategy, and they can benefit a traditional retiree or an early retiree.  The benefits will be different for everyone and they have to be evaluated on a case-by-case basis.  However, some general benefits will apply to most.

Benefits of Geographic Arbitrage:

  • Lower Cost Of Living
  • Fewer Taxes In Retirement
  • Cheaper Goods and Services

The main benefit of geoarbitrage is being able to live a similar or better lifestyle with less money.  That’s what I like most about it.  I like getting the most bang for my buck!  The availability of land in the suburbs usually leads to more square footage and lower-cost housing accommodations.

Another benefit is the differences in country or state laws to favor your lifestyle and your wallet.  If you choose to retire in 1 of the 9 states mentioned above, you will enjoy NO state taxes.  This alone can save you about 10% to 15% of your nest egg.  If you retired with $1 million that translates into a savings of $100,000 to $150,000 just by relocating to a tax-friendly state.

How To Pay Fewer Taxes With A Roth Conversion Ladder

Finally, since everyone’s salary and cost of living is lower, the costs of goods and services also come down.  Goods and services like food, gas, clothing, haircuts, and education are all lower in these places.  This is what geographic arbitrage is all about, having the luxury to choose where you want to live and live better.

That’s why I consider geoarbitrage one of the FIRE life hacks:

Geoarbitrage Life Hack


Working Remotely

Working remotely is another way to apply geographic arbitrage by earning income with a company based in a high-paying location but living in a lower cost of living area.  Companies do not pay you a salary based on your cost of living.  So ideally, the best way to take advantage is to work remotely from a location with a lower cost of living.

The is an opportunity for geo arbitrage by benefiting from the disconnect between salary and cost of living.  Salary is tied to the cost of living because companies need to entice employees to move within a reasonable commute.  If the surrounding area has a high cost of living, workers will expect a higher wage to accommodate their cost for housing, gas, food, and services.

If your job allows you to work from home you might be able to benefit from geo arbitrage.  By lowering your cost of living you are effectively giving yourself a raise.


“It is not how much you make that counts, but how much money you keep”  – Robert Kiyosaki


Negatives Of Geoarbitrage

Until now geo arbitrage sounds like a fantastic idea to take advantage of locations with different costs of living.  If international geoarbitrage is too extreme, you can simply choose to relocate domestically or within the same country.  However, maximizing financial gain is not the only goal during retirement.

Negatives Of Geo Arbitrage:

  • Leaving Behind Family/Friends
  • Unfamiliar Environment
  • Transportation Costs

Family and friends are usually high on the “what makes you happy” list, therefore it’s something to strongly consider before relocating further away.  You will most likely want to be close to family and friends during your retirement.  Having all the time and money in the world won’t matter much if what makes you happy is being able to enjoy quality time with family and friends.  This is a real drawback to geoarbitrage especially for those thinking about moving abroad.  For some, moving halfway around the world with their spouse might be the right choice, for others that just won’t work.

Living in an unfamiliar environment might also be a downside, especially if you still have children that you want to bring up in similar environments to your childhood.  Make sure to visit before relocating and confirm it’s a place you see yourself having a high quality of life.

Lastly, transportation costs might be higher due to relocating from the city.  The best cities for geographic arbitrage are usually away from downtown and in the suburbs.  You might need a car for reliable transportation.  Make sure to factor this into your “Is it worth it” calculation.


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Geoarbitrage Calculator

Now that you know the pros and cons of geoarbitrage you can use a geoarbitrage calculator to find out if it’s worth it for you.

Best Geoarbitrage Calculator:

These are the best geoarbitrage calculators I’ve found.  They are easy to use and can help you make an informed decision.

The Nomad List Calculator is straightforward and even gives you suggestions at what age, location, and net worth you can retire.  The Nomad List is best for someone invited to the idea of relocating anywhere in the world.

I tried using the geoarbitrage calculators and got these results:

Nomad List Calculator Example

Geoarbitrage Example Locations

The results show that I could choose to retire in Armenia at age 35 with a net worth of $225,501.

I wouldn’t go that route for my early retirement but it also gives you a list of other options.  Using this calculator can be a great starting point if you are curious about international geoarbitrage.

If the idea of relocating to another country is too extreme or you already have a location in mind, then the Freedom Is Groovy Calculator is a great tool.

The Freedom Is Groovy Calculator is great for planning a relocation if you already have a proposed new salary, housing costs, and expenses.  It also breaks down the “prospective gap” which is the difference between salary and expenses.  You can increase the “prospective gap” by working remotely for a company in a high-paying city but living in a low cost of living area.

If you’re interested in geo arbitrage, I recommend playing around with both calculators to see which one works best for you.  They can show you the dramatic difference geo arbitrage can make on your retirement plans.  Like everything else, if you plan for geo arbitrage well, it can be an amazing life hack!


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This information is my opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.