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Expert Financial Advice for Expatriates

Pensions

3 Key Financial Benefits of Retirement Abroad

Nov 29th 2016


In retirement many of us imagine we’ll be better off financially speaking. We may no longer have to pay a mortgage, fund our children or pay to commute for example.

In reality, if we stay living in high cost countries such as the UK or the US, our affordability could be silently eroded by retirement inflation.

According to the likes of The Senior Citizens League in the US and This is Money in the UK, retirement inflation is eroding retirees’ incomes dramatically, and it is little understood by those it is affecting most.

Retirement inflation is defined as increases in the real cost of items that weigh heavily on retiree budgets – from insurances to fuel costs, and from recreational pursuits to food for example.
The good news is that if you retire abroad, you may be able to positively benefit your wealth, and offset the effects of retirement inflation.
Here are 3 of the most significant financial benefits you may be able to enjoy if you change country when you start to draw your pension income.

1. Lower Living Costs

The cost of living in the likes of the UK and the US is already high and rising. Yet the cost of living in some of the world’s most stunning locations is significantly lower.
Lower costs for housing, food and fuel can also be enhanced by needing to spend less to heat and light your home if you move to a warmer climate.

Recreation and hobby costs could be eroded to nothing if you move to a location where the weather is conducive for outdoor living, opening up a whole new world of things to do for free such as biking, hiking, swimming in the sea and year-round gardening.

Do country-based research specifically around the cost of living, the quality of life and safety, and you will come up with a very long list of options for your retirement abroad.

2. Lower Taxation

Countries with high debt burdens need to charge their citizens a lot of tax. Some of these countries like the US and the UK also choose to charge high rates of tax on retirement income.

This is grossly unfair when you consider how hard we all have to work in order to save into our pension pots in the first place.

The good news is there are a number of countries to choose from that charge lower rates of tax, flat tax rates or even fixed or zero rates of tax.

For example, Cyprus charges a flat 5% tax on pension income, Jamaica, Mauritius, the Seychelles and Trinidad and Tobago all levy a flat tax on all income, and Belize, Malaysia, Panama and Costa Rica charge no tax on foreign sourced income.

3. Improved Investment Returns

For most of us, when we move abroad we are free to explore the international financial marketplace for the investment, saving and banking of our wealth. This means that a whole new world of opportunity opens up for potentially increasing our investment returns.

Rather than being restricted in how and where you can invest your pension savings, or how and where you can save your emergency fund or bank, because of your home country’s rules and regulations, you can look to a free market to find the best returning options that suit you.

You can look at which currencies to save in to ensure you offset currency exchange concerns, you can potentially free up your wealth from tax and charges, and you can choose a more personally appropriately structured portfolio now that a whole new world of options is available to you.

From choosing which country to base your investments in to which currency to hold them in, and from choosing products and structures to shield your wealth from taxation or to protect your fiscal privacy, the range of options is almost unlimited.

With so much choice comes a real responsibility to get it right for your financial future of course, but with carefully sourced advice from an international financial adviser who understands all your options, you may be able to make much more of your retirement savings than you would have if you’d remained living in your old home nation.

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