Expat Retirement Planning
Securing a comfortable retirement means making sound choices while you are planning for retirement and when you reach pension age.
Income in retirement
Even if retirement is many years ahead, having an idea of how much income you will need in later life will help you to set aside enough savings today.
How much income you will need depends on your lifestyle choices and varies from person to person.
Cash flow forecasting is the key to calculating how much you require in retirement. Using a forecasting model, this amount can be worked out.
Saving for retirement
Retirement can easily last 30 years or more. Saving enough to fund a long period after work is costly. There are many different ways to save for retirement. For example, you could use savings accounts or invest in a second home or buy-to-let property; however, saving through a pension scheme has some advantages.
Joining a pension scheme through work makes sense if your employer will help to meet the cost by making contributions to the scheme on your behalf.
If you are topping up a work scheme, you might save through a personal pension plan. This is also an option if you are self-employed—in which case, you must bear the whole cost yourself of saving for retirement
Choosing your pension age
If you want to retire earlier, you may have to manage for a while without the company or state pension paying. On top of that, starting your pension early makes it more expensive because the pension has less time to build up and longer to be paid out. So you will normally have to save more each month to provide each $10,000 a year of pension that you want.
Retirement does not have to be a cliff-edge where you are working one day and finished with work the next.
If you plan to carry on working into later life, you will not necessarily need all your pensions or other savings in one go. With phased retirement, you divide your pension savings into chunks and can start drawing a pension from each chunk at a different time. Some other types of savings and investments also give you this flexibility.
As you cut back on work, you could increase the amount you draw from your pension scheme or other savings and investments so that your overall income is maintained.
A phased approach to retirement also gives you a way of planning to deal with the effect of inflation. You can start retirement on a lower amount of income and gradually increase it later to compensate for rising prices.