Last Updated on 5th July 2023 Retirement can creep up on us, and it’s common for younger adults to assume they have plenty of years to think about saving and budgeting.
Having a pension scheme is a good start, but knowing what your retirement statement looks like and what you’ll have to live on, is crucial. While it’s a cliché, it is absolutely correct that it is never too early to start planning for your golden years. It’s also never too late to dedicate some time and focused financial strategising to ensure your affairs are in good order.
Whether you aspire to an idyllic relaxation in the warmth of the Mediterranean sunshine or plan to spend retirement enjoying an exhilarating lifestyle, the fundamental factor is making sure you have the financial security to enable you to do so.
We’ve collated some key pieces of advice to consider, whether retirement is several decades away or growing closer on the horizon.
The Benefits of Planning for Retirement Far in Advance
If you’re not sure of your retirement plans or in which country you’d like to live, that doesn’t mean you can’t start laying the foundations of a financial cushion.
It is so vital to start saving as early as possible because most people will rely on pension products. However, if you add five or ten years of savings into the same fund, with the same rates of return, you’re going to have a substantially better monthly or annual savings pot to rely on.
It’s also worth considering how your retirement plans may change. For example, having a generous nest egg will make it far easier to:
- Decide to retire sooner if you have a sufficient budget.
- Take advantage of opportunities to travel or move.
- Change your plans around new relationships or family events.
- Cover unexpected costs or medical expenses.
The ideal position is to have saved an ample amount into your retirement fund, and seeking professional financial advice is always optimal to ensure you are on track.
Pension schemes usually allow you to dictate the risk exposure of your pension investments – others may require specific instructions to taper the risk level as you get closer to your retirement age. However, there may be low-risk, long-term investment strategies out there that will produce returns that far exceed those available through pension investments.
The more time you have for your savings to grow and appreciate, the greater the capacity to earn higher returns and improve your retirement quality of life.
How to Adjust Your Pension for an International Relocation
Next, let’s think about what happens with your retirement budget if you decide to move abroad. That might be now, as a professional expat, or as a permanent move after retirement. In either situation, it’s equally crucial to seek expert guidance since there are several considerations here that will impact your future.
Examples include:
- Comparing tax-efficiencies and taxation rates on your pension income – which can be substantially different overseas to in the UK.
- Knowing whether to opt for a lump-sum cash withdrawal or whether you would be better off using other capital for living expenses.
- Consolidating pension funds and choosing the optimal products or alternative investments that comply with your plans.
- Choosing between receiving a foreign-source pension from the UK in a different country, transferring your pension fund overseas, or selecting another option.
- Balancing out currency exchange rates and how they may affect your pension income if the fund remains in Sterling.
These are just a few of the very many factors that impact the most optimal retirement strategy. Therefore, it’s essential to consult a wealth management professional with an in-depth knowledge of tax and pension regimes in your home country and intended destination.
As with pension saving, the more time you have to plan and make adjustments, the greater your preparedness for a new life overseas.
Along with pension planning comes a requisite need to think about succession and inheritance taxes. Many of the most efficient structures are best implemented in advance of a move to take advantage of the most appealing tax incentives and allowances.
Why Retirement Planning is Just as Important in Later Life
A common misconception is that if you have just a few short years left until your planned retirement date, there isn’t a great deal you can do now to make up for decades where you didn’t make pension contributions or other investments.
The opposite is accurate, and a few years of carefully managed financial investments and proactive decision-making can profoundly change your financial security.
At any stage, when thinking about your retirement years, it’s essential to review:
- What age you expect to retire, and whether you will cease working entirely or have other income streams available, such as rental income.
- The total retirement budget you have now and what you calculate requiring to cater to your retirement plans.
- How your savings are currently held, and whether there are products or investments on the market with higher returns or improved tax exposure that would immediately increase your retirement fund.
- Options for leveraging assets, capital funds and investments to add to your total financial cushion and improve your overall pension provision.
The key to excellent financial planning is to look at what you have now, what you need, and what steps are available in the interim to make those goals a reality. Even if you have already retired, there is no reason you can’t revisit your budget and plans to assess where you could adjust your wealth management strategy to cater to your lifestyle ideals.
In some cases, there are solutions such as reconfiguring your estate, cashing in assets or restructuring investment products to return higher return rates at lower taxation charges. Remember that many people are retired for around 30 years, so it’s always valuable to invest some energy in professional financial advice.
It’s also worth considering how quickly and frequently tax regimes change. There are often new initiatives or schemes available which may not have been possible at your retirement date, which now present an excellent opportunity to improve your financial outlook.
Perhaps you have been thinking about your retirement plans and would like professional assistance with creating a proactive strategy to ensure your budget matches your aspirations. If so, please contact your local Chase Buchanan office to schedule a private consultation with the international wealth management experts.
*Information correct as of April 2021