Identify your Goal.
This case study is designed to help those who wish to retire in Asia and what to consider before they retire. Many people don’t know where they will eventually retire until later in life which means there is less time to plan.
As the world shrinks many of us will choose to retire in a different country to where we were born or perhaps even spent the majority of our working lives. This could be particularly true if the country where you have lived and worked is suffering from a decline in the quality of life it offers its citizens and security has weakened. Certain countries also tend to not respect the elderly and see them as a burden whereas in Asia this is normally the opposite case.
In Asia, many countries offer ‘retirement packages’ specifically designed to attract people looking for an alternative retirement option that offers a better quality of life. The cost of retiring in a different country is also becoming more competitive as new countries join this market and there is greater competition.
Why Retire in Asia:
Retirement in Asia varies from country to country but generally, most Asian countries offer the following benefits for those who choose to retire.
Good climate with friendly people.
Generally more secure and stable than many countries now in the West.
Improving infrastructure and growing and prosperous economies.
Generally affordable and excellent health care with insurance options provided planning is done in advance.
Ability to purchase and own your own property at a reasonable cost.
Many Asian countries do not tax income brought into their country by someone who has chosen to retire there.
Affordable home care & nursing for the later years of life.
More supportive culture for the elderly and retired.
With people living longer and being more health aware more of us are choosing a hybrid type of retirement. This often involves having a base in Asia, your retirement home, yet spending a significant amount of time traveling for pleasure to meet family and friends. Many Asian countries are ideal for this kind of retirement as they offer good security while you are away and it is easy to get help to look after your house or pets while you are away.
Who might consider retiring in Asia?
Recent surveys have shown a growing trend with regard to people of other nationalities retiring in Asia. Favourite destinations are places like Thailand, Malaysia, Singapore, the Philippines, Indonesia, and Vietnam.
All types of nationalities are making this decision from Australians and Americans to Europeans, Brits, and also other Asian nationalities like Koreans and Chinese. If you wish to retire in Singapore or Malaysia you will need to demonstrate significant wealth to make this worthwhile but in Singapore, you will get one of the best standards of living in the world.
The other locations in Asia like the Philippines, Thailand, and Vietnam appeal to the ‘budget’ retiree. They are far more affordable and still offer a high standard of living. It would be fair to say that a significant proportion of people who retire to places like the Philippines do so because their income/pension goes far further than it would in their home country meaning they can get more out of their later years.
The more affluent also enjoy Asia due to high levels of security and the ability to have drivers and maids at a fraction of the cost in their home country. For some retirees, the ability to also be able to afford ‘carers’ who can help them as they get older means they can stay in their home for longer and with better support than they would in more Western countries.
A significant percentage of International people who retire in Asia will also do so because they have a foreign partner or spouse. For these people, it should be even easier to retire in Asia as they will have a partner who can more quickly help them settle in.
Preparing for Retirement in your new home country:
Whether you decide to retire in Asia or anywhere else in the world, it is important to spend sufficient time there before you decide. `Deciding to retire somewhere based on having visited a few times for holidays will definitely not work as having a holiday somewhere and living there is very different.
You will also need to check that the hobbies, sports, and interests that you want to enjoy in your retirement are available and that you will have a community to socialize and support each other.
Clearly the ‘financial planning part’ is going to be very important and the struggle here is finding the information you require to help you with your calculations. This will be significantly easier if you initially spend 6 months getting used to your new home before you make major decisions.
As a coach, I would always recommend an initial 6 months trial period for many reasons.
Generally, most countries will cover you for medical insurance if you move abroad for a year before these options are no longer available.
If after 6 months you decide that your idyllic retirement spot in Asia is not what you imagined you can easily go back or look elsewhere without having wasted money buying a property, car, and other items you may no longer need and which might be difficult to sell.
Over the past few decades we have found more and more people choose a hybrid retirement where they may start in Asia and then maybe later move back to their country of birth or nearer to family. With health improving and people living longer, hybrid retirement is becoming more attractive.
With regard to finances when retiring abroad there is much to consider and plan before you move. Generally, a coach can help clients when making these decisions by running through a checklist of the basic things to get ready for:
Will you need a local bank account where you are moving to and which bank should you use?
Do local banks have the same security and protection offered by the banks you have used in your home country?
How easy is it to transfer money from your pension or ‘home account’ to the new account where you are living and what are the costs?
Depending on the circumstances consider using a foreign exchange company to help when converting currencies.
Will your new account provide a credit card or should you keep your existing cards?
My advice to clients with regard to bank accounts or investments in their new home country in Asia is not to move all your assets there.
Generally, banks in places like Thailand, Malaysia, the Philippines, and Vietnam do not have the security offered by the major banks in the West. They are also more inefficient and harder to deal with when you are traveling potentially making it difficult to access your funds.
Bank accounts in these countries are also more bureaucratic and slow when it comes to the account holder dying. It can take forever for a beneficiary to access funds and the costs will be very high.
As a coach, I would always encourage clients who decide to retire in Asia to keep their ‘home accounts’ and maybe set up an offshore trust if they are considering retiring abroad permanently.
The use of ‘Trusts and Wills’ is a specialist area, that impacts those who move abroad to retire. Consideration needs to be given to this complex area of financial advice. Ideally, this should be done before your move or as early as possible if you are concerned about making sure your assets are passed on to your beneficiaries as easily as possible.
Trusts can also be used if you retire abroad to protect your assets if you do get into trouble when you retire abroad as these assets are protected and cannot be accessed by any party unless due to criminal reasons. A Trust can also reduce many taxes and ultimately puts you in control of your assets and better able to choose what happens when you are no longer around.
Insurance
This is perhaps the most talked about area when it comes to retiring in Asia. This is because medical insurance can be very expensive as you get older and if you have pre-existing health conditions an insurer may not even offer cover.
Many medical insurance providers also stop insuring clients after a certain age so this needs careful planning often way before you move abroad to retire. Depending on your home country it may also be possible to get medical insurance from ‘back home’ but this is becoming less common as countries try to reduce costs.
It is possible to reduce the cost of medical cover but this is a complex area and needs careful planning often well before you retire.
How will you fund your retirement?
The majority of clients who choose to retire to Asia will have an income from their pension. This is often the basis for the country which will host them being happy to provide them a ‘retirement visa’.
This income will generally come from a company or government pension scheme. More and more it also comes from a person saving until they retire and then converting their savings into ‘retirement income’. This is also a complex area and how you choose to convert that income will depend on interest rates when you retire. You will also need to consider currency risk and how to make sure your income grows to keep pace with increased living costs.
Depending on the pension you receive and the surplus you have each month after all expenses it is worth considering how you will protect yourself from inflation and a potentially fluctuating exchange rate.
Over the past few decades generally, most currencies in Asia have depreciated against the US Dollar so it makes sense to not convert all your assets. Keeping investments in US Dollars in either cash, equities, property or bonds will based on past performance provide you greater security and growth than converting all your assets into the local Asian currency.
If you therefore have other assets like property and investments as well as your pension most International Financial Planners would recommend you retain these accounts. Clearly, you would want to review them and things to consider would be the following:
Property - Does the property you have provide an income to help sustain your retirement? Alternatively, is it somewhere you will continue to use regularly which at the moment you want to keep?
Many retirees if they have property will keep them initially but as they get older and have less time and energy to manage these assets they will begin to sell them off. Financially this may not be the best decision especially if the property generates a great income and also offers good capital appreciation. In the later years, this may not matter as other things may be more important like easier access to money in case of unforeseen expenses and occurrences.
Property can also be notoriously hard to pass on to your heirs and expensive with regards to taxes while if you sell it this becomes much easier.
Equities/Funds - With so many people now working abroad many of us will build up funds and equities in places like the US, UK, Europe, and Asia. Often people are confused about what to do with these assets and end up spending unnecessary taxes and paying for accountants in different countries as a result.
Generally, those who decide to retire in Asia will be better off moving these assets outside of the above countries into a different structure which will save them accountant fees and taxes. This is again a complex area where it is best to get advice as depending on your personal situation will be important when choosing the correct structure.
Summary:
Currently, countries like the Philippines, Vietnam, Indonesia, and other Asian countries are in the midst of significant economic growth. This is resulting in significant new infrastructure projects like metro systems, hospitals, and airports which are rapidly improving the standard of living in these countries.
These trends have momentum and will continue for decades to come as the winds of change blow favourably across much of SE Asia. This is also due to ‘political stability’ in most of Asia helping them to avoid the issues faced by both Europe and the Middle East.
For those considering retiring in Asia, it currently ticks most boxes in terms of providing a fulfilling and secure retirement. The welcome and friendly nature of the people and the rapidly improving standard of living at a very affordable cost make this an interesting option for many.
Clearly, decisions like this need to be thoroughly planned and discussed with an independent specialist who understands the issues. Sadly many who do not plan not only lose significant amounts of money but ultimately don’t make a success of their retirement.
If you are planning on retiring to Asia click on the link below to find out about the attractive coaching packages we offer to make your move to Asia a success.