The average American worker saves less than 5% other their income each year after taxes, housing, food, and other costs. At this savings rate it will take an individual making $100k per year over 65 years to save enough money to retire. That same individual working as an expat in KSA could easily save over 85% of their income each year. One of the biggest reasons many people decide to move overseas to become an Expat, are the incredible financial benefits that can be gained from working overseas. Most people understand in general that working abroad can be financially beneficial, but finding specific details on exactly how much is still a challenge. Therefore, I created the infographic and Top 10 list below to detail exactly how much financial benefit an average employee earning $100,000 per year could gain from becoming an Expat in Saudi Arabia.
There is no Income Tax in Saudi Arabia. Therefore, via the foreign earned income exclusion, qualifying US Expats working in KSA can earn up to $105,900 in 2019 (with future years adjusted higher for inflation) completely tax free. For the example in our infographic above this would result in an addition $30,000 in savings per year. For a dual income family with both individuals working abroad the benefit could be potentially doubled. Any additional income above the $105,900 limit is taxed at standard US federal tax rates.
Most Expat positions in KSA (and many other countries as well) provide house assistance as part of the job contract and many provide completely free housing as part of western style residential gated communities (a.k.a. Residential Compounds). To get a better feel for what residential housing is like in the compounds you can check out our post on Compound Life which includes pictures of the housing options and furnishings within the KAUST community.
Food costs in KSA, as well as in many other countries where Expat positions are commonly available, are typically much lower than those in the US. You might not always be able to find exactly what you are looking for in the store, but generally we have found about 95+% of what we get in the US we can find here. If you’re interested to learn more, feel free to check out the following posts on some of our culinary adventures grocery shopping, cooking, and eating out in Saudi Arabia.
Similar to housing most Expat contracts contain educational allowance or provide free schooling for employee’s dependent children. In most cases these are very competitive, well-funded, and internationally accredited western style schools. For more information on our own experiences with the KAUST School click here.
- Car/Auto Costs
Certain Expat positions provide cars or in other cases paid drivers or buses to transport employees back and forth between work and home. For those more adventurous Expats that like the freedom of owning their own car and exploring the country on their own schedule, then buying a car is also an option. Car ownership in KSA is still typically cheaper than in the US as labor costs for repairs and maintenance, insurance premiums, and fuel prices are all still much lower than in the US.
- Medical Costs
Another huge advantage of working as an Expat is low and typically free medical care. For those from the US your first experience going to the doctor, dentist, or pharmacy will be very strange but in the best way. In the US “good” insurance coverage means either a split month cost shared with your company, followed by co-pays at every visit, and large yearly deductibles that need to be covered each year before full benefits kick in. In KSA most employer provided insurance covers all costs, period. No co-pay, no deductibles, no monthly plan payment. I still remember my first yearly medical check-up in KSA. I arrived at the Doctor’s office and checked in and stood for a second waiting to pull out the credit card for the copay. Then nurse looked at me funny for a second and then said just have a seat and the doctor will see you shortly. After the doctor visit, I was given a script for my medication refill. Again, I signed nothing and payed nothing. I simply walked out of the doctor’s office and over to pharmacy located in the clinic. I gave the pharmacist the prescription from the doctor and was directly handed 3 boxes (a 3-month supply) of brand name (not generic!) medication. No credit card needed, no 5 minutes of the pharmacist doing complex math to discern my specific copay, just a bag of medication and a smile. I still remember walking out of clinic have signed nothing and payed nothing feeling like I needed to start running before some nurse started chasing after me with a bill to sign. To this day, I still feel like I am getting away with something, every time I go to the clinic and I still hustle out the door just in case they change their mind.
- Utilities and Other House Hold Expenses
Since in most Expat positions in KSA you do not own your house (they are provided as part of the compound) you are also generally not responsible for costs associated with maintaining the house as well. Different compounds and Expat contracts hand this differently, but in most cases all the utilities (Electric, Gas, Water, etc) are generally provided free of charge, and this is great because the houses are typically large and have massive AC units that run 24/7 to keep the houses comfortable in the hot summer. Most house come fully furnished and move in ready with just the need to bring your own clothes. But maybe the best part is that since you don’t own the house (it is provided as part of your contract) any repairs or general issues are completely covered. Since the compounds are large and the management companies want to keep the houses in good repair, they almost all have large 24/7 maintenance crews that typically respond to requests within a few hours to 1 day at most depending on the level of urgency of the request. In the US if something breaks, even small things like a clogged drain, you know that you are on the hook at least for a ~$50-100 service call charge plus the part fee plus labor once the repair person completes the job. In most compounds in KSA as long as it is not purposeful or negligent damage on your part it is completely covered. The shower clogs or drain slows call the number and its snaked out and draining perfectly a few hours later with no charge. A floor tile is cracked call the number and its repaired with a perfectly matching tile the next day no charge. Garage door isn’t opening smoothly call the number, no charge. You see some ants by the back door, call the number and pest control comes and sets traps and sprays, no ants and no charge. I think you get the picture. This one especially makes our family and friends back home in the states the most jealous and our parents are always joking that we call the number and give the maintenance team their address back home.
Basic TV packages and high-speed internet are typically provided as part of your housing package in the kingdom free of charge. However, you will probably want to pay a small fee (typically ~$100/year) for a good VPN service. This is important because the internet connection that comes with your house falls under the strict laws and regulations of the Kingdom and many common sites, including even YouTube, HBO, and other US based stream tv sites will be blocked. With a VPN service you can encrypt your connection to the internet so that content is not blocked and you can stream your favorite shows and movies from back home. We us an Apple TV box and have subscriptions to Hulu, Netflix, and HBO. This gets us 90+% of the shows available back in the US and only costs ~$28 month total for all three services.
This might seem like a contradiction to have as a benefit since 401Ks don’t really exist in the kingdom, but for some cases this might be a benefit as well. Of course, if you work at a company in the US that provides a 401K match then you would be giving up free money not taking advantage of your employers matching incentive, which typically does not make good financial sense. However, in cases where a company does not match 401K contributions then you might be better off putting that money into other investment vehicles. When working in KSA you won’t have this option so you will have the opportunity to invest your extra savings in whatever investment you chose and this might force you to more deeply examine all your investment options and become a more knowledgeable about the Pros and Cons of many different types of investments. This will become even more important as you start to move further down your own path to FIRE.
Last but certainly not least is the amazing savings advantage the you can gain working abroad as an Expat in Saudi Arabia. As you can see in our example above for an individual earning $100,000 per year this would result in a total yearly free cash flow of nearly $85,000 versus ~$5,000 for the same paycheck in the US. This is an incredible 1700% increase in free cash flow, which you can deploy like a flame throw to melt away any remaining student loans or credit card debit. To put this in perspective, the same individual working in the US would need to earn approximately nearly $245k per year to achieve a similar level of free cash flow, assuming they maintained a 6% 401k contribution. Once you have vaporized all your debit, or for those without any debit to start with, you then have the exciting challenge of figuring out what to do with the mounting pile of cash in your bank account. This of course is where the real fun and FIRE journey begins.