Tony Noto also helped greatly with my section on American individual retirement accounts (IRAs). I'm not sure if your clients know, Tony, how fortunate they truly are.
My agent, Sam Fleishman (the man who appears never to sleep) worked tirelessly to ensure I was given a strong publishing contract. Thank you, Sam. Now get to bed.
Finally, to my lovely wife Pele: You tolerated my mission, working as my editor and time manager – pulling me away from the manuscript when life needed living.
Introduction
On U.S. television, when law enforcement closes in on a white-collar heister, the fugitive often flees to a foreign country. He might steal a yacht headed for the Dominican Republic or fly a Learjet to the Caymans.
The 67 percent of Americans without passports might gasp at the ballsy border-bounding foolishness.2 Doesn't the crook realize that by leaving the country, he risks being buried in an Afghan cave by Al Qaeda?
Smile if you're among the world's 230 million expatriates.3 Such risks aren't likely. One genuine pitfall for expats, however, could be poverty in retirement.
Many on cushy foreign packages may scoff at my suggestion. After all, there's a large league of expats in Southeast Asia and the Middle East for which international living and working provide a fast track to Millionairesville. Teaching at international schools are couples with children, for instance, saving more than $100,000 (U.S. dollars) a year.
And the parents of the kids they teach? Most make the teachers seem like paupers by comparison. They left their home countries to work abroad in industries such as banking, information technology, oil, cosmetics, pharmaceuticals, and shipping. Many work for firms like Coca-Cola, American Express, Johnson & Johnson, Google, Microsoft, Exxon Mobil – the list goes on.
But not all expats (including millions in Europe) make buckets of money. And even those who do face financial risks.
In 2003, when I left Canada to teach in Singapore, I kissed good-bye to a defined benefit pension. Had I continued with my former job, I could have paid off a home, contributed modestly to investments, and received income for life.
Few expats have that luxury. What's worse, most don't realize they would need millions of dollars in the stock market or multiple mortgage-free rental properties just to equal, for example, the retirement benefits earned by most public-sector workers in Great Britain, Australia, or Canada.
Such benefits are globally waning. But they're still a reality, and most governments offer additional monthly cash. Social Security (for Americans), Canadian Pension Plan (for Canadians), and their equivalents for Brits, Australians, Germans, New Zealanders, and others provide income for non-expatriates. But without maximizing contributions to these plans, we can't fully open mouths to such morsels.
Most countries determine payments based on the amount of income employees earned coupled by the numbers of years they contributed to their home countries' respective social plans. Maximum Social Security payments for Americans, for example, exceeded $28,000 a year in 2012.4 Expats seeking such income from an insurance company would have to invest nearly half a million dollars in an annuity. Those retiring in 10 or 20 years would need a lot more. Inflation is greedy.
Other countries also pay cash benefits to contributors of their respective social systems. Here's a snapshot.
Currencies converted: July 7, 2013.
SOURCE: Complementary and Private Pensions Database, “Private Pensions – OECD.” Accessed April 29, 2014. www.oecd.org/finance/private-pensions/issaiopsoecdcomplementaryandprivatepensionsdatabase.htm.
Departing your homeland for a long-term contract or overseas adventure can leave you hungry – especially if your adopted country doesn't offer pensionable benefits. As a result, most expats need to save more and invest more effectively than their home-based contemporaries do.
Not all geriatric globe-trotters, however, get forced to a street corner with a busker's banjo. According to HSBC Bank's International Expat Explorer Survey, 68 percent of expats report saving more money than they could in their home countries.5 So there's hope for prosperity.
But hope on its own is a lousy strategy. You need a plan. Start by asking the following questions:
● How much money will I need to retire?
● How much should I be saving and investing each month?
● How am I going to invest?
This book provides a game plan to answer such questions, whether you're aspiring to keep up with the Kardashians or live like a Buddhist monk.
One method to create or augment future retirement income is through the stock and bond markets. But many expats get rooked. Silver-tongued investment salespeople peddle dodgy products. Expats are easy targets.
Offshore investment schemes are often slippery pitfalls, rewarding financial advisors with massive commissions, hemorrhaging their clients' profits through high hidden fees and kickbacks. Many expat advisors sell them exclusively, locking unwary folks into 10-, 20-, even 25-year schemes.
Once an investor catches on to the fee-burdened riptide, it's often too late. Those scrambling out of the water face redemption penalties up to 80 percent of their accounts' proceeds. What's worse, many overseas employers welcome financial sharks into their company seal pools. With the best of intentions, they endorse offshore pension sellers, most of whom have a single purpose: reaping the highest possible commissions from unwary workers.
Whether you find a scrupulous financial advisor or manage your own investments, you should understand how the stock and bond markets work. I'll describe how money is made in the markets, answering many of the questions you may have been too embarrassed to ask. The stock market, you'll learn, represents a collection of real businesses. Investing in them doesn't have to be risky, time-consuming, or complicated – if you do it right.
I'll show how to spend just 90 minutes a year on your investments, while thumping the performance of most professional money managers. Best of all, you won't have to watch the stock market, follow the economy, or read the dull financial pages of the Wall Street Journal.
Sound too good to be true? It isn't. Use the Internet while reading this book. Doing so will allow you to verify my warnings about specific investment products. You'll find mountains of academic support for this book's investment strategies.
If you've invested poorly in the past, you have plenty of company. Dan Weil, writing for Moneynews.com, reported that a 20-year study by Chicago-based Dalbar proves most investors are like drowning ducks. While the average U.S. stock earned 384 percent (8.21 percent annually) between 1992 and 2012, the average American investor earned just 130 percent (4.25 percent annually) on stock market investments.6
Such poor investment performance might make the difference between eating cat food and caviar during retirement. I'll guide you toward something palatable.
Once you're armed with investment history and theory, the book's next sections get more specific. I'll show
Andrew Bender, “Record Number of Americans Now Hold Passports,”
“World Expat Population – The Numbers,” Resources for Expats, International Moving Companies Moving Overseas, World Expat Population – The Numbers, Comments. Accessed April 29, 2014. www.feedbacq.com/blog/world-expat-population-the-numbers/.
“Private Pensions – OECD.” Accessed April 29, 2014. www.oecd.org/finance/private-pensions/issaiopsoecdcomplementaryandprivatepensionsdatabase.htm.
