Retirement Planning Tips for Immigrants and Expats

Counting Money

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There are many benefits of retirement planning, including investing now for financial security when you retire. Interest will accrue over time, allowing small regular contributions to grow into significant savings. If you’re an expat or immigrant, you need to decide whether to retire in your home country or divide work-life between countries. Many who work abroad, still support their families and plan to get back to their home country after retirement.

Even if you’re not close to retirement, there’s no better time to start preparing for retirement than now. While you may have the right intentions to establish yourself back home while working abroad, cross-border finances can be complex.

Here are guidelines for expats and immigrants to help them plan for these situations.

Retiring in Another Country

The first option is retiring in the country you live or work. Review your current retirement accounts, whether they include a 401(k), pension plan, Roth IRA, or another structure of savings. When planning for your retirement in a different country, you need to consider several things, including:

  • Stability of the currency and economy
  • How retirement income is taxed
  • Age restrictions for retirement

To navigate the complex environment of retirement planning as an immigrant or expat, here’s a look at all these three factors.

  • Taxes on Retirement Income: When you start using your retirement investments or savings, they will be subjected to taxation. In a country like the U.S., when you withdraw from your 401(K) after the age of 59.5, all disbursements are treated as income. Tax laws vary greatly between countries, so compare options between your country of residence and home country to know which provides you with a better retirement package.
  • Age Restrictions: In some places, there are age restrictions on retirement. Check the laws in the country you want to set up your retirement savings as this affects when you can access retirement funds. 401(k)helpcenter.com explains that in the U.S., a 401(K) participant can withdraw money from their plan when they reach 59 ½ years without paying a 10% early withdrawal penalty.
  • Economic Stability: The relative stability of your currency back home and in the country, you work in also helps when working out where to set up your retirement plan. A stable economy means you can expect the currency to avoid fluctuations, which gives a predictable rate of return on your investment. Check historical exchange rates to know how far your money can stretch in the new country.

Investing in Multiple Countries

Besides only investing for your retirement in the country you work in, you could also put some money in your home country.  This means having foreign portfolio investment and building a retirement kitty back home. Focusing on multiple countries allows you to explore different options, including funds, real estate, and companies. In some countries, multinational investors reap the benefits of a system that’s easier to navigate. Compare the tax system in your country and where you work to know how much you can put in both.

Talk to a Professional

Navigating retirement planning for expats and immigrants can get tricky. Laws change, and you could find new investment vehicles that will give you incredible returns. An expert will help you understand the complex issues and find the best way to invest for your retirement. An accountant who specializes in foreign investment will be a suitable choice to assist you.

Also, it’s common for seniors to opt for selling their family home for something smaller when they retire. This allows them more freedom. If you plan on getting a convenient place to stay, you can review your plan to include housing in more than one address. Check out the local housing prices for a U.S. home to know what you can expect when you sell or buy; for example, homes in Manhattan averaged a sales price of $1.25 million last year — an amount that would provide for a long and cushiony retirement in several other countries.

Conclusion 

Planning for retirement is important. Even if you’re an immigrant or an expat, you can plan for your retirement focusing on both your host country and where you come from. Consider the laws and opportunities in both countries to decide which country provides the best environment for investors.

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