Tuesday, August 8, 2017

Where to retire - a network analysis

I am an elderly man, and it is getting towards time to retire. But where?

I could retire back in Australia; but, as Thomas Wolfe said: "You can't go home again." I could retire in Sweden, but the tax authorities are likely to then take 25% of my pension, which I need to be living on, instead. So, where to go?

This is a question that has occupied the minds of many people, for themselves as well as others; and so, inevitably, you will find web sites on the matter. For example, Live and Invest Overseas has a Retire Overseas Index, recommending particular places, which it updates annually; and International Living has a similar Annual Global Retirement Index.

To help me in my decision, let's look at the International Living data, The World’s Best Places to Retire in 2017. This site provides a rating (out of 100) of ten important characteristics, for 24 countries that might be of interest to retirees:
  • Benefits & discounts
  • Buying & renting
  • Climate
  • Cost of living
  • Entertainment & amenities
  • Fitting in
  • Health care
  • Healthy lifestyle
  • Infrastructure
  • Visas & residence
For 2017, the individual scores vary from 57-100, with "Benefits & discounts" and "Cost of living" varying the most between countries, and "Fitting in" and "Health care" varying the least.

The ten scores for each country can be averaged, to provide a rank ordering of the 24 countries. These average scores vary from 73.3 to 90.9, as shown in the first graph.

There is little to choose between the first three countries in terms of their average score (Ecuador, Mexico, Panama), nor between the next three (Colombia, Costa Rica, Malaysia). But this does not make these countries intrinsically equal. After all, both Panama and Ecuador handsomely outdo Mexico on "Benefits & discounts", while Mexico does better on "Cost of living". I need an analysis that takes into account which characteristics differ between the countries.

This is where a network analysis comes in handy, as a tool for exploratory data analysis. As usual in this blog, I have calculated the Manhattan distance pairwise between the countries; and I am displaying this in the next figure using a NeighborNet network. Countries that have similar retirement characteristics are near each other in the network; and the further apart they are in the network then the more different are their characteristics.

The countries are color-coded by geography, which shows that their actual location has little effect on the Retirement Index. However, the European countries are gathered at the bottom-left, without any representative from Asia. The six top-ranked countries are all clustered in the bottom-right of the network.

Next to this top-rank cluster come Portugal and Spain on one hand, and Nicaragua on the other. These three countries have similar Retirement Scores, but they are separated in the network because Nicaragua scores poorly on "Infrastructure" and "Health care", but better than Europe on "Cost of living", "Buying & renting" and "Healthy lifestyle".

Spain does better than Portugal on "Entertainment & amenities"!

All in all, Portugal look like a good bet to me. The Live and Invest Overseas site lists individual places to retire, not just countries, and for the past three years it has recommended the Algarve region in Portugal as the top location.

Importantly, the Portugese also won't tax my pension (Pension i Portugal ger skattefria miljoner), although the Swedish government is not happy about this, of course (Skattefrihet ska stoppas: Portugal till förhandlingsbordet).


  1. I think you shold include some sort of risk value in your network e.g. the risk of being killed by war, wild animals or fire. Love Snail

    1. I am not sure that any of the recommended places are particularly dangerous. However, maybe the death rate is slightly higher because of the number of elderly people who keep moving there? David