How to Plan Your Retirement as an Expat

How to Plan Your Retirement as an Expat

Saving for retirement is hardly on top of one’s financial priorities in their 20s. However, getting started on pension planning early guarantees a comfortable retirement. When you reside in one country all your life, retirement planning is straightforward and much more simple than expat retirement planning.  You pay taxes, which means you are entitled to a government pension in your golden years. You can also contribute to private pension schemes, and if you are lucky, your employer may chip in and contribute to your pension. Buying a house and completing the mortgage payments can also be part of your retirement savings.

When you are an expat, most of the above options fly out the window. Expat retirement planning can be complex as chances are you will be employed without a pension. If you work in a foreign country, you may not stay long enough to qualify for their equivalent pension benefits. Besides, most expats avoid local property purchases, which means they will prefer annual leases instead of buying a house.

Despite the numerous rewards of being an expat, you need to be conscious about your savings strategy. Here are insights to help you plan for your retirement when working in a foreign country:

Key Considerations to Keep in Mind

Most countries, except the GCC have a social security scheme for their citizens. However, to access the savings you contributed to the scheme, you need to reside in the country. Therefore, before laying down your pension plan, figure out if your home country has a social security deal with your expat country. If there is an arrangement, you can easily transfer your pension contributions. Without an agreement between the two countries, your retirement gets more complicated. Some countries may allow the transfer of pension funds.

Expats can also enjoy opulent packages in foreign countries. It could be a higher salary, allowances or through annual bonuses. While that could help boost your savings, you should not get excited until you understand how to access the money in your home country tax efficiently.

Know When You Will Retire

You cannot read a map without a destination in mind. Therefore, you need to figure out what you want to achieve and have a time limit for better planning. For instance, what is your retirement age? Do you plan to retire in your home country or abroad?

Whether you recently got a job in a foreign country and you are not yet ready to settle down, you still need to make plans for your future. Knowing what you will be doing for the next 10 or 20 years ensures that you take advantage of your current situation. You will make wise investments and save more money if you plan to retire early. For instance, if you plan to retire abroad, work on your citizenship first, and consider the cost of living to ensure you put away enough cash. If you go back to your home country, you need to think of tax-efficient ways to transfer your retirement savings.

The most flexible way to save as an expat is using international/offshore investment funds.

Start Saving Early

It will be easy to achieve your retirement goals when you start early. Besides, when you are young, you can afford to take more risk, and your money will have more time to recover in case of a market downturn. Therefore, the sooner you start saving, the larger your retirement fund. For example, if you have a pension plan in your 20s and plan to retire at 65 years, your retirement will be secure, and you do not have to contribute as much. With a contribution of only $400 a month, you can still expect a retirement pot of over $800,000.

Consolidate All Your Pension Pots

Many expats get depressed during retirement because they cannot access their home based pension savings. It is vital to monitor your pension pots and if possible, consolidate them.

Expats move around a lot; the short contracts allow them to work a few years in a country before relocating. Therefore, they end up contributing to a couple systems throughout their expat life. Unfortunately, most of the contributions are short term, which means the pension plans do not always materialise. Since the money may never bear fruits, many expats lose track of it after some time. Research shows that a third of expats misplace their retirement savings in foreign countries.

Most expats give up on their retirement pots because they have no clue how to access the funds. If you lost track of a pension pot, a financial adviser with cross-border knowledge could help you to get your money back. Expat retirement planning covers all of this and more!

Nowadays, you can consolidate your pensions using an offshore pension plan. The idea is to have your portable pension virtually following you wherever you go. That means you can contribute to the offshore plan from any country and access your funds from anywhere.

Protect Your Wealth

As an expat, you enjoy living life to the fullest, but you need a buffer if other people depend on you. Taking life insurance is often a sensible idea. However, finding the right policy that will protect you in any country you move to is daunting. Therefore, you need a global protection plan for your life insurances. Your will should follow the local laws of the country you reside to ensure your beneficiaries can access your estate.

Be Mindful of Currency Fluctuation

Currency fluctuations have an impact on the amount of money available for retirement. Your income from state pension will vary depending on the currency. If you plan to retire abroad, you can use a currency broker to limit volatility by fixing the exchange rate you receive. You can also ensure your pension is paid in the local currency of the foreign country.

As an expat, retirement planning is essential and needs to be thought-through with the assistance of an expert.

For more insights, further advice or guidance, you can get in touch HERE.

Blog published by Mike Coady.