Geoarbitrage: The Ultimate Guide & Resources

Geoarbitrage is best defined as moving to a lower-cost-of-living area to enjoy a better lifestyle with the same income level.

This can be a great life hack in pursuing Financial Independence/Retire Early (FIRE).

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


What Is Geoarbitrage?

The definition of Geoarbitrage is taking advantage of the difference in costs between two geographic locations while having the same kind of lifestyle.

This strategy takes advantage of the difference between living costs 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, which 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 with an ideal lifestyle and where his money has more purchasing power.  His strategies might seem extreme, but geoarbitrage doesn't always involve moving abroad.

I would encourage you to consider the strategy on your journey toward financial independence.

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


Domestic vs International Geoarbitrage

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


International Geoarbitrage

International Geoarbitrage is when you take advantage of the difference in living costs between different countries.

So if someone worked their entire career in the United States and then retired in Vietnam, they would have taken advantage of international geoarbitrage.

Several factors go into choosing the correct country, including:

  • Healthcare Costs
  • Quality Of Life
  • Cost Of Living
  • Proximity To Family/Friends

Considering all of these factors is a lot of research and number crunching.

Luckily, we can leverage the work done by Business Insider and their team.

They comprised a top 10 list, having factored in many of the variables above.

Top 10 Countries To Retire In According To Expats


Domestic Geoarbitrage

Domestic Geoarbitrage is when you take advantage of the difference in living costs 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 of a lifestyle change since the range of lifestyles is not as extreme within one country.

I favor domestic geoarbitrage because I am already familiar with healthcare, taxes, and the way of life here in the states.

Again, we can leverage Business Insider's hard work in crunching the numbers (a 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 Florida, which has an incredible 6 out of 17 cities on the list, most likely because there is no state tax.  So one of the easiest ways to identify if a location is a candidate for geoarbitrage is to look at local and state taxes.

That single factor can significantly impact 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 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 must 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 living 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 square footage and lower-cost housing accommodations.

Another benefit is the differences in country or state laws to favor your lifestyle and wallet.

If you choose to retire in 1 of the 9 states mentioned above, you will enjoy NO state tax.

This can save you about 10% to 15% of your nest egg.

Retiring with $1 million translates into 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 are lower, the prices of goods and services also decrease.  Therefore, goods and services like food, gas, clothing, haircuts, and education are lower.

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

Remote work 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.

This is an opportunity for geo arbitrage by benefiting from the disconnect between salary and cost of living.  Compensation 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 housing, gas, food, and services costs.

If your job allows you to work from home, you might be able to benefit from geoarbitrage.

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 living costs.  If international geoarbitrage is too extreme, you can 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 on the “what makes you happy” list.  Therefore it's something to consider strongly before relocating further away.

You will most likely want to be close to family and friends during 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 considering moving abroad.

For some, moving halfway around the world with their spouse might be the right choice.  For others, that won't work.

Living in an unfamiliar environment might also be a downside, especially if you still have children you want to bring up in similar environments to your childhood.

Make sure to visit before relocating and confirm it's where 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 downtowns.

You might need a car for reliable transportation.  Make sure to factor this into your “is it worth it” calculation.

JL Collins FIRE Calculator

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Geoarbitrage Calculator

Now that you know the pros and cons of geoarbitrage, you can use a geoarbitrage calculator to determine if it's worth it.

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 gives suggestions for the age, location, and net worth you can retire.  The Nomad List is best for someone open-minded about relocating anywhere.

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 lists other options.  This calculator can be a great starting point if you are curious about international geoarbitrage.

If 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 relocation planning 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 geoarbitrage, I recommend playing with both calculators to see which works best.

Like everything else, if you plan for geoarbitrage well, it can be a fantastic life hack!