|
I have no existing retirement arrangements,
what are my options?
In modern society, everyone seems to be
told by TV adverts, children’s demands, etc… that immediate
gratification is the only way. However, most people also want
their current lifestyle to continue in retirement, or even
improve with, for example, more travelling. You may even wish to
retire early.
To marry up these two ideals, it is
important to start saving towards your retirement now. The cost
of delaying the savings process can have a dramatic effect. If,
for example, you would like to retire early with a pot of US$1
million, the cost of delaying by just 5 years can more than
double the amount you need to save each month.
Here are the figures for someone looking
to retire early at age 55 starting at different ages. Example A
is at a 5% growth rate and Example B is at a 9% growth rate.
|
Example A |
|
Age |
Minimum monthly premium required |
Duration of policy |
Total premium required to achieve US$1million at age 55 |
|
30 |
$1,845 |
25 years |
$553,500 |
|
35 |
$2,659 |
20 years |
$638,160 |
|
40 |
$4,065 |
15 years |
$731,700 |
|
45 |
$6,935 |
10 years |
$832,200 |
|
Example B |
|
Age |
Minimum monthly premium required |
Duration of policy |
Total premium required to achieve US$1million at age 55 |
|
30 |
$1,053 |
25 years |
$315,900 |
|
35 |
$1,729 |
20 years |
$414,960 |
|
40 |
$2,983 |
15 years |
$536,940 |
|
45 |
$5,689 |
10 years |
$682,680 |
Though US$1 million sounds like a lot of money,
but when you consider current annuity rates for a 55 year old
being just over 5%, this only amounts to an annual income of
US$51,000. This would be lower still if you want to inflation
proof your income!
The most suitable option for most expatriates
to meet this goal is an offshore pension plan.
Offshore pension plans are international policies into which you
can contribute no matter where you reside in the world. As such,
the portability factor is great which assists in maintaining a
disciplined and constant approach to your pension contributions.
Unlike most countries 'onshore' retirement packages, offshore
pensions are not restricted by the tax implications or
retirement parameters you will typically find in these taxable
jurisdictions. Contributions can be made into an offshore
pension free of tax as long as you remain in a tax efficient
jurisdiction and the returns are virtually free of tax - hence
the opportunity for growth is better offshore.
You can select a retirement date that suits you and, depending
on your tax status at retirement, you can elect to take your
entire pension fund immediately if required. Most will draw an
income at retirement and, unlike onshore pensions, will pass on
the remaining funds to their spouse, children or whomsoever in
the event of their demise. |
