Why retirement becomes more complicated when your career, pensions and finances span several countries?
Retirement planning can be complicated enough when you’ve lived and worked in one country. You have your pension, savings, investments, healthcare and plans for where you want to live. At least most of those things belong to the same system and most of us are in this category. But what happens when your working life has crossed borders?
Like me, you’ve worked in two, three or even more countries. I have seriously started counting! You may have paid into different pension systems, built savings in different currencies, bought property abroad or ended up with family living in different countries. Suddenly, your retirement isn’t just about asking: How much money do I have?
It becomes a much bigger question: How do all the different parts of my international life work together? You may have pensions in several countries and yes, I certainly do. If you’ve worked abroad, you may have accumulated more than one type of retirement income. You could have:
- state or social-security pensions
- workplace pensions
- private pensions
- retirement accounts
- investments
- property income
- or even income from a business you continue to operate
I can tick most of those points above. Now, the important thing is that these don’t necessarily follow the same rules. They may become available at different ages. They may be paid in different currencies. They may have different rules about increases, survivor benefits and taxation. Can you see now how important it is to sit down and work things out. Instead of simply asking: “How much pension will I receive?” You may need to ask yourself: Where did I earn it, when can I receive it, can I take it abroad, and what happens when I move? Welcome to being an international retiree!
Your passport isn’t the same as your pension
Another common misunderstanding is assuming that citizenship determines your pension position. It doesn’t necessarily. Yes, your passport can be extremely important because it may determine where you can live, whether you need a visa and what rights you have as a resident. But your pension rights are generally connected to your employment and your contributions. This can become very frustrating. You set-up could therefore be something like:
- a citizen of Country A
- have worked in Countries B, C and D
- and want to retire in Country E
Your passport is only one part of the picture
Where you live can change the financial picture. This is where international retirement becomes particularly interesting. Imagine that you have earned a pension in one country but you plan to retire in another. You now need to understand not only whether the pension can be paid overseas, but also:
- how it will be taxed
- whether it will continue to increase
- what currency you’ll receive
- what your new country’s tax rules are
- whether a tax treaty applies
The same pension can therefore have a different practical value depending on where you live. And that’s before considering the cost of living. Your expenses may be in a different currency. International retirees can easily end up with income and expenses in different currencies. For example, you might receive one pension in pounds, another in euros and have most of your day-to-day expenses in another currency.
Exchange rates can move
That means your income might remain exactly the same in its original currency while its purchasing power in your retirement country changes. This doesn’t make international retirement impossible. It simply means currency needs to be part of the planning rather than an afterthought.
Healthcare changes as you get older
Healthcare is another area where the simple question “Does this country have good healthcare?” isn’t enough. You also need to know:
- whether you’re entitled to use the public system;
- whether you need private insurance;
- what happens as you get older;
- what happens if you need long-term care;
- whether your partner has the same rights.
The healthcare arrangements that work when you’re 65 may not be the same arrangements you’ll need at 80 or 90.
Family matters too
Retirement isn’t just about money. Where your children and grandchildren live may influence your decision. Your partner may have a different nationality, pension history or healthcare entitlement. You may want to be close enough to family to provide or receive support. Or you may want the freedom to live somewhere completely different. These aren’t financial calculations, but they are part of the retirement decision.
So what’s the answer?
The answer isn’t necessarily to find a list of the “best countries to retire to.” The more useful starting point is to understand your own international retirement position. Before comparing countries, work out:
- where you’ve lived
- where you’ve worked
- what pensions you’ve earned
- where your assets are
- where your family is
- what your healthcare arrangements are
- what citizenships you hold
- where you are currently tax resident
- and what sort of life you actually want
Then you can start asking which countries might work for you.
The international retirement question
For someone who has worked abroad, retirement planning is less about finding a perfect country and more about joining the pieces together. Your pension may come from one country. Your savings may be in another. Your family may live somewhere else. And the country you eventually choose to live in may be somewhere completely different. That’s what makes international retirement planning both complicated and interesting. So, the starting question isn’t “Where is the best place to retire?” but rather “What does my international life look like, and how can I make all the different pieces work together?”
That’s the question I will explore in the next article, 6 things before you retire abroad. Moving on I will have a full series of valuable information coming up in the near future.
As I discover more and more through my research and writing these articles I'm happy to share my findings with you.
