The problem with saving for retirement is no one know how long they are likely to live or if they need to spend a huge slice of their wealth in funding long-term care costs if their health fails in later years.
At best, all an expat can do is make some reasonable saving decisions based on the best information available – but where do you start?
When do you want to retire?
Retirement is more flexible now, with part-time working and easier access to pension cash from the age of 55. Early retirement is attractive, but comes with less years to save and a gap between giving up work and when the state pension kicks in at 67 years old.
Check your pension and savings
Find out how much you have in your pension and savings accounts and what the likely projections are for your favoured retirement date. Use these figures to reset how much money you are putting aside for retirement and whether you need to save more to meet your targets.
How much cash will you need to pay for retirement?
The best pensions base retirement income on two thirds of final salary. Work out this amount if you plan to retire before 67 or the amount less the state pension if you stop working at 67. Don’t forget adjustments for any personal or workplace pensions as well.
Don’t forget the state pension is frozen in many countries that do not have a special treaty guaranteeing index-linked payments with the UK.
I need to top-up my income to retire
Consider buying back missing state pension qualifying years. Ask for a state pension forecast so you do not get a nasty financial shock too near the date you give up work.
Retiring as an expat
Don’t forget to tell the DWP where you are going so they can send on your state pension. If you have a workplace or private pension, they also need to know where you are to pay any benefits.
Sometimes it’s a good idea to take any 25% tax free pension lump sum in the UK and then move overseas as some countries have a different tax treatment of the cash. Expats need tax advice if settling in France, Spain or the USA and taking a lump-sum as the money could be treated as taxable.