Manage your money well when retiring abroad

Managing Money Matters Ahead of and Following Retirement Abroad

Managing your money when retiring abroad – all that you need to do to keep yourself financially healthy in your overseas retirement.

When you retire abroad, making sure that your money and finances are well looked after is a number one priority. It’s what can make or break your retirement abroad.

The number one reason why expatriates are forced to give up on their dream of a new life abroad is because they fail to get their money matters in order.

This fact alone should be enough of an incentive for you to ensure you do not make the same mistake.  Although when it comes to money matters, we very rarely have total control over our well-being.

As an example, some of British retirees who planned well and then moved within the eurozone a few years ago have been hit by the fall in the value of the pound. 

So even careful planning may not be enough to secure your future completely, however there is enough you can do to make sure you thrive in most circumstamces and don’t take too heavy a blow when times are hard.

Therefore, the key to success when it comes to managing money matters ahead of and following retirement abroad is keeping on top of your finances at all times. 

This needn’t be arduous, time consuming nor difficult and there are those who can and will assist you – but it is critical if you want to enjoy your retirement and have a good, guaranteed standard of living overseas.

Can You Afford to Retire Abroad?

The number one question you need to ask and answer before you go anywhere down the road of planning a move abroad is whether you can afford to make that move. 

Moving house can cost thousands of pounds, moving abroad can cost many thousands more if you factor in shipping goods, selling one house and buying another for example.

So, how are your finances, do you have a lump sum you can and are prepared to commit to the move.  This will be money down the drain effectively, as all it will do is relocate you.

If you have a sum to play with, now you need to think about your income. 

If you’re moving abroad in retirement, are you already in receipt of pension and/or investment income?  If so, is this a fixed sum that you will need to live on for life, is there room for expansion in your income if you reinvest some of your profits and wealth? 

If you’ve yet to retire, are you going to have to find a job abroad to sustain you and your spouse or family for a while?

You need to have a complete overview and understanding of your current money matters before you move anywhere.  This is because the last thing you want to experience is having moved abroad only to find that you do not have enough in the bank to sustain you through the early months when you will find you’re pouring good money after bad to set up and establish your new life abroad.

Frozen Pensions Can Put Retirement Dreams on Ice

It is estimated that up to 500,000 Britons are living abroad on frozen pension incomes, because of the British government’s direct discrimination relating to what they pay to retirees depending on where they choose to retire abroad.

Many assume that those who retire overseas are wealthy, footloose and fancy free – the reality is that many retirees go in search of lower living costs abroad because they are restricted in retirement because of poor pension incomes.  This situation is compounded for Brits who inadvertently or ill advisedly take up residence in one of a handful of nations where the British government has decided to freeze its state pension payouts.

Countries such as Australia, New Zealand and South Africa, all popular choices with retiring Britons because of the lifestyle and good weather on offer in each, are nations where the state pension is frozen at the rate you are receiving it when you emigrate.  This has left some in the situation where they are being forced to survive on as little as £17 a week.

Therefore, before you plump for a fixed destination in retirement, ensure your state pension will not be frozen in that country, and make sure you take a good long hard look at your financial position before you leave the UK to ensure you can afford your relocation, and afford to maintain a decent standard of living abroad.

Taxing Times

If you have got enough in the bank to move overseas and you feel you’re earning a decent income that will fund a good lifestyle in retirement, have you thought about the erosion impact that taxation can have on your wealth?

Believe it or not, there are some countries in the world where they tax you even harder than in the UK, what’s more, the UK may want some tax off you depending on whether you still earn any of your income from Britain – in the form of rental income perhaps. 

You also need to think about capital gains tax that is chargeable on the resale of properties in many nations abroad – sometimes whether you’ve made a profit or not!  This is in a bid to stop speculation…and it can hit you hard if you buy a home too quickly, decide it’s not in the right location or not the right house, and make another move within a short period of time.

Tax can also be applied to your assets if you die – or if your spouse dies before you.  In the UK transfers between spouses are usually 100% tax-free when it comes to inheritance tax – abroad this is not always the case.  Even in Europe.

So, you need to be aware of the tax situation in your new nation, and protect and shield yourself from it as much as you legitimately can and…

Will You or Won’t You Make a Will Abroad?

You must make sure you have a legal and valid will that covers you back home and overseas, that is legitimate to cover the bequests you wish to make, and which is valid in law to cover the assets you own, no matter where in the world they are located.

Seek qualified cross jurisdictional legal advice – do not leave it to chance and do not leave it too late or you, your spouse, your family, loved ones and friends could all potentially suffer greatly following a loss when they discover they have a huge tax bill hanging over them and a minefield of bureaucratic red tape to wade through.

Currency Conversions Erode Your Cash

Another area you need to consider is the fact that you’ll be living and transacting financially on a day-to-day basis in another currency other than the pound.  If you earn your income in pounds and all your money is managed through an onshore British bank, every time you access that money abroad you will be charged for the privilege. 

You may be charged if you withdraw it from a hole in the wall, charged if you internationally transfer it, and charged for a currency conversion as well.  What’s more, as the pound is wallowing in a woefully low position against the likes of the euro and the dollar, you’ll be losing out every time you access your cash.

What Can Be Done to Preserve Your Wealth?

The above discussion will no doubt have alerted you to the worries and problems relating to money matters that you will need to deal with when you think about moving to live abroad. 

Initially financial aspects of the move can seem a little overwhelming, but they needn’t be.  With our 10 step action plan, you can get a strong overview of your situation, arm yourself with knowledge, and get good advice on hand to help you and actually start making more of your money with the aid of the expatriate advantage…

Expatra’s 10 Step Money Management Action Plan

Step One – Assess Yourself!

Before you move abroad you need to get a complete picture of your finances.  Get a state pension forecast, get all your paperwork together for every account and investment you have, and go through the lot to ensure you haven’t missed anything. 

You will then have a complete picture of what money you have got where, what cash is returning you which interest rate, and how you are going to be able to afford to make the move and then sustain yourself abroad.  Having all this paperwork up to date and in one place is a wise move too, because it will come in very handy when we get to points six and seven.

Step Two – Take Tax to Task

You need to know about the income tax situation in your new nation of choice.  What’s more, you need to find out if there are any tax breaks for pensioners, any tax reasons why you should perhaps not remit all your money in to your new nation, and any other forms of tax that you may be liable for.  These could include tax on anything you import, tax on foreign goods bought in-country, tax on capital gains and property purchases.

Forewarned is forearmed.  Tax is a burden we all have to shoulder, however, if you can legitimately shield yourself from it, you owe it to the state of your wealth to do so.

Step Three – Clever Currency Conversion

You can use the expertise and services of currency brokers (called FX brokers in the trade) to help you move your money about internationally for less. 

They charge less in fees than banks, building societies and the post office, what’s more, they can offer you forward contracts that can see you getting a better rate of exchange for large lump sum transfers, or regular monthly income-type transfers.  Look into the services available and use them to save yourself time, stress and MONEY!

Step Four – Don’t Bank On It

You probably do all your banking through one current account onshore in the UK.  When you move abroad you may want the same degree of flexibility and simplicity and therefore decide to sign up for a local bank account as well. 

Don’t be tempted to close your old UK account down though if you don’t have to…keeping it in place makes it so much easier if ever you need to return or you want to do business in the UK.

Additionally, think about getting an international bank account.  All high street banks offer such accounts now, they just allow you greater flexibility and accessibility to money matters, as well as offering you accounts in different currencies, and an account with a more international focus.

Step Five – Understand The Expat Advantage

The expatriate advantage begins for you the minute you become non-resident in the UK for tax purposes.  This opens up the wonderful world of offshore savings and investment where you can, depending on your personal circumstances, potentially find far better returning, more flexible and attractive financial solutions. 

Some of the solutions available will also save a qualifying individual from taxation for example…and so getting to understand the expat advantage is crucial if you want to make more of your money.

Step Six – Will Yourself

Don’t put it off – get a will in place.  And make sure you have cross-jurisdictional legal advice to ensure the will you create is legal in all nations in which you have assets, for the nation in which you’re resident, and legal as well for your heirs and beneficiaries. 

To not bother is to show your family that perhaps you don’t care – as harsh as that sounds, think about it, think about the reality of you dying having not bothered to make a will because it was too much hassle for you.  Not only have you left a massive hole in their lives that they will struggle to cope with, you’ve left them with a hell of a mess to sort out in terms of your affairs.

Also, don’t assume that it will all work out okay in the end, because in many nations there is compulsory tax that may have to be paid through the sale of assets you bought to protect the financial future of your family.  Don’t be an arse, get a will in place!

Step Seven – Seek Support

It’s not easy getting a complete and thorough overview of your money matters, and it’s even harder trying to work out what’s best to do with your money, particularly when you move abroad and your opportunities and liabilities change. 

So, seek qualified and experienced, independent financial advice from one who is used to assisting expatriates with their wealth management.

To help you access such advice and make sure you know how to choose your advisor, we have published our expatriate financial advice guide.

The guide will help you understand whether you need an advisor at all, and if the answer is yes, how to choose one and what questions to ask when you are considering an advisor.

Step Eight – Diversification is the Key to Financial Success

Keeping all your monetary eggs in one basket is never a good idea. 

Therefore you need to seek the best ways to diversify your wealth. This may see your money spread across different asset classes, currencies, financial service providers etc. It may also see your money divided up according to your priorities.

Step Nine – Rainy Day

One priority you should not overlook is your rainy day fund. 

When you’re living abroad there will inevitably be a time when you have to get back home at short notice. You don’t know when or why the call will come, but it probably will come. 

So, have some money on hand that will always be enough to fund flights and accommodation back home.  Having that small rainy day fund close at hand will give you peace of mind and security.

Step Ten – Stay on Top

Getting money matters in order is empowering, it really is.  You will feel that you have done the absolute best you can for yourself and for your family. 

The key now is to staying on top of ever changing circumstances. 

So, you should have a six monthly or annual review to ensure your money is still performing well, any headline rates you signed up for haven’t now dwindled, and that your money is where it needs to be to work hard for you.

In Conclusion

Getting your money sorted out ahead of your move and then when you have relocated is key to your long-term success and happiness in your retirement abroad.

Once you move to your new country of residence, there are a whole host of new and potentially exciting options open to you for the management of your money.  So, take advantage of your position, get assistance wherever you need to, and don’t forget to sort out your will as well!

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