Can you afford to retire? A look at Financial Retirement Planning for US Expats, Citizens and Reside


Everyone needs to think about retirement planning, but what does the term actually mean? In its simplest form, ‘retirement planning’ means deciding on how much income you will need once you finish work and where it will come from. This will also include working out your regular expenses and looking at any assets or savings.

The secret of enjoying a stress-free retirement is to start planning as early as possible. Retirement may seem like a long way off but even a little money can go a long way. Make a plan and stick to it, as living on social security once you retire may not be a whole lot of fun.

For those who have company pension plans, hedge your bets and put away as much as you can from your income. You will be grateful one day for having done this. Even assuming you retire with a $1,000,000 retirement fund, how long do you think that will last you?

(if you are retired and you are looking to earn income on your retirement funds, click here for a 12-month plan that will pay you 8.5% fixed interest regularly into your bank account).

Start saving early

What most people forget is that retirement planning should start early on and many years before retirement. How much money you need will depend upon your personal circumstances and required standard of living.

To give you a very rough idea, if you apply the often-used 80% rule to whatever you are earning now, you will need 80% to live on during retirement. So if you earn $50,000 p.a. now you will need approximately $40,000 after you finish work. Given that most Americans live for 20 years once they retire, that’s $40k x 20 years which is no small amount of money. For those who avoid retirement planning, these figures become unachievable and instead they find themselves having to live on what they have. Click here to watch a video explaining the retirement factors to consider.

One of the major restraints US citizens and residents face especially those living abroad is opening up bank accounts, investing into funds and other products. Banks and financial institutions do not want to deal with the US government and regulations, they simply refuse US citizens in bank accounts and restrict into which investment products you are able to invest in. If that sounds familiar and you are struggling to find investment products available for US citizens and residents, contact us and we will provide information about products that are eligible for you.

The amount of money you accrue to help with your retirement will vary immensely based upon the age you begin saving:

Age 21 – 35

At this age you are probably not even thinking about retirement. However, you might be thinking about buying a home and money for the future. This still requires putting money aside. As we have seen in our last article (click here) there is a difference between saving and investing. Saving also has a cost and will decrease the value of your money. Investing on the other hand is meant to increase and grow your savings.

At this age, even if you only put away $50 per month, with interest earned, it will be worth far more once you hit 45. If your employer offers sponsored 401(k) or 403(b) retirement plans, they are well worth going for. Your employer has to match what you invest up to a certain level i.e. if you contribute 3% of your annual salary, your employer will deposit the same amount. This sum will accumulate nicely over the years. The more you put in, the more you will have once you retire. Experts suggest contributing 10% of your salary. During 2019, you are allowed to contribute as much as $19000 towards your retirement plan. You won’t pay income tax until the money is withdrawn. Other tax-efficient savings accounts are the IRA and Roth IRA. Both have limits on how much you can invest. If you take money out before you retire, penalties may apply but you can withdraw funds for major expenses such as home purchase, education, health care or disability.

If you are not a US citizen or resident, there are regular savings plans that you can start which provide a guarantee your capital will not reduct in value and a 4% minimum return on your savings. One of those plans is the S&P 500 Index. It invests directly into the S&P 500 Index and allows you to participate in the stock market growth without the downside risks. Click here to find out more about the plan.

With this plan you do not have to worry about the market swings, as your savings are capital protected. Contact us for the S&P 500 Index Regular Contribution factsheet.

Age 36 – 50

By this age, you may be struggling with credit card debt and mortgages. In spite of this, you should still look at retirement planning. Your earning ability is likely at its peak, making it a good time for you to invest and earn some valuable interest. Think about putting the maximum into 401(k), Roth IRA programs or a private individual plan. If you are not eligible for the Roth IRA, click here find out more about the 12-month plan. All funded with your pre-tax dollars, tax payments are deferred, enabling your money to grow to the maximum. This is also a good time to look at insurance for life and illness.

If you are not a US citizen or resident, you are eligible to set up your own S&P 500 Index regular contribution plan. As mentioned above this offers capital protection, a minimum return of 4% per year or the S&P 500 Index return, whichever is the greater. What does this mean? Well if the S&P 500 Index has made over 4% your funds will grow by what the S&P 500 Index has made. If the S&P 500 Index return is less than 4%, your funds will grow by a fixed rate of 4%. The S&P 500 Index is recommended by Warren Buffet at the best retirement investment available. Contact us for the S&P 500 Index Regular Contribution factsheet.

Age 50 – 65

Now you are starting to panic a little. Worrying about whether you will have enough to retire (click here to view a great video about it).

The clock is now ticking fast but if you have planned correctly, you should now not need to save so much. If you failed to set up a 401(k) or an IRA, then from the age of 50, you can add in an extra $1,000 per annum to the traditional or Roth IRA and $6000 per annum into a 401(k) or other investment products on the market such as 12-month plans (click here for more information).

You may also want to look at other forms of investment such as blue-chip stocks or investment into real estate. You should also be able to find out what Social Security benefits you will be entitled; early benefits kick in at age 62 and full benefits at age 66.

An alternative 12-month tax efficient plan

A good alternative is the 12-month tax-efficient savings plan, available for US citizens or residents. This plan is great for those who are looking to earn income on their savings and to build up a lump sum without having to lock your funds for a long time.

The plan offers a fixed annual interest of 8.5% paid out every quarter directly to your bank account. Click here to find out more about the plan. Over 4 years aircrew professionals have been investing into the plan. Aircrew from Cathay Pacific, Fly Dubai, Emirates, Qatar, Sichuan Airline, EasyJet, Wizz Air, Air Baltic and Virgin. Talk to one of them to see if they like the plan!

Other things to consider

  • Your home – as an asset, how will this fit into your retirement plan? Will you need to take out a home-equity loan or even sell your property if it becomes too big?

  • Tax efficiency – there may be ways of you avoiding paying high-rates taxes, such as paying them upfront rather than when you withdraw money, such as with a Roth IRA or a Roth 401(k). A financial planner can help with this.

  • Medical insurance – is your Medicare insurance sufficient or do you need a Medicare Advantage or Medigap policy?

  • Annuities – this is a form of pension. With so many different options available, always take financial advice.

  • Living abroad - US citizens living overseas can have big problems opening up bank accounts and even find their investments restricted. There are organisations that can help with this. If you are considering retiring abroad, always get advice before making the move.

Do not delay planning for retirement and do take it seriously. As one day you will not be able to work anymore especially if you are an airline pilot or crew.

Contact us for more information on the retirement programmes available for US citizens, residents and expats.


Featured Posts