I meet so many expats that don’t even know where to begin when planning for retirement. I’m here to help guide you through the process. This is how I guide my clients step-by-step. The key is getting a head start. While it’s best to get started as soon as possible, it’s never too late to plan and take control of your finances and your own destiny.
This article is going to be the first of a three part series about retirement. There are three critical steps you must take in order to retire comfortably. The first step is you must prepare for retirement. This is so important because for the first time in your life, you will no longer be building your nest egg, but rather you’ll be spending it. This is one of the first things I explain to my clients.
In preparing for retirement, you must be honest with yourself and hopefully me, your financial adviser. You have to remember that your income is not going to be as big as it was before. Certain expenses will have to be cut back. For many expats, this will be not going to the beer bars or go-gos every night, but maybe once or twice a week instead. I know a few expats that retired to Thailand with a lump sum and didn’t follow this advice. Within three years, they were broke and forced to go back home.
While we don’t want to curtail our lifestyle, the fact of the matter is that most people do not have enough money saved up for retirement. That’s why it’s so important to establish a budget. For instance if you retire at age 65, 59% of men and 70% of women will live to age 80 ! After that, 20% of men and 31% of women will live to age 90. That means if you retire at 65, some of you will need your money to last another 25 years. And with the statistics showing men die first, you must ensure that there’s enough left so your wife won’t have to go back to work.
Furthermore, as you get older, health care costs rise. Are you covered? Only about 20% of retirees age 65 and older are covered by employer-sponsored health insurance. Even though medical costs are lower here in Thailand, it’s important to get coverage. I know a few expats that have 1 million Baht plus hospital bills here in Thailand.
Another important thing to consider here in Thailand is converting to the Baht. For my clients and I, most of our money is still in dollars, Euros or pounds. The money we keep here in Thailand is our spending money. How many months of spending money should one keep here in Thailand? The most important factor I look at is the Baht conversion rate. When the Baht got close to 33 Baht to the US dollar, we transferred several months’ worth of money to our Thai bank accounts. It’s also important to keep the number of transactions down because you can lose out on not only the conversion rate, but Bangkok Bank, for instance, charges approximately 600 Baht for each wire transfer from the US. Over time, this adds up to thousands of lost Baht. Being smart with small fees is important and will save you money over time.
The last and most important thing to consider in preparing for retirement is where to put your money. All of the things I have discussed in this article are what I call the nickels and dimes. It’s where you keep your retirement assets that is critical to your long term success. No one wants their hard earned fortune taken by an unscrupulous broker or a firm that goes belly up. That’s why my clients and I use TD Ameritrade (which has $500 billion in assets), Interactive Brokers, Saxo Capital Bank, Investors Europe and other discount brokers. Once an account is established, Exchange-traded funds (ETFs) from Vanguard with over $2.4 trillion in assets or US stocks can then be used to diversify growth investment portfolios. My clients and I don’t have to worry about either one of those brokerage firms going out of business or running off with our money since your money is held separately from their business structure in segregated accounts. In the future I will write an article on the importance of having a broker with segregated client trading accounts and why this important.
I hope this article gives you some insight to what needs to be done in preparing for retirement. In the next two articles, I’ll discuss how to manage your retirement and how to build your investment plan. As always, feel free to give me a call, email or Skype and we can discuss your own customized retirement plan.
Don Freeman is president of Freeman Capital Management, a Registered Investment Advisor with the US Securities Exchange Commission (SEC), based in Phuket, Thailand. He has over 15 years experience and provides personal financial planning and wealth management to expatriates. Specializing in UK and US pension transfers.
Call 089-970-5795 or email: email@example.com.