Expats having problems understanding retirement savings products

Planning retirement finances years ahead is far too complicated for the majority of expats.

Given that it’s almost impossible for most expats committed to furthering their careers to predict their financial needs when they hit 65 or so, it’s no surprise the majority put off retirement planning until much later in their lives. Another cause for reluctance is the average IFA’s jargon, and the endless media reports of financial scams put a damper on even the consideration of long-term savings products. This reluctance to invest for the long-distant future isn’t just a British thing, as US and Australian expats seem to feel the same way.

Research by a combination of experts from the three countries revealed a common reason – the total lack of vital information about the entire savings issue. Ideally, planning should include an estimate of the amount needed to fund a comfortable retirement, an even more difficult estimate of how long a saver will live in order to put by enough for a good life, and the unpleasant possibility of having to fund long-term care should they succumb to illness after retirement. It seems many expats start a savings plan but aren’t able to address complex finance-related questions.

Oddly, differences in cultural identity affecting retirement planning came with very similar retirement expectations. One problem is that insurers are gradually moving from traditional direct benefit pensions giving guaranteed incomes to direct contribution schemes with no guarantee of how much will be received after retirement. Given the state of today’s world, it’s no surprise that career-oriented expats working in pricey locations would rather spend their salaries than hope for a pot of non-guaranteed gold at the end of their personal rainbow. As a result, many modern expats aren’t intending to retire at all, with others preferring to retire gradually and still more looking to finally give up work at older ages. Few, it seems, expect a decent lifestyle in retirement.

At present, more American and Australian expat professionals are saving for retirement than are British expats, and women are lagging even further behind in the investment field. Advisors believe far more focus on financial literacy is needed in order for potential clients to fully understand well-designed educational approaches to the complications of planning for retirement. Specifics should be based on gender, age and income relevant to expats in all three countries, with workers receiving a personalised savings goal to encourage them to put regular amounts aside. Unfortunately, sticky issues such as roaring inflation, fluctuating exchange rates, economic instability and political chaos can wreck even the most carefully constructed expat retirement plans, especially those based on savings in a foreign currency.