Financially Independent (if you) Retire Elsewhere?

Adapt to the AI job menace with an international "Plan B"

Esplanade, Piriapolis, Rio de la Plata, Uruguay. French Riviera vibes, no jet lag.

For the last several months, as I’ve commuted downtown to my midwestern city and looked at the people around me, I’ve increasingly wondered to myself:

What fraction of white collar workers are in the last “career” job they’ll ever have, but don’t realize it?

We can’t know that answer for sure. Even so, if the AI maximalists are only one-half correct, the answer might be at least ten percent of the overall workforce, in as soon as one to three years.

This ambient AI-driven job loss trajectory may well be amplified by a recession caused by the regime’s “own goals” - especially its schizophrenic, unconstitutional, and profoundly ill-advised tariffs.

The next recession may be one that the Fed can’t rate-slash its way out of, for fear of stoking inflation caused by the tariffs, and accelerating the dollar’s decline and capital flight.

The old policy playbook for fixing recessions depended on the world having seemingly unlimited appetite for Treasury debt. Those days seem to be on the way out.

So, pockets of the job market are corroding, and when the overall unemployment situation turns bad, it may turn bad hard, and stay that way.

You can tell I worry about this. And, if you’re honest, you probably do too.

I’ve been exploring backup plan scenarios for when the “well paid” part of a career comes to a sudden halt — midway through a productive run in the workforce — but long before “normal” retirement age.

You might want to do the same thing for yourself.

It can be very comforting to know there is a version of a safe, pleasant, dignified life available for you and your family if you are eliminated from the workforce by AI, or otherwise. And I think for many of us there might be.

The plot twist is: that backup plan works a lot better offshore.

Here’s how to evaluate your options.

How much do you have?

Start with maybe the most important question: how much cash flow could you sustainably produce from your balance sheet right now, if your income went away and stayed gone?

The answer might be: more than you think.

And the reason why starts with Section 72(t) of the tax code. This section allows penalty-free withdrawals from IRAs before age 59.5, if you take a series of “substantially equal periodic payments”.

How large these payments must be depends on your age, prevailing interest rates, and your account balance.

The details of your own 72(t) strategy are outside the scope of this essay, but you can find a useful calculator here, and a useful overview is here.

A married couple in their late 40s with retirement plan balances of $700,000 could produce 72(t) distributions of over $42,000 per year. That doesn’t get you very far in the US, but we’ll see below, it may yield some decent options overseas.

Suppose this couple sold their US house and moved overseas. Their home equity and other non-retirement account balances might be as large as, for instance, $600,000. Under the battle-scarred but still good-enough-for-quick-projections Four Percent Rule, that’s a sustainable inflation-adjusted draw of $24,000 per year.

So, our family is up to $66,000 per year (or $5,500 per month). For a couple accustomed to multi-six figure combined earnings, this still doesn’t seem like it’s a long-term “forever” solution to a vanished career.

And of course it’s not — but only from a US framework. (We are, after all, a country where buying health insurance through the Obamacare exchanges while unemployed but — for whatever reason — not eligible for Medicaid costs a family around $20,000 per year.)

When we pivot offshore, the picture starts to look quite different, and better.

And that’s without Social Security.

Suppose our family has had a pretty strong earnings record. They might qualify for as much as $45,000 per year in Social Security at age 62, even if their promised benefits are cut by 17%. (That 17% cutback is what is currently projected to happen after 2035, unless Congress appropriates more funds for the program.)

A Plan B strategy starts to emerge:

• Find a place where your post-benefit-cut Social Security will be enough to live on once you’re 62.

• For the years before you reach age 62, pay for your life by taking Section 72(t) distributions from your qualified retirement plans.

• Use targeted drawdowns or a sustainable unitrust draw from your taxable accounts to supplement the 72(t) distributions.

This all presupposes that our family of Expat Preppers never finds any way to create any income once they’re overseas.

In an era of remote work how likely does that seem? To me, not very.

Maybe their supplemental income wouldn’t be much. But in a low-cost location, it doesn’t take a lot to meaningfully improve an already not-so-bad situation.

Where can you spend it?

It’s difficult enough to make a realistic budget for what you know well - your own current life (likely in the United States). It’s reasonable to be skeptical about precise lifestyle cost estimates for overseas locations.

Nonetheless, let’s start with the data set we do have - conveniently sourced by International Living.

It’s not a comprehensive list of country options, but just to put some ideas and options in play, I researched and gathered the following estimated monthly costs of living for a couple:

Costa Rica $2,240
Mexico $2,298
Argentina $2,400
France $2,625
Spain $2,825
Portugal $3,000
Belize $3,030
Uruguay $3,200
Panama $3,205
Italy $3,425

Our hypothetical couple in their late 40s who are (perhaps) obliviously in the last three years of their high-earning, live-in-a-nice-suburb life in the US are (under a conventional onshore high-cost playbook) possibly pretty hosed.

But if they’re willing and able to adapt by living internationally, their prospects aren’t necessarily bad. Rather, they’re just quite different than what they had expected.

Anne Tergesen did a really nice job profiling some international retirees in the Wall Street Journal - I recommend reading her piece available here. See what parts of the stories profiled in the article resonate with your own situation.

We’ve roughed out the outline for the Financially Independent (if you) Retire Elsewhere AI “Plan B” in this essay.

But as we’ll explore in future essays, tactics and details matter a lot.

They make all the difference between something that might be unexpectedly nice — or instead, an abrupt, unwelcome forced adaptation.

The tactics in play involve capital and asset allocation, passports and visas, and language capabilities.

They also involve a shift of mindset.

How do you live happily, lightly, and flexibly when the political, economic, and technological setting is so fluid, unknown, and potentially hostile?

• When you might live out the rest of your life in the US, but you might not.

• When you might have 15-20 high-earning years left in the workforce, but you might not.

• When your children living out their adult lives in the US might be a great outcome, but it might not.

• When you might live in the US three or four years from now, but you might not.

How do you stay resilient and thrive under conditions of uncertainty and disorder?

Call it what you will: The Great Unraveling. The Fourth Turning. The End of Empire. Stochastic Anarchy. We’re in the middle of it, and it’s grown almost impossible to ignore for anyone who isn’t willfully oblivious.

One way to hold onto a semblance of good cheer is to realize you have more options, and agency, than you think.

Our explorations of these questions, issues, and tactics will continue in the Expat Prep essays ahead.