Most people want to retire on their own terms. For some of you, this will mean staying on in Singapore or another country in the region – for lifestyle reasons, for example – rather than returning to your home country. But careful financial planning is required when it comes to retirement for expats. Here, ANDREW TALBOT of Avrio Wealth, provides tips on building your nest egg while abroad.
As an expat, you may be subject to uncertainty in your work: for example, the need to move country at a moment’s notice. Also, many overseas employers don’t offer the conventional pension schemes that you’d normally receive in your home country – and you may not be eligible for a local retirement fund. You also need to look at how you’re going to build your retirement income if you can’t continue to pay into your pension back home.
There’s a great saying: ‘The best time to plant a tree is 20 years ago. The second best time is today.’ In short, the earlier you start, the less onerous saving for your retirement is likely to be. You may also be able to afford to take greater risk with investments the further away you are from retirement, as temporary shortfalls caused by fluctuations in the market can be smoothed out over time.
Key things to consider
When thinking about saving and investing for retirement, it’s important to consider where you plan to retire to, along with how income from your retirement savings will be taxed in retirement. Look into the cost of living in your new country and tax implications in both your home country and adoptive country. You might be in the situation where you have moved to various countries throughout your working life, holding retirement savings in each.
So, when you’re planning for retirement, there are some key issues to keep in mind:
- Where do you want to live when you retire? If you’re thinking of retiring abroad, it’s worth checking how the cost of living compares with other countries.
- When do you want to retire? Determine the time you want to move into retirement, whether it’s earlier in your career, at age 65, or later.
- Are there costs that you may not have considered? Your children may have moved away, but they may also live in different parts of the world. Travelling to see them will be a big expense. The cost of health care is likely to be higher in retirement, too.
While retirement for expats often means returning home, some have enjoyed the kind of experiences of life abroad that convince them to remain overseas. This could be either in the country in which they’ve been residing, or a different country that might offer an improved quality of life, a better climate or allow them to be closer to family.
Many people are now looking for greater flexibility in retirement, which could include more extensive travelling, or maintaining homes in different countries. Or, it could involve more adventurous activities that they were unable to pursue when working, due to time constraints or having young children in tow.
How should I create a retirement fund as an expat?
One strategy is to create multiple streams of income. Income in your retirement could come from several different sources rather than relying on, say, a conventional pension.
Once you’ve calculated how much you’ll need, where you are likely to be and what expenses there are going to be, the creation of your retirement fund will come from different sources of income accumulated. These may include:
- A conventional occupational pension scheme
- A buy-to-let property portfolio
- Cash in the bank
- A share portfolio
- A social security or government pension
- Consultancy work or part-time work in retirement
- A small business
Be aware of factors that will affect this income. For example, tax: every jurisdiction will have a different tax rate and some may tax you on worldwide income. If you’re trying to achieve the fabled ‘tax nomad’ status, then you need to spend time in at least three counties. Tax may be higher on certain assets than others – for instance, property and a share portfolio.
- Goals: Set the amount you will need in retirement
- Consider your timescale and risks for investment; property holdings may be longer than a share portfolio
- Think of currency and tax in the countries you’re going to reside in
- Select your investment vehicle
- Construct your portfolio based on you, your risk and your timescale
- Monitor and adjust your plans as they change
Set up an online consultation to see if Avrio may work out a long-term solution for you.
This material is intended for educational and informational purposes only. It is not intended to provide specific advice or recommendations for any individual. Additionally, you should consult with your Financial Advisor, Tax Advisor, or Attorney on your specific situation. The views expressed in the material are that of the author and do not necessarily reflect those of any market, regulatory body, State or Federal Agency, or Association. All efforts have been made to report or share true and accurate information. However, the information may become materially outdated or otherwise rendered incorrect due to subsequent new research or other changes, without notice. The author nor the firm are able to always verify the content from third party sources. For additional information about the firm, please visit the MAS Website at https://www.mas.gov.sg/ and the SEC Website at www.adviserinfo.sec.gov. For a copy of the firm’s ADV Part 2 Brochure, please contact us at firstname.lastname@example.org
Read on for more financial advice for expats.