Anywhere away from cities and industry. Small villages and towns that are a few hours drive from major cities will be the cheapest places to live.
Property prices and property taxes in small villages will be low and the cost of food if bought at the local markets low too. Buy what is in season. You may have to make a longer journey now and then to a larger town to stock up on certain items and fill your car up with cheaper gas at one of the supermarkets.
Alentejo villages would be a good starting point, or any village in the North of Portugal, just stay away from the larger towns and cities. If you prefer a warmer climate in winter then the Algarve would be suitable but stay away from the coast and look inland, have a look at places like Alcoutim, Almodovar, Salir, Alte, Ourique, Sao Marcos da Serra, Alferce, Monchique, Marmelete, Aljezur, Rogil, all are within striking distance of larger towns and airports but are clear of industry and heavy tourism, check out this site MonchiquePortugal.info
Stretch your Euros
If you are prepared to live sensibly, grow some of your own fruit and veg, have a few chickens, do without too many trappings you can make a pension go a long way. Much depends on where your pension comes from of course. The one thing that can be costly here are cars both new and used. If you have a fairly new and reliable left hand drive to bring with you then consider doing so and get it “matriculated” here. Portugal has to be one of the most affordable countries in Europe in which to live.