When’s the ideal time to start thinking about retirement?
Thinking about retirement already? Chances are, if you’re reading this, you’re an expatriate in a low-tax jurisdiction. Lower taxes mean more income that you can use to build a secure financial future. So, when should you start thinking about retirement? When should you start saving/investing for retirement? The answer is – as early as possible. Let’s consider the question another way. How many years of post-work life will you enjoy? Perhaps 25, maybe 35. You’ll need your retirement plan to fund these – which means starting early and letting compound growth do the heavy lifting for you.
Start thinking about retirement as soon as you can
If you’re an expat in a low-tax environment, you’ve got many benefits going for you. But on the flip side, the government isn’t going to assume responsibility for setting you up with a pension. You’ll have to do that yourself, and that involves a bit of planning.
When’s the ideal time to start thinking about retirement? Start as soon as you move abroad. Yes, life will be hectic and expensive with relocation costs, finding a place to live and creating a social circle. But, you can immediately check whether you still qualify for a pension back home, and how you can keep that topped up. It might not fund your entire retirement but it’s a very valuable asset to have.
The real planning starts soon after – maybe when the first year is done and dusted. Ideally, you’ve figured out your new home and got a handle on your finances. You know what’s coming in and going out every month, and your new job has stabilized. Now’s the time to start thinking about life after your expat adventure. So do a formal budget and stick to it. Pay your savings account first, and then spend from what’s left. The earlier you start saving for retirement, the harder your money works to grow over time.
As you settle further into your expat adventure – say three or five years in – you might have a clearer idea of your goals. But new developments in life – meeting someone, getting married, having kids – will all play a role in your exciting adventure. Your financial planning will need to be re-calibrated to ensure you keep an eye on the long game. Like I said, investing for retirement and planning for that important chapter needs to be kept under “active planning” at all times.
If you’re ten years into your expat life, chances are, you’ve been thinking about retirement for a while and you’ve already got a private retirement plan in operation. If you haven’t – start now, please. The years creep up, and you need to get started as soon as possible. Think about all the wonderful years you’ll live after retirement age. Your retirement plan will need to be there for you.
And if you’re already well on your way, now’s the time to be looking at optimising your portfolio. Think about where you’re going to retire, and move to currencies you’ll be spending later. You also want to investigate tax-favourable ways of structuring your investments so that you don’t lose out when accessing your hard-earned funds. You can save thousands, if not hundreds of thousands, just by seeking expert help to get your portfolio structured the right way. Investing for retirement isn’t the only part you need to think about!
As you get to the end of your wonderful expat adventure, with great memories and a life abroad well-lived, it’s still not too late for meaningful adjustments to your portfolio. This isn’t the time to play fast and loose because a market blip might mean you don’t have time to recover. Ask your adviser to play safe, and diversify. It’s also the time to re-base and restructure assets so you can access them easily, wherever you’re going, without losing out to capital gains taxes. This is particularly relevant if your domicile status is still within the UK, for instance – because that opens you up to tax liabilities. Do a last check, work with your adviser to get your exit plan in order, and bon voyage.
One last thing – make sure the advisers you’re working with offer a wide range of coverage and support. A continuation of support is a great way of hitting the ground running for the next phase of your life. Investing for retirement doesn’t stop when you reach your retirement home.
About Mike Coady
Mike Coady is an expat expert based in Dubai and is on hand to help with all of the above and more.
Mike is an award-winning money coach and industry leader in the financial sector.
Qualified to UK Financial Conduct Authority (FCA) standards, a member of the Chartered Insurance Institute, a Founding Fellow of the Institute of Sales Professionals (FF.ISP), and a Fellow of the Institute of Directors (FIoD) and featured as a highly qualified Financial Adviser in Which Financial Adviser.
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Blog published by Mike Coady.