One of the things that I find particularly difficult about financial advice in the blogosphere is that most of it relates to people that live in one particular country and don’t move across countries. For example, some common advice is to max out on your 401K (or something equivalent) and take advantage of your employer’s contribution. But what happens if you live in a country now and you aren’t sure that you are going to retire there? Maximising your retirement savings (and making your employer match your contributions) is really good advice when you (and your employer) live within the same borders. What if you don’t?
My adult working life so far includes a number of years in various countries. For example I lived in the U.S. briefly when I went to graduate school. I didn’t contribute to a 401K and I’m not a U.S. citizen (take that IRS – ha!), so I cannot contribute to that and last time I looked I had 0$ in my pension. Leaving the U.S. after school, I moved to and paid into a European pension system for one year when I worked in the semi-disclosed country. I then got a (brief) job as a civil servant which made me eligible for a great pension scheme. As a civil servant, this meant that my employer made all the contributions to my pension, which was awesome, except that I also didn’t contribute on my own, which means that having left said job, I have no pension contribution saved over those years and no entitlement to what was paid for me. Now that we are in the U.K., we don’t know what country we will live in in 5 years from now or even 1 year from now, but if I contribute to my employer’s pension, I can’t get it out if we leave. My partner is the same. He also has no pension and no retirement savings because he has lived in a different set of counties and has recently moved around with me as the primary (not so much) income earner. At the moment, I can maybe get 1 euro 50 from my years on the European continent, nothing from the U.S., and maybe 11p from the U.K. pension! Clearly, I need some other kind of retirement strategy?
I did a (little) bit of research and there is something called “Offshore retirement and pension plans” but the whole “offshore” language makes me nervous especially because you lose the tax benefits of saving (never mind the employer contribution to your pension).*1
So how to develop a retirement plan when the country and your employer is unlikely to be able to (and to want to) help you long term? In the UK, there seem to be Self Invested Pension Plan or SIPP but you cannot take it out until you are over 55/57 depending on your age, and tax free Individual Savings Accounts or ISAs. There is also LISA, which helps for retirement build-up and tax breaks, but you take a 25% penalty if you pull it out before you are 60, irrespective of whether or not you move countries. Anyone else have any experience or advice they can offer me besides the Queen?*2 I’m sure she is busy at the moment but maybe if I ask nicely, she will give me some advice? Currently, I just use a cash ISA to put my (no) savings in (when I don’t take it out, which I do). Thoughts?
References
*1 Portable Retirement Plans for Expats
*2 Not all offshore funds are bad, just ask the Queen (paywall)
That does make this a bit trickier, though I think most of us in the US at least are treating social security as later in life “gravy” but not set in stone income because there’s no saying what it will look like in the future. The big one is probably figuring out if health care costs will ever factor into your retirement costs.
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