One of our favourite underrated places to travel to in Europe is Poland. Having explored nearly all of the European Schengen (World’s largest Visa-free zone) countries, Poland reigns supreme as the best value for money. Even Eastern European countries like Estonia, Latvia, and Lithuania couldn’t beat it. And a big part of the reason is because, even though, Poland is part of the European Union, it hasn’t adopted the Euro. Instead, its currency is the Zloty, which is nearly on parity with the Malaysian ringgit. Not surprising then, that we when visited Poland, we felt like we were getting southeast Asian prices, but with European-level standards of transportation and accommodations.
I also feel a kinship with their culture due to their disdain for communism, and how the fall of communism in Eastern Europe started in Gdansk, led by Lech Wałęsa, whose watermelon-sized balls led him to rebel against the communists and still live to tell the tale. If you’re ever in Gdansk, get thyself to the European Solidarity Centre STAT, which to this day, Wanderer and I still consider the best museum we’ve ever visited in the world.
So, having discovered how little it costs to live in Poland, I always wondered whether it would be possible to retire early there by using geo-arbitrage.
Turns out you absolutely can, because a Polish reader reached out to me and told me they did exactly that.
So without further ado, let’s hear it from PolishFIRE, who just reached FI at the ripe “old” age of 39 with her husband.
You and your spouse will be Financially Independent by 39, but even more unique than that is that you did it while working in Poland! Can you tell us a bit about yourselves and your jobs?
I work in the pharmaceutical industry, in a global company. I was able to reach an international level position, meaning I compete on the global market and can earn a salary that is higher than is typical for Poland. I was able to profit from residing in a comparatively low-cost-of-living country while enjoying globally-competitive compensation – you could call it mastering geoarbitrage! My husband is an American who worked in management at a local manufacturer back in the USA before moving to Poland ten years ago to continue his education at a lower cost than he would have at an American university.
What was your cost of living and where did you live in Poland?
Since we started tracking our expenses, it’s been going down gradually, and it is currently at about $1900 (USD). We live a comfortable life, traveled pre-COVID multiple times a year (on a budget), and eat out regularly. We live in Krakow, Poland. It’s a nice, historical city, and we own a house here with no mortgage (helps to keep our expenses low).
How did you learn about FIRE?
Once we were done paying off the mortgage on our house and started accumulating cash, I got an idea of buying some freedom with the money suddenly leftover at the end of the paycheck. Could I work part-time? Could I take a year or two off? I did not know that what I was looking for was called FIRE. I was Googling and looking for resources for people with my mindset, came across some FIRE blogs and was hooked. I literally read your blog (and a few others) front to back, and I knew this is what we could pull off at some point. I called it “Project 100 Months”. We made it in 46!
Tell us about your investments and why you decided to invest in this way.
We are extremely lucky to be able to profit from two worlds – the US stock market and Polish real estate market, and pick the benefits of each of them. Poland, and Krakow especially, have a very fast growing property market. The properties are renting very well, and their value grows at a steady pace of 15-20% per year. We also know the city well, so we know where to invest. So our main source of passive FIRE income (70% of our full FIRE number) comes from the rentals and flips. We also have invested in the low fee index funds in the USA – this is all the buffer money, the 30% over the FIRE threshold. We also have a pile of cash in USD – that is our buffer for when we don’t want to sell the stocks, and in case the properties are vacant. About 15% of our investments sit in a 401k and we haven’t counted this towards our FIRE number – my husband didn’t invest enough there, because he learned about the backdoor withdrawal options too late (from your book no less). So, we treat this as a pile to grow until we hit the normal withdrawal age – or a backup in case of a disaster later in life.
We tried to copy our Polish rental model in the USA, but the property taxes and rental agency management fees were eating up all the income there in an area with relatively low rent prices. Even without the management fees, I don’t know how it can be a profitable market for those with a mortgage on their property. We decided to sell, luckily at break-even, and move on. We learned our lesson – owning a wooden house across the ocean is not for us. It did not add up when we “mathed this shit up”!
The current split of investments allows us to diversify between currencies, and market circumstances – for instance when COVID hit, we lost one renter, but the Polish currency fell so much that the exchange rate improvement on our USD cash would have covered the loss had we not been working, while Polish real estate increased in value (which we leveraged, selling one which accelerated hitting FIRE by 8 months!). The diversification works!
What are the tax implications of retiring in Poland? Do you have capital gains taxes?
The tax structure is convenient for the wealthy unemployed. Property tax for each of our rentals is about $30 per year (less than 1 month’s electric bill!). Income tax on the rental income is 8.5%! Meanwhile capital gains is 19%. There is no property capital gains in terms of a flip if 5 years have passed since the purchase, OR if you put the money from the sale towards another residential property within 3 years.
In comparison, my current marginal tax rate for my salaried job is 32%, with low to no options for tax deductibles, such as 401k.
So this is another reason why property investment made sense to us!
What do you or your spouse plan to do after you quit your job(s)?
My husband has been enjoying the semi-retired life for some time, accepting occasional project-based jobs in Poland (usually related to English language writing), while managing our properties and learning more languages (we took a semester of Swedish during the lockdown, and now he’s doing German). He works out more often than before, does some minor renovations around the house, and generally fiddles with random hobbies.
I haven’t quit yet. Hitting FIRE made me realize I can actually make my biggest dream come true if I keep at it just a while longer – that is, living in the South of France. And because FIRE gave me the guts to go for the impossible (while worrying less about the consequences of changing jobs), I was able to land an amazing promotion in May 2021, and I love it so much that I might keep going for a while longer to make my dream come true. So my first 45 months of FIRE will be busy still earning for that dream home before I quit. We considered using my current employer to relocate us to France for a year so that we can test drive that lifestyle, at their expense, and see if the dream is everything I hoped for. What FIRE has done for us is open up the option to pursue whatever new ideas come to us while giving us the comfort of having all the basic needs covered. The options at that point suddenly seem limitless! And since we got to FIRE in 46 months instead of 100, I can potentially have FIRE and the South of France in the same timeframe. Not bad!
What does your family think about your retirement plans?
My mom hit her retirement age last year and keeps going because she loves her job. So she can’t imagine why we would retire early. She keeps asking my husband if he likes being “unemployed.” My dad retired early from his corporate life in his late 50s, but still can’t quite understand us walking away from our careers at 40.
My husband’s family is surprised, but they are happy for us. Some of them quizzed us on plan A and B and C, and they couldn’t find any flaw in it, so I assume they are OK with it…
We have sold my husband’s brother on the idea of FIRE too – and back in the USA he is now set with his own targets, a big fat investment plans and he’s already helping other family members set up their ROTH’s and 401k’s. He is in his mid-20’s so I’m pretty sure he will hit his FIRE number before our age, if he is really into it.
We’ve become FIRE evangelists in a sense, with many of our friends are learning about it from us and slowly coming around. We keep lending them your book and then sitting down with them to work out the details specific to the Polish market.
Will you continue to live in Poland after reaching FI? Why or why not?
Our FIRE number is really not enough for a comfortable life outside of Poland, unless we were to sell our main house (we’re not ruling it out). We may decide to move – there are a lot of things we’re considering, keeping the ageing process in mind – mainly the subjects of healthcare (which really sucks in Poland with private options ending when you hit 70), elderly care (which does not exist unless you pay big money for it), climate change, and ongoing political dramas. The last two are completely out of our control, and they really affect a lot of countries similarly – so maybe we are just really risk averse? And for us, very old age is like 30 years from now, so who knows what the world will be like then?
If my dream of living in the South of France works out, we’ll move. Perhaps permanently, perhaps for a while, but when that quietly-growing 401k kicks-in maybe it will open up some more options.
Are people in Poland pro-home ownership or pro-renting? Why?
In one sense, people in Poland tend to favour owning their properties. Their home is their castle, and renting is considered “throwing away money”. With low property taxes and increasing property prices, it’s a logical investment, so many people even buy an apartment for their child’s duration of university studies. Selling it 5 years later, they will earn more than they bought it for, essentially providing rent free living for 5 years of studies. Notably, 60% of all property purchases are done using cash. Of course, many people earn pretty low salaries in comparison with the booming real estate prices, so while they may inherit an older apartment or own something far from the big city, there’s still a large group of renters.
Rentals work best in big cities, as starter homes for singles or young couples, this is why our strategy has always been to appeal to hip, young professionals with studios or small 1-bedroom units – a.k.a. the smallest living unit for when you’re tired of subletting a room. Generally, as soon as a couple decides to get married or have kids, they are looking to buy.
What do people in Poland think about investing in the stock market?
Generally – it’s not that popular. It’s considered gambling. Our stock market is really full of institutional players, such as retirement funds, and very few individuals actually invest there. Polish people would much rather invest in gold (physical gold pieces, like coins), and property, before they invest in stocks.
Recently more and more banks and institutions offer access to international ETFs, making it possible to invest in US/UK markets, but it’s still not that popular. I honestly feel the same, so we only have a token amount invested in the Polish stock market.
What advice do you have for others who live in Poland and want to become financially independent?
Same as everywhere – grow your income, track your expenses, cut your spending – don’t buy crap and just invest whatever is leftover. Be aggressive, have defined goals and regularly review your progress.
More importantly, a piece of advice to any Americans (and Canadians) in their young age – university is free for EU citizens and also costs close to nothing for non-EU citizens, limiting the expense of education mainly to room and board. There are many English language degrees you can earn in Poland, including medicine which is a US-board certified degree at a fraction of the cost of an American university.
My husband earned his 2-year Master’s degree at a top rated Polish university (taught by American and British professors, no less) and paid $5000 for it. Skip your student loans and hack your way through this period in your life.
Also, there are many entry-level corporate jobs in Poland (notably Krakow is an epicentre of this market), with literally 500 of the Fortune 500 companies here, where you can get skills, credentials and that CV entry with a brand logo, together with your international experience that can help you stand out if you later want to go back to your home country to further your corporate career.
We have a number of friends from the US who came here, finished their degrees, avoided the student loans (and stayed!) and are now trying to convince their friends and younger siblings to do the same. Not needing those massive student loans can dramatically accelerate your path towards FIRE!
Wow, that’s really eye-opening to know, PolishFIRE! In fact, now that you mention the low cost of a college education for even non-EU citizens, I remember this American tour guide from Florida that we met in Hamburg in Germany. Instead of paying over $70,000 for his hospitality degree in the States, he decided to go abroad to Germany, and as a result, earned the same degree for only €7000. Now, he’s fluent in German, makes a good side income from his tourist gigs, got multiple job offers, and never wants to go back to the States again.
Thanks for your time and for sharing your story with us, PolishFIRE!
What you guys think? Would you ever study in Europe to save on tuition? How about doing real-estate investing in another country?
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