Cost of retiring in Spain

TransferWise content team
17.04.17
5 minute read

Spain is the most popular destination of all for British citizens looking for retirement abroad. With large numbers of other expats from Europe and beyond also calling Spain their home, many Spanish regions have bustling expat communities. The southern province of Andalucia is particularly favoured for its beaches and balmy weather, although ancient cultural hubs around cities like Granada and Seville have also proved popular.

If you’re feeling the pull of Spain and want to plan your retirement there, then costs will be a factor. Have a look at this beginner’s guide and start to plan the next chapter of your life in Spain.

What will it cost to retire in Spain

The cost of living in Spain is generally cheaper than the UK or other Northern and Western European countries. However, the large cities of Madrid and Barcelona are known to be expensive.

Most expats living in Spain head for the southern coast of Andalucia, where the weather is reliable, the sea is warm and the golfing is good. As a result, these areas include ‘hotspots’ where costs have been pushed up significantly by both tourists and expats looking for the good life. Although even just stepping slightly off the beaten path in this region brings significantly cheaper accommodation expenses and lowers the overall cost of living.

The amount of money you’ll need to get by in Spain depends of course on how luxurious or basic the lifestyle you wish to lead. It is possible to live frugally on less than €1000 a month. Expenditure for one or two people living a comfortable but not lavish lifestyle can average €1250-€1500 per month. Throw in all the sun you can handle, and you can see why retirement in Spain is such an appealing option.

Everyday costs in Spain

When considering costs in Spain it is important to recognise the impact the exchange rate will have on your cash. Rates of exchange - particularly when changing Sterling and US dollars to Euros - have fluctuated significantly over the last couple of years. If you earn your income or pension in a different currency and make regular transfers to Euro, then you’ll need to find the best deals possible. Use an online currency converter to track the mid-market rate - this will help you to understand the true value of your money. TransferWise can be a great service for your transfers as they provide you with the real mid market rate and use local transfers to charge you the lowest fee possible.

When budgeting for everyday items, there is a wealth of information available to help you plan. Popular blog, EastofMalaga.net, publishes annual cost of living details, specific to the region of Andalucia. This is the most popular destination by far for expat retirees, making this a particularly useful local resource. On a broader basis, the data site Numbeo.com provides average cost of living data which can give valuable insight into the prices of everyday essentials, entertainment and travel in different locations.

Using these resources we can calculate an example average monthly cost of living for a couple retiring to Spain.

Average price in Spain (GBP)*

Accommodation (2 bed, non tourist area) £388
Utilities (including Internet) £132
Groceries £300
Dining out and entertainment (two people, 4 times a week) £500
Healthcare (dependant on circumstances) £52
Total monthly basic costs £1372

Details from EastofMalaga.net, Numbeo.com and SpainMadeSimple.com as of June 2016

What visa do I need to retire in Spain?

EU citizens do not need a visa to live in Spain, but should register as residents to receive ID documentation. To do this you must present yourself in person at the Interior Ministry offices in your province or at a designated police station.

You may be asked to prove your income and access to health service through either a private insurance policy or registration for public healthcare. Details in Spanish can be found on the Spanish Ministry for Work and Social Security website or in English at the UK Government site.

If you are from a non-EU country, then you’ll need to apply for a residency permit. This should be started in your home country, before registering fully once you arrive in Spain. Requirements vary from country to country butt you can expect to be asked to prove your income and assets to make sure you can support yourself in Spain.

Once you are established in your new home, you should also register on the padrón, which is the resident list held by town halls for planning purposes. By registering you can access reductions on goods and services, discounted taxes and social benefits.

Budgeting for retirement - Health Insurance

Health care in Spain is well developed and free at the point of access to both local and foreign users. However, if you are not a Spanish citizen or resident there may be some limitations to the services you can get without paying. Furthermore, the public system can be subject to delays so many expats choosing to retire in Spain prefer to take private health insurance.

If you wish to use the local Public Health Service you will need to complete some paperwork. In the UK, you can complete form S1, which is available from the International Pension Centre. This can be used to obtain a medical card on arrival in Spain. Different EU countries have their own processes, so it’s important to research these before you leave.

Budgeting for retirement - Tax

If you are a tax resident in Spain (because you live there for more than half of the year, or have your main financial interests there), then you’ll need to pay Spanish income taxes. In most cases, however, you are able to effectively offset the taxes in your home country, so you do not pay twice.

You must file a tax return in Spain if you earn over €22000 a year (including any pension), or are receiving rent or capital gains from other investments. Further details can be found in this helpful article about Spanish taxes - but be prepared to ask for professional advice to make sure you are compliant.

From living the highlife in a beachfront property to golfing at peaceful hideaways in the hills, you’ll find the retirement lifestyle you’re looking for in Spain. With the relatively low cost of living, you could even throw in a few little luxuries for less than you might think. Do your research using our guide and further online sources so that you can really make your retirement funds work for you.

TransferWise is the smart, new way to send money abroad.

Find out more