Retirement Saving Strategies for Expats – Are you saving at least 10.5% of your income for retirement as an Australian Expat?
When an Australian expat relocates overseas for an employment opportunity, they are usually contracted by an international organization which has no obligation to make the otherwise mandated super guarantee (SG) contributions to their superannuation account.
The current rate of super guarantee required to be paid by Australian employers from 1 July 2022 is 10.5% of ordinary time earnings.
This rate is legislated to increase by 0.5% each financial year before reaching 12% from 1 July 2025.
Due to the mandated and automatic nature of super guarantee contributions being paid to Australians super accounts, it can quite easily be forgotten about by Australian expat as a means of retirement savings upon moving overseas.
Superannuation is an underrated means of forced retirement savings, particularly to those in the wealth accumulation stage of life, and so expats should look to replace super guarantee contributions by other means while living overseas.
Sometimes the allure of a higher remuneration package being offered overseas, while financially beneficial on paper, can result in no provisions being put aside for retirement as often there is a situation where a higher income leads to higher expenses and lifestyle costs.
What can expats do to replace super guarantee while overseas?
Of course, everyone’s circumstances will be different and the most suitable way to replace the super guarantee will be dictated by a range of factors.
Some examples include the length of stay overseas (investment time horizon), tax rules of the destination country of residence, and the alternative retirement schemes that are available overseas.
There are a vast number of retirement schemes on offer by overseas employers that can provide a more than adequate alternative to Australian superannuation. UK pensions, US 401k/IRAs, Canadian RRSPs, Hong Kong MPFs, Singapore CPFs, to name a few.
Each requires an investment of time to understand the nuances and suitability to your particularly situation.
A key pain point we see for expats is the considerations around repatriating these retirement schemes upon returning to Australia.
This is due to the cross-border tax intricacies that arise and will play a part in whether such scheme is suitable for you.
It’s important that Australian expats think about the future logistics of opting in to these schemes and plan ahead of returning to Australia.
Australian expat retirement saving options
Not all Australian expats will be afforded the option of an overseas retirement scheme, for example those in Singapore where participation is usually restricted to citizens and permanent residents, and so need to look at alternative retirement saving options.
The option to make voluntary super contributions while overseas is an obvious one and may certainly be suitable to some.
There are however instances where contributing to super can result in tax implications with your overseas tax authority, such as the IRS in the United States.
See our Guide on this here: https://atlaswealth.com/au/news/tax-treatment-of-superannuation-for-us-based-expats/.
While the rules pertaining to superannuation are mostly the same for a non-resident expat as they are for an ordinary Australian resident, there may be other, more tax efficient retirement savings options you can employ outside of super to ensure you are still savings for retirement in an effective manner.
Some common examples are Australian listed securities such as shares, managed funds, or bonds through a diversified investment portfolio, offering tax advantages, flexibility and liquidity should your circumstance change.
Again, the suitability of this may not be for everyone.
While the prospect of an overseas employment stint is exciting it’s important that arrangements are made so to ensure your retirement savings are not left unattended while overseas.
Naturally, you would like your finances to be in a better position because of your overseas stint.
There are a number of considerations to think about when choosing an alternative retirement saving solution.
Sometimes there are too many options, and you may find it helpful to speak to a licensed Financial Adviser about how you can ensure you are continuing to save adequately for your retirement.
If you wish to discuss the options available to you, please feel free to get in touch through the Contact tab on our website.