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International Savings and Retirement Planning
Preparing for Life after Work
Particularly those expats who have committed to the lifestyle for the long run and regularly switch countries (habitual expats is a fitting term) will have to put quite some thought into how to manage their wealth in a way that ensures a comfortable retirement without any money woes. After all, not every company plan is transferable, and not every country has social security agreements that allow you to take your contributions with you, or transfer them to your home country. You might also be losing out on tax benefits available in your home country. You might not even have made up your mind on where to retire in the first place. If you are self-employed, a freelancer, or a contractor, retirement considerations gain even more urgency; no other group has as much pressure on them in terms of financial management.
As is always the case with money issues, there is no one-size-fits-all solution. Expats have a variety of possibilities to make sure they are able to maintain financial independence as retirees. Some might opt to stick to the scheme they paid into in their home country (circumstances permitting), others might look into purchasing real estate. There is also an option tailored towards the expat community: international savings plans.
International Savings Plans: Pros and Cons
While international savings plans are often seen as a feasible type of retirement planning for the international crowd, one should keep in mind that they are, in fact, not pension plans. Typically, they are offshore investment plans that come with the usual risks and upsides outlined in our guide on the topic, and a number of specific pros and cons.
Pro:
- You do not need to reach a certain retirement age to access your money.
- You can opt to have the entire sum of your savings paid out at once.
- You can continue to pay regardless of your country of residence, and are flexible in regard to how and when to pay, and in which currency.
- Depending on your country of origin, returns are generally not taxed.
Con:
- The premiums you pay into your savings plan are not tax privileged.
- Minimum premiums, as well as fees, can be rather high.
- As international savings plans are private, investment-based plans, they can be affected by stock market volatility.
If you can see yourself being interested in an international savings plan, whether for retirement provisions or simple savings, it pays off to shop around a little. Chances are that large banks in your home or host country offer plans of interest to you. As with all other accounts, banks might be reluctant or unwilling to open accounts for individuals living in another country – if you can make time for it during the busy period before relocation and have found a suitable plan offered in your country of origin, we strongly recommend talking to your local bank.
Get Professional Advice
As with all investment and savings provisions outlined in this article, it is imperative to talk to a professional about your particular situation and plans before committing to anything and, in the worst case, suffering financial damage. Not everyone benefits from moving their money offshore or is comfortable with the idea of investing, and in many cases, there are more feasible alternatives. Life savings and retirement provisions are complex topics, and the expatriate lifestyle does nothing to alleviate this – planning ahead is key!
Inheritance Planning
While certainly not a topic that any family, be they expats or not, likes to think about, estate planning is of particular importance for the international community. Different nations have different legal frameworks for inheritance; as an expat with possessions, investments, and accounts abroad, your assets and savings might not be passed on to the person you thought they would be, or only with some severe inheritance tax disadvantages. Even if you have a will, you might find that it is not necessarily recognized just anywhere on the globe.
For instance, for US and UK expatriates, a determining factor is which country you are domiciled in. Please note that this is not necessarily your country of residence! However, expats from most EU member states (other than the UK, Ireland, and Denmark) will have fewer legal issues to sort out from 2015 onwards. On August 17, 2015, a new EU reform of succession law comes into effect. For example, EU nationals should then be able to choose whether their succession should be subject to the respective inheritance laws according to their own nationality or their habitual residence. For expats who decided to spend their retirement years abroad (but still within the EU), this could be a considerable help.
There are several ways to take care of the inheritance issue, especially if EU laws don't apply to you. A number of expatriates have made trusts their inheritance arrangement of choice, others opt to have separate arrangements for their possessions in their current country of residence and their home country. However, as there are too many factors involved in the topic of sensible estate planning to make broad general statements on the best way to tackle it, we strongly recommend sorting out your personal situation with an expert on the matter in the country you are domiciled in to make sure you do your part in keeping your family’s financial future safe, even after you are gone.
