Are drinks by the ocean
your vision of a peaceful retirement? How about hikes in clean mountain air?
Many of us have an idea of where we’d like to spend our golden years, but little
idea of how to get there — or the logistics around money and choosing the right
locale.
BBC Capital spoke with Stephanie Sherman, a New
Jersey-based financial planner for Prudential Financial Planning
Securities, who gave us surprising ideas for making your retirement
years golden, no matter where you’d like to be.
Among them,
‘practice’ for your life abroad by taking extended vacations in the
countries you are considering and join organisations there. Can’t decide
on a single place? Sherman has ideas for that, too.
To learn click on BBC Capital
The choice to retire abroad is one being made by an increasing number
of Britons, and thanks to globalisation and the Internet, it is now
easier than ever to plan and execute your dream of retiring abroad even
if you’ve never visited your chosen nation before!
Information about every element of starting a new life overseas is
now just a mouse click away, and suddenly the world really does seem
like a much smaller, more accessible place.
Many elements will factor in when it comes to your own choices about
where you plan to retire, but time and again when questioned, those
Britons who have already relocated overseas or who are in the active
planning stages cite the following top 5 reasons for wanting to move
abroad when they give up work…
1) Better weather
2) Less crime
3) An improved lifestyle
4) Lower cost of living
5) And lower taxes on pension income
These reasons are valid, genuine and achievable if you plan your retirement carefully. 1) Better weather – the climate in the UK is
changeable, to put it politely! Whilst Britain does enjoy four distinct
seasons, the summer is always all too short, and the winter can drag on
for too many months. What’s more, no one would ever move to the UK for
its weather – which is why it’s unsurprising that so many Britons seek
warmer climes when looking for the best place to retire abroad.
Because traditionally we Brits seek out sunshine when we go on our
annual holidays, many Brits who plan a retirement abroad choose one of
the nations they have fond memories of from their summer holidays.
It is always preferable to move to a nation you have experience of –
but it’s also critical to remember that a two week holiday is not a fair
indicator of what a brand new life will be like living in your given
nation!
What’s more, even the Mediterranean has a wintry season for example,
and some countries where the temperatures never drop below freezing
suffer from other climatic nasties such as hurricanes, rainy seasons or
high humidity. Therefore it’s important to look more closely at the
year-round climate in your destination of choice, and ensure it’s not
too hot in the summer, not too wet in the winter, and that it will suit
your requirements and desires. 2) Less crime – whilst some parts of the UK remain
safe and appealing places to live, work and raise a family, increasingly
more densely populated areas are suffering from an increase in crime
levels. So-called ‘petty crime’ is also increasing as the UK suffers
from higher unemployment rates and poverty levels – and it’s the petty
crimes against the person and their possessions that can make living in
some towns and cities in Britain unbearable.
In retirement no one wants to feel vulnerable and unsafe, and yet
that’s how people are being left to feel as police numbers are cut and
seemingly less action is taken against criminals and thugs who can make
life in the UK really depressing and unpleasant.
Naturally enough, if one can escape high crime by relocating,
retirement is the perfect time to move because the requirement to be in a
given location for employment no longer exists. Therefore increasingly
some Britons are citing their main reason for relocation abroad in
retirement as wanting a safer place to live.
It’s always advisable to look beyond reported crime statistics when
choosing a new nation however, because whilst on paper a country may
appear safe, in reality certain parts of that nation may not actually
feel safe to live in. Therefore it’s really critical that anyone wanting
to move abroad spends time exploring and experiencing a given location
overseas before committing to move there.
Part of the exploration process will be experiencing the location at
all times of the day and night to see if it is indeed safe. It’s worth
speaking to other expats about the realities of the crime levels too –
you can do this by using forums on the internet for example, and posing
questions about how safe expats feel living in a chosen nation. 3) An improved lifestyle – in the UK there is
increasing pressure being placed on every household to work, work, work.
Everything from taxation to energy bills are going up, so as the cost
of living shoots up and job security falls dramatically, the lifestyle
‘enjoyed’ by Britons is declining.
According to a recent quality of life index by uSwitch, the quality of life in the UK is the worst in Europe…
Therefore, once again it is unsurprising that so many Britons
planning a retirement abroad are doing so in a bid to improve the
quality of their lives…and it shouldn’t be too difficult to achieve this
improvement! 4) Lower cost of living – achieving a lower cost of
living is not as easy as it once was. Inflation is running high in many
of the most desirable nations as globally speaking, energy and food
costs are soaring. Britons have the added disadvantage of having a very
weak currency that does not transfer well. However, property costs
abroad can be lower, and those Britons who carefully research their
nation choice can find a place where day-to-day living costs are less
than in the UK.
The key to remember for all those seeking a lower cost of living is
that it is no longer a given that if you move abroad you will be paying
out less. So research must be done very carefully, factoring in
everything from the currency conversion rates, local inflation, grocery,
energy and property prices.
Again, forums can be a good place for would-be expats to chat with
those who already live abroad in a given country. You can then talk
about what the cost of living really is. 5) And lower taxes on pension income – in the UK
pensions are taxed as income received, and this can seriously erode the
amount a retiree has to live on. In a handful of countries abroad
pensions are not taxed at all, or are taxed at a much lower rate than in
the UK. Additionally, in some nations if you leave the majority of your
wealth outside that nation it legitimately escapes taxation.
If you can enjoy your pension income without the deduction of high
rates of taxation, naturally enough your money will take you much
further and afford you a better lifestyle in retirement.
Heading off into the sunset of your work life? Be prepared. (AFP/Getty Images)
Despite a long career spanning more than 40 years, Latifah Merican
Cheong wasn't done with work when she retired.
“It is important to me that I am useful,” said Merican Cheong, who
worked at the World Bank and Malaysia's Central Bank. She now takes on advisory
projects for the International Monetary Fund, World Bank and United Nations
agencies, earning some pocket money in retirement. She also volunteers.
Rising costs, longer life expectancy and reduced benefits mean
planning for retirement is more crucial than ever. According to HSBC,
38% of retirees in a global survey of more than 16,000 people said their
income in retirement was less than they expected, with more than a
third of those people attributing this shortfall to not planning enough
for retirement. Many people also don’t take time to really think about
what a retirement lifestyle might look like.
The years just before
retirement can be important ones for making sure you are on track
financially, emotionally and professionally to go boldly into your
golden years. While not everyone has the financial savvy or resources of
a former central banker like Merican Cheong, all is not lost if your
plans fall short as your retirement date looms. Here's what to do with
five years of work ahead of you. Five Years to Go
Now
is the time to pull together a projection of your living expenses in
retirement and to assess how much you might expect from pensions,
retirement savings accounts and part-time or consulting work you plan to
do in retirement.
Look at your statements and put together a
realistic monthly income amount. Then compare it to your current
expenses and family budget. Consider what you won’t need any longer once
you retire. For instance, do you spend $150 per month on dry cleaning
clothes you’ll no longer wear when you stop working? Delete that expense
from your model retirement budget. How much less might you spend on
petrol each month when you no longer commute by car to work?
Create
a realistic budget and compare it to the income you know you’ll have in
retirement to get a sense of how big a gap there might be — and what
you need to do to fill it before you retire or in retirement.
Free
online calculators are available from banks and from the US-based
nonprofit AARP. Many banks help customers set retirement goals free of
charge, while certified professionals will charge a fee for a detailed
plan, said Jamal Mahmood, a certified financial planner at Access Wealth
Planning, LLC, in the United States.
In developing nations, such
as the Philippines, government retirement benefits can be too meagre to
live on, so many people rely on their grown children for support, said
Layne Sisk, who lives in the US but serves as chief executive of Server
Plus, a call centre and data-entry firm in Manila.
Extended family
plays a far more important role in retirement security in East Asia
than in the West, but that is changing, according to a Center for
Strategic & International Studies survey in 2012.
Merican
Cheong said she and her husband prepared, so they don’t have to ask
their sons for money. “We are very conservative in terms of financial
management and cutting your dress according to your cloth,” she said.
Private
retirement schemes are catching on in some Asian countries to boost
government-managed pensions, or for the self-employed who aren’t
required to contribute to state plans, said Ahmad Zakie bin Ahmad
Shariff, former chief executive of the Federation of Investment Managers
Malaysia. He retired about a year ago.
Do you have a target date
for retirement in mind, even if it’s not set in stone? Having an idea of
when you'll retire will help you correctly position your assets to
reduce risky investments while earning enough to meet your projected
expenses.
“More important than the age you retire at is that you
live a comfortable life when you do,” said Shariff, who also serves as a
founding director of Private Pension Administrator Malaysia, central
administrator for Malaysia’s nascent Private Retirement Scheme. Checklist: Five Years Before
- Develop a projection of retirement income, assets and expenses
- Set a retirement-age target, even a flexible one
- Ensure assets are correctly positioned Four Years to Go
Half
of retirees surveyed by HSBC in 15 countries during 2012 and 2013 said
they have cut down on everyday spending, while 22% said they believed
their health would deteriorate during retirement. That’s one reason it’s
important to begin to think about caring for yourself when you’re no
longer working. Start curbing some of your expenses, particularly if
you’re a bit off your retirement saving goals.
Medical costs may
take up a larger proportion of your income as you age, so now is the
time to research health insurance and medical care plans for the future.
It’s also smart to address any minor health issues now if you have a
comprehensive care plan, before you’re paying more of the bill.
Lee
Choon Heng, a retired engineer in Malaysia, said hospitalisation
coverage provided by his employer ended when he retired in January. Then
in February, he suffered a stroke, which postponed his plans to travel
more during retirement.
You should also think about housing
considerations well before retiring. Determine whether climbing stairs
in a two-story house will remain sensible as you age, whether to sell
and downsize, or whether to set aside money for ongoing home repairs and
modifications. If you want to modify your home, it is easier to get a
loan to do so while you are working.
Review annually how much you
have set aside in government programs, such as US Social Security or
Malaysia’s Employees Provident Fund, and when to begin receiving
benefits. For many, this can be a moving target.
Malaysia last
year raised its minimum retirement age to 60 from 55, said Lee Ching
Wei, founder of the iMoney comparison website for Malaysian financial
products. While that age remains lower than the retirement age in nearby
Singapore, it is on par with Thailand, Indonesia and for men in
Vietnam, he said. Many European countries also raised the retirement age
following the global financial crisis. Checklist: Four Years Before
- Ensure medical costs will be covered
- Think about housing considerations
- Determine when to begin receiving state pension payments Two to Three Years to Go
Jim
Pelosi, a retired US Army officer who owns investment properties and
receives a “respectable US government pension,” suggested people pay off
debts and try to live on their retirement budget in the few years
before they stop working. The point: you should be able to cover
expenses with your projected retirement income, he said.
“Practice living as if retired,” Pelosi said. “Does it work?”
Keeping physically fit leading up to retirement can also help guard against rising medical costs in retirement, he said.
“A potential retiree should glide, not fall, into retirement,” Pelosi said.
Are you ready for your golden years? (Pascal Le Segretain/Getty Images)
Now is also the time to consider whether to continue with some
form of paid work in your golden years. Reducing hours, switching to
consulting work or turning a hobby into a new business can shorten the
duration that you’ll need your savings to live. It can also keep you
mentally engaged — a boost for a longer, healthier life.
Be sure
to find out the laws about how much you can earn while drawing on a
government pension or other retirement scheme in your country.
“Extending working years, whenever we look at the projection, it makes the biggest difference,” Mahmood said. Checklist: Two to Three Years Before
- Do a trial run, living on your retirement budget
- Pay down any outstanding debt
- Consider career goals, part-time or volunteer work One Year to Go
A retirement plan should not be static: Re-evaluate it and update it just before retiring and afterward.
If
you have excess savings, you may decide to spend more on yourself, make
gifts to family or charities during your lifetime, or receive qualified
help with estate planning, Mahmood said. Meanwhile, if you see a
shortfall, setting more money aside in the lead up to retirement instils
the discipline to live on less money, he said.
As you re-evaluate
your retirement income and assets, experts recommend making sure your
money is in investments that are less risky than those you might have
held during your working life. Yet, not so safe that you won’t earn high
enough returns, causing you to end up running short of money down the
road, Mahmood said.
"If your retirement horizon is 25 years —
meaning if you retire at 65 you could live to be 90 or more — then you
want to be sure you're earning a good enough return, or it's going to be
very hard to extend them long enough," Mahmood said.
Typically at this stage of your life, you want to be investing less in stocks and have more of your savings in bonds, real estate or cash, Lee said.
Meanwhile,
retiree Shariff is crossing new adventures off his bucket list. He has
ridden a dhow — a traditional sailing vessel — down the Nile, and
glimpsed a pride of lions from the safety of a hot-air balloon floating
over Kruger National Park in Africa.
“Retirement is not being old—it’s being bold, deciding what you want and then doing it,” Shariff said. Checklist: One Year Before
- Review and update your retirement plan
- Consider spending more on yourself during retirement or gifting money
- Share retirement plans and insights with friends and close colleagues.
