Even if retirement seems a while away, there’s no harm in planning ahead! When you stop working, you’ll need money for daily expenses – and, in all likelihood, increasing healthcare costs. However, without a steady retirement income to rely on, your savings will eventually run. With pension contributions from employers often not being a viable option for expats on account of frequent relocation, we asked Andrew Talbot of Avrio Wealth, to discuss a handful of avenues of income to consider.
Gathering your retirement fund
An increasingly popular method to build money for retirement is to create a pot from various sources; this reduces the risk of the “stream running dry”, as these alternative sources can balance things out. Here are five financial assets that might help you produce your retirement income. (Keep in mind that the location of your retirement is an important factor, and you’ll need to take into account currency, local taxes and duration of stay.)
#1 Part-time work or consultancy
You may still be able to continue to work for your current employer on a part-time basis or venture into directorships or consultancy work. Many retirees are ready to end their full-time career, but are still interested in part-time work; this can provide a steady stream of income. It may be completely unrelated to what you used to do; or, if you loved your past job, you could consider taking on part-time consulting opportunities. This can also be in different countries (note the different currencies, though).
#2 Social Security or state pensions
Depending on your country’s retirement system, you may be entitled to a government pension or social security payments. This can generally be received if you contributed, worked for a number of years in the country or pay taxes there. The income tends to be constant, with very modest increases tied to inflation, and will only be in one currency.
#3 Pension Income
You may have a pension from a former employer or your personal pension plan – you may even have a few. These tend to be complex in their structure, but provide an income at a set retirement age. Some even pay a lump sum at the beginning. Considering that the currency is likely to be the country of the employer, tax may be taken off the payment, depending on which country it is.
#4 Rental Income
If you have a second property or a large property portfolio, you’ll benefit from this. You may decide to convert cash or investments into a rental property at retirement to provide you with extra income. The property will have running costs, but there typically won’t be any finance or mortgage costs as this has usually been paid off before retirement. Property is becoming an increasingly highly taxed asset so there may be future taxes to consider. The currency is also in the country that the property is in. However, if you find trouble getting tenants, you may run some losses or not have any earnings.
#5 Investment Income
This can be derived from a portfolio of shares or fixed interest bonds. You may also consider selling your investment holdings in your portfolio each year. The holdings can be in different currencies to reflect your location choice and can be tax efficient depending on the structure.
Handy planning tip:
Start by assessing the figure you want or think you’ll need during your first year of retirement. Then proportion this amount into the different streams (as seen below).
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