If you're retiring to Europe, be prepared to adjust your savings and investments, taxes, pensions, and estate planning to fit your new life abroad.
Anyone who has recently retired or is about to retire will enter a new, exciting phase of life. While some fear retirement will be boring, many accept the freedom it offers. If you choose to retire in Spain, Portugal, France, Cyprus, Malta or other overseas countries, you may fall into the latter category!
Southern Europe certainly offers a beneficial lifestyle for retired expats, but long-term financial security is essential to help you enjoy retirement. To do this, you need to take a good look at your finances and the way you hold your assets. Your situation is completely different from your working day in the UK, so be prepared to adjust.
Saving and investing
During your working career, you may have built a successful savings and portfolio, but your circumstances and goals were different at the time. With a fixed salary, you can take more risk and focus more on growth when choosing to invest.
However, many retirees are looking for income; whether it's recurring payments or temporary withdrawals. In addition to planning for this, you also need to protect the capital that generates income, so you must manage risk carefully. Your goal should be to earn at least enough capital growth to keep up with inflation over time to help maintain your spending power throughout retirement.
It's a good balance. The starting point is an objective assessment of your risk tolerance. Coupled with a good understanding of your goals, environment, needs, and time frame, this is key to ensuring that your portfolio is right for you. In any case, diversity is at the heart of managing risk within the tolerance you define.
tax
All free time in retirement costs money! You can help maximize your revenue through strategic tax planning. While the opportunity to cut taxes when paying payers is limited, how you hold savings and investments can have a significant impact on retirement income.
Please note that tax planning in the UK is unlikely to be effective in other countries. For example, IAS and UK bank interest are fully taxed on non-UK residents. Once you live in another country, you have access to investment opportunities that can provide better tax efficiency and other advantages.
Locally-compliant arrangements, such as suitable life insurance bonds, can combine your investment, tax and estate planning to bring different portfolios under one tax-efficient roof.
Pension plans
This is when you benefit from these years of pensions; you can start taking the money out instead of paying it every month.
There is no one-size-fits-all solution for expats, but once you are no longer a UK resident, leaving a UK pension in place can become less beneficial.
UK pension income is paid in pounds sterling, so if your main expenditure is paid in euros, this carries exchange rate risk. UK pensions are also still subject to UK regulations, and as the UK is not within the EU, future non-resident pensions may change.
To protect your long-term financial security, make sure you research your pension options and fully understand the various implications. Here, you need to be extra careful, so professional, disciplined advice is essential.
Estate planning
None of us want to consider leaving this world, but there's no denying that reaching retirement age does bring us closer to home.
The key message here is not to risk leaving too late. Decide who, how much and when you want to leave your assets. Then look at the most efficient way to achieve this, in the most tax-efficient way, taking into account both the rules of the UK and the country of residence.
The inheritance laws of most European countries are very different from those of the United Kingdom, with restrictions on how inheritance is distributed. If local regulations don't suit your family situation and your wishes, you need to plan ahead.
In the process, don't lose sight of your own needs – look for arrangements that will provide tax efficiency for you and your heirs.
An integrated financial planning approach produces better results than focusing on one element at a time. For example, the way you hold investments and pensions can affect the taxes you and your heirs pay and how assets are passed on to your heirs.
While some people try THE DIY approach, cross-border taxation, wealth management, pensions and estate planning are complex and it is difficult to objectively assess their situation. For ultimate peace of mind, consult an expert advisor who will take the time to understand your unique circumstances, needs, and goals to help you achieve a thriving retirement wherever you live.