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Should I save for retirement when living outside the UK?
Every expat has a different story to tell. There are, however, certain things all expats need to be mindful of, and saving for medium to long term falls into that category. This applies of course not only to those who are planning to remain overseas in retirement but also to those who are planning on returning to their home country.
Many expats live in countries where retirement saving is not enforced through the law, the GCC states are prime examples of this. As such, many expats will often find themselves more generously remunerated in terms of salary, but there is a shortfall in saving for the future.
This scenario is common for many expats who become accustomed to enjoying a high standard of living whilst simultaneously neglecting the opportunity to save. The expat lifestyle can be rather addictive and when expats develop a habit of spending all their salary each month, the notion of ‘save first, spend later’ is often overlooked.
A 2017 GoBankingRates survey found the share of millennials with $0 in savings is on the rise. In 2016, 31 per cent had saved $0, which jumped significantly to 46 per cent in 2017.
Historically, saving even the most modest of amounts each month was a culturally ingrained activity especially within the Western World. However, increasing consumerism is becoming more culturally ingrained as trying to keep up with the Jones’ prevails.
Unfortunately, this approach is quite simply, reckless! Not putting any money aside, especially when you are overseas and earning a considerably higher salary than what you could command in your home country, makes little sense.
First and foremost, before looking at building any form of savings, the most important place to start is addressing any existing liabilities you have. Whilst it may seem that paying off your credit card or any other forms of debt isn’t directly saving, clearing existing debt is the start of the wealth-building process.
A further wealth-building exercise that British expats should take advantage of is making voluntary National Insurance contributions which allow UK nationals to receive a state pension in retirement. Brits need to make a minimum of 35 years of contributions to receive the full state pension.
There is a collection of different options available for those looking to save. Brits who live in certain countries with favourable taxation laws like the U.A.E. will also benefit from paying no tax on the growth achieved due to double taxation agreements between the home and residing state.
Working out a plan of how much you should be saving depends on your ambitions later in life. Receiving professional advice on this planning is key in making sure you are taking the most efficient steps possible.