How Much Do You Need To Save For Retirement Abroad?

Understanding how much you need to have saved in your pension to finally retire can be overwhelming. Factors like inflation and the rapidly increasing cost of living, are making it harder than ever to predict how much you'll actually need.

Many people desire to have sufficient savings for a comfortable retirement, rather than just enough to survive. We all want to be able to enjoy our later years without financial stress. Having enough saved in your pension can provide a sense of security and peace of mind.

Have you been saving for retirement? Are you confident that the retirement you envision is the one you will actually have? Exactly how much will you need?

There is no simple answer, as it will depend on your personal circumstances. However, there are guidelines and tools available to help you envision the life you desire in the future. These resources can assist you in creating a plan so you can begin setting aside money accordingly.

Estimating Your Retirement Abroad

In the past, the traditional guideline for a retirement income has been roughly 75% of your current salary. This estimate assumes that you do not have any mortgage or rent payments. It also does not factor in potential future care costs, which can be expensive.

If you’re a business owner or self-employed, determining a target, based on your current earnings will be even more difficult, as chances are that your income is subject to fluctuations.

Whilst many British expats know they will not return to the UK, they are not necessarily going to stay in their current country of residence. As the cost of living varies dramatically from country to country, it's important to factor this in when making provisions.

Utilising The Retirement Living Standards

A Good place to start when planning for retirement is to ask yourself, what are your lifestyle expectations? How often do you see yourself travelling? Will you own a car? What about dining at restaurants or having enough left over for interests and hobbies?

The Retirement Living Standards (*LINK*) provided by the PSLA provide a clear image of what retired life could look like at three levels. The standards clearly show how much money is needed at each level, including guidelines for the costs of various goods and services.

The numbers vary based on whether you are single or in a relationship. They also depend on whether you reside in London or another major city. Planning on retiring abroad? The standards can also be a useful guideline for expats, adjusted to the costs of living in your new home country.

The levels are categorised as follows:

·      Minimum: Covers all basic needs with a little amount leftover for leisure activities

·      Moderate: Provides more financial flexibility and security

·      Comfortable: The ability to enjoy some luxuries with more financial freedom

For instance, the Standards say that a couple living outside London should have £22,400 per year for a basic lifestyle. This includes £95 a week for groceries, one staycation in Britain per year, and no car.

A 'Moderate' life would need £43,100 per year. This could cover takeaways, meals out, a small car, and a two-week holiday in the Mediterranean.

For most of us, the ‘Comfortable’ option will be the goal. This will require roughly £59,000 per couple per year but will mean enjoying luxuries such as £130 a week on groceries, more holidays, £1,500 per person on clothing, and enough to spend on gifts for loved ones.

Furthermore, comfortable in one country could be moderate in another after considering tax, cost of living, and healthcare costs. At the same time, the need for holidays can be removed entirely if you plan to retire in a more agreeable climate.

Planning Your Savings Abroad

Understanding these standards can give you a better impression on how much you’ll need in your pension pot to have a comfortable retirement. A pension calculator, such as the ones offered by Pension Bee, Aviva or MoneyHelper can be a great way to start planning how much you need to start saving to work towards your goals.

Working with a regulated expat financial adviser can help ensure your savings are invested correctly to meet your income requirements. Choosing the right product as a non-UK resident allows ease of access and the removal of any unnecessary tax liabilities.

Consider Investing For Income In Retirement

The right investments could provide you with retirement income as well as capital growth, with the potential for your savings to go much further. Well placed medium to long-term investments may give your money the best chance at out-running inflation and growing over time.

A carefully managed investment portfolio could generate a comfortable income in retirement, and provide you with enough to continue to live well even after you stop working.

It's important to know that all investments can go up and down, and always come with a degree of risk. It's always best to consult a professional for advice before investing your money.

Retiring abroad is an exciting proposition for many, by planning ahead and working with a local expert, you can have peace of mind knowing your retirement provisions are adequate.

If you're an expat, new to investing, and want some guidance, or are seeking advice on how to make your pension go further, our team of qualified and regulated expert advisers can help you plan for the future.

To understand how, book a free discovery call with one of our financial advisers below.