One of the key considerations for retirement planning is knowing both when you want to retire and when you are ready to do so.
While this may sound simple in theory, there are multiple factors at play that can influence whether you will be able to enjoy the lifestyle you want with the wealth you have accrued.
You may want to think about how you’ll spend your time, what will give you a sense of purpose, and whether you’re personally ready to leave your working life behind.
On the financial side, moving abroad can have a significant impact on your retirement prospects and can be a key determinant in when you retire and the lifestyle you are able to have.
Read on to find out how you can know if you’re ready to retire, and why being abroad could change it.
Setting clear goals can help you arrive at a target figure
Perhaps the most important step to take when trying to determine if you are ready to retire is to set clear goals about what you want your retirement to look like.
By doing this, you can then find figures for how much you will need to achieve those goals, giving you a clear financial target to aim for.
Consider the following questions:
- What’s your ideal retirement age?
- Where do you want to live in retirement? Will this affect your travel costs?
- What big trips, house renovations, or other one-off expenses do you have planned?
- How much are your regular outgoings, and are they likely to change?
- Are there any activities or pastimes you would like to start in retirement that could add to your expenses?
Of course, you don’t need to know the exact answer to each of these questions. But having a general idea about them can give you the direction you need to feel confident in your retirement planning.
Once you understand how much is likely to be enough, you can make informed decisions about when to retire rather than continuing to accumulate wealth without a clear purpose.
A financial planner can work with you to find answers to these questions and more. They can use cashflow modelling to project how your income, expenditure, and wealth could change throughout retirement, helping you understand how much you may need and whether you are on track to achieve it.
Cashflow modelling can also take into account factors outside your control that could affect your finances, such as:
- Inflation
- Market movements
- Healthcare and later-life costs
- Life expectancy
You can then run multiple projections to see how your finances would fare based on different decisions you could make, such as retiring at 60 rather than 65, or living in a different economic climate.
Develop a sustainable and efficient retirement plan
Once you have a clear target for what you will need to retire with confidence, you then need to develop a plan to get you there.
Retirement planning has two stages: preparing for retirement and then maintaining the plan once you have retired.
When preparing, it’s a good idea to conduct regular reviews to help ensure you remain on track to reach your goals. You may need to make adjustments as you go, which could include:
- Increasing your pension contributions
- Putting more money into your investments (if still eligible)
- Rebalancing your savings and investments to help support long-term growth
- Extending your retirement date by a year or opting for a phased retirement instead
- Downsizing to help bring you to your goals quicker
Then, once you have retired, the focus moves to ensuring you stick to your plan while remaining flexible as circumstances could change. This may include:
- Creating an efficient withdrawal plan that balances your personal pension, savings and investments, State Pension, and any other forms of income you have, such as rental property, while accounting for the tax rules where you live
- Adjusting your budget in response to inflationary or market pressures
- Reviewing your expenses and withdrawals regularly
A financial planner can help you get on track to achieve your dream retirement and develop a sustainable income strategy once you stop working.
Moving or living abroad can influence your preparedness for retirement
If you’re an expat or you’re planning to move abroad for retirement, it’s important to factor this into your plans as it could significantly affect your financial targets.
For instance, if you plan to move to a country where the cost of living is typically lower than in the UK or US, your budget may end up being considerably lower than you think. Of course, this can also work the other way round if you move to a more expensive country.
Moreover, it’s important to consider how living abroad could affect other parts of your finances. For example, you might need to travel more if you want to see your family regularly. Or there may be different tax rules in your new country of residence, which could be either more or less advantageous to your overall position.
There could also be issues related to currency fluctuations or local inflationary pressures that are important to build into your plan. For example, if you receive retirement income in pounds or dollars but spend primarily in euros, a weakening of the pound or dollar against the euro could reduce your spending power and mean you need more wealth than your original projections suggested.
Finally, you will also need to consider your healthcare plans and how living abroad could affect the cost of care or medical treatment, if you need it.
As such, it’s important not to simply transpose a retirement plan you developed in the UK or US over to a new country. You will need to work with a financial planner with international expertise to ensure your plan accounts for local tax rules, living costs, healthcare, currency risk, and other considerations specific to your country of residence.
Indeed, if the country you’re moving to has a lower cost of living than in the UK or US, a move abroad could mean you are closer to being financially ready for retirement than you think. However, you need to ensure you have covered all bases before you take the leap, which is exactly where we can help.
To speak to a cross-border financial planner, get in touch.
Email contact@ambient-wm.com or call us on +34 658 077 450.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.