How to build a retirement fund as an expat

As an expat you are likely to be subject to much uncertainty, you may need to move country at a moments notice. Many overseas employers will not offer the conventional pension schemes that you would receive in your home country. You may not be eligible for the local retirement fund as well. 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.

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.

There is a great saying. ‘The best time to plant a tree is 20 years ago. The second best time is today’

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.

When you're planning for retirement, there are some key issues you need to consider:

  • 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? – The day you want to move into retirement whether it is early or later.
  • Costs that you may not considered? – Your children may have moved out 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

While some expats choose to return home in retirement, their experiences of life abroad may 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 are now looking for flexibility in retirement, which could include more extensive travelling and homes in different countries. It could involve more adventurous activities that they were unable to pursue when working, due to time constraints or having young children in tow. So how does an expat create a retirement fund? Create Multiple streams of income.

Once you have calculated how much you need, where you are likely to be and what expenses there are going to be. The creation of the retirement fund will come from different sources of income accumulated such as:

• Conventional occupational pension scheme • Buy to let property portfolio • Cash in the bank • Share portfolio • Social security or government pension • Consultancy work or part-time work in retirement • Small business

Case Study

Mr. and Mrs. Brown live in Singapore and wish to retire to Malaysia. They have calculated that they need 50,000 GBP per year. Their daughter is in Australia after remaining there after university and their son is in Italy working. They expect to travel to both countries to see them. They still need to maintain their health insurance and the cost of flights each year.

They receive 8,000 GBP each from the UK basic state pensions and Mr Brown receives 12,000 GBP from an occupational pension scheme. They have a buy to let property in the UK that provides them with 12,000 GBP per year. They have a portfolio of 500,000 GBP they need to generate 10,000 from this, even though it could produce a lot more.