What living longer means for your retirement
A lot of expats financial planning involves planning for retirement, as a comfortable retirement is often people’s number one goal for the future. The ever-increasing advancements in science and medicine mean that retirement is not only comfortable but also long. As we push the limits of how long we live, 100 years is very plausible in today’s world. However, this has an impact on people’s future retirement funds and plans and this is why we always recommend speaking to a financial adviser to put a plan in place for the long term.
As much as it is good news, a larger older population puts a strain on governmental and institutional spending, such as health care. Employers are also put in a situation where they may witness increased expenditure on retirement benefits. In such a scenario, alternative sources of income to cushion your retirement are desirable.
Here are a few things to consider when planning your well-earned retirement:
1. Inflation
Living longer means that you must account for inflation over the years. Your income must keep up with, if not beat, inflation for a long time. Let us take the retirement age as 65 years and a life expectancy of 95 years. Inflation for 30 years can accrue to a sizeable amount required to maintain living standards. While inflation rates are not consistent year-on-year and may even dip, the overall compounded effect can eat away at your savings.
2. Taxation
As the ageing population rises, the government may increase its spending on social benefits by raising taxes. This additional liability might be presently unaccounted for. So factor in higher tax obligations to protect your income and plan for longer years of retirement.
3. Long-lasting savings
As an expat living abroad, there is some security that comes with exchange rate differences. If you are earning in GBP and spending in a weaker currency, there is a lesser burden. However, exchange rates are not constant. Unprecedented global events can affect your savings.
Similarly, investments that are considered safe or minimal risk may not keep up with inflation rates. Even if you earn decent returns on them, there is a chance that they could run out during retirement. A great source of investment to last you well into retirement if you live longer is property. Speak with one of our in-house property investment experts to see what options we currently have.
4. Buffer income
Always aim for more than you estimate that you will need after retirement. If your expenses fall within the estimate, you can always save and invest the rest. If you surpass this amount, your safety net can protect your wealth. To achieve this buffer, you can consider investment options that offer returns for a lifetime. As you balance between making provisions for inflation and outliving your funds, you can create a mixed bag of options that give you high returns.
You must also ensure that your pension plan offers you the best benefits based on your requirements. Some expats consider transferring their pension funds offshore to prevent money leaking out by tax or other levies. There are several options available for expats, our advice would be to weigh the pros and cons of each and always speak to a reputable financial adviser.
Planning
As you plan for your retirement with these points in mind, you may find that you need professional guidance. At Hoxton Capital Management, our financial advisers offer customised services to meet your financial goals and needs.
With the right advice, you can set off on the right track towards retirement.
About Author
