Welcome to Radio Aysha. Today, I want to talk to you about how to navigate pension planning when you're an expat. And I want to tackle that topic because it's something that we often live to way too late in our life. And there are challenges that apply to everybody. But specifically, there are even more challenges that apply to expat and we're going to dig into it.

So the first challenge when we are leading an expat or an international life and thinking or not about pension planning and retirement is that you typically need a number of years of contribution in a specific country. before you can qualify for pension benefits at retirement. And so that means that if you spend two years there, three years here, et cetera, even though you are paying and making social security contributions, these Years may not be enough to qualify for any kind of benefits when you reach retirement.

And usually, you would need to spend 5 to 10 years to be able to qualify for anything. Now, it depends a little bit of the country and it also depends on the agreements that different countries have with each other. And so the point is that it's not always a guarantee that you will get benefits for all your years of contributions.

Then another thing, if you move from one country to the other, there are often period of times when you are out of work and not contributing, either because you are looking for a new job in the new location. Or, as is often the case for women, maybe you're following your husband to a new country and he has a job immediately there, he maybe has been transferred or he's been recruited from abroad, but you don't have a job there at first or at all for several years.

And so that means that there are many years where you don't contribute to the social security system, to the pension system. And even if at some point you start a job in the new location, then again you need to have a minimum number of years of contributions before it starts counting for benefits later on and you might not reach that number of years to actually get any benefits. And that's an issue.

And then there are other aspects, other challenges. So, for example, the fact that the systems are different from one country to the others, it's different rules, it's different logins, it's different languages. And so it might be a little bit difficult to make sense of all of that.

And then especially access these benefits, especially If you don't keep a good record of your data over time, let's say you worked in the US or in the UK 15 years ago or even 20 years ago and then you might not necessarily still have your data or your social security contribution dates or your social security number or even, for example, your phone number, which is often very important to be able to log in and access kind of anything, right?

So you don't have your local phone number, you never really changed it in the system when you left. And so now, many years later, you want to look at your retirement and prepare, but somehow it's difficult to access all your data and see what you can be entitled to, never mind actually getting benefits paid to you.

Now, some other challenges is that Typically, and that I've already mentioned before, but it's worth repeating, experts like pension experts are very single country oriented. And so they know very well the local rules and they might advise you on certain products and course of action. But they don't necessarily benefit you if you are living an international life and if you are moving to another country a few years down the line.

And then mind you, these experts are often very expensive and whether they're expensive or not, what's often the case, actually most of the time, is that They are actually recommending you expensive products, expensive pension related investment products like life insurance and other pension schemes.

Either they work for a company that sells these products or they are incentivized. It's actually their job to sell you these expensive products. Or if the expert is independent, they very often receive commissions for selling you these products. And especially if you go to a pension expense and you don't have to pay anything, they have to somehow make money.

And the way they do is by selling you these expensive products and then they get commissions out of it. Now, don't get me wrong, most of the time, or very often, these experts, they think they are doing the right thing. They actually believe this is the right thing. But they are maybe not that educated on long term investments, investment growth.

They're also definitely not educated on multi country pension planning. And so they recommend you, often in good faith, something that's not really suitable for you. Or that is way too expensive, which means you contribute. And at the end of the day, it's like the most expensive savings plan you can get.

Because what you get is, if you're lucky, the amount of contributions you, you actually made. But there is no growth to it, right? That's why I say it's an expensive savings account. And so I've experienced that firsthand, all of these issues. For example, I spent four years in New York and there I changed job.

So. What happened is that I was first working for a company, uh, and this company actually, by the way, uh, they are allowed to do that in the US did not contribute to a pension scheme for me for the first 12 months of employment. And so I have a gap there even though I did make social security contributions and then I actually had some time in between two jobs because I was looking for the new jobs I left.

I was not very happy there. I was also. I was expecting my, uh, first child and I was very sick, pregnancy sickness at the time. And so I took some time off and then after, uh, our son was born, I looked for a new job. And so I have first year, no pension contributions because of the employer kind of rules.

Then I have this gap of, it's about, I think, 18 months, and then I have a new job. where I was contributing in full. Okay. But that means that over these four years, I have very inconsistent pension contribution. And on top of that, I didn't keep much of a record and it was actually a little bit of work to find back my social security number and to figure out what it means for me in terms of retirement with regards to the contributions that I made there.

And obviously, When we talk about this topic of pension planning, there are also emotional aspects to it. There is uncertainty, there is a fear of making mistakes, maybe now, of having made mistakes in the past, and Often, there is also this kind of mistrust in the system. And if I look back at my own experience, when I was younger in my early 20s, and quite frankly also in my early 30s, I was not that interested in that pension topic.

And I think it's the case for many people, okay? And I was also very much into The, the, the state of mind that in any case, by the time I retire, there will be nothing left in the system for me, right? I was thinking, oh, I cannot trust the system, population, aging, et cetera. It's not worth the trouble to contribute or to make sense of it or to maximize it because by the time I get there, I won't get much of anything.

So why bother? Okay. And quite frankly, there is definitely something to it. Okay. There is definitely something to it in the sense that the further we advance, the less there will be for retirees simply because of population aging, but also because the retirement system is not adapting well and fast enough to the fact that the population is aging.

And so it's paying outsized compared to what's available for them to current retirees. And so this is at the expense of the younger generations. And at some point the wheel will stop spinning and then there will be much less for the younger generations. So. That's another topic, but it was to illustrate how I felt for a very long time about the pension plan.

And because of that, I made a few things that, looking back, I would have done differently. So, for example, there are some Ways where you can catch up on miscontributions in the social security system in Switzerland. But you can only do that for a certain period of time when you move back to Switzerland or when you move to Switzerland for the first time.

And looking back, I think it would have made sense for me to do that. But at the time, I didn't care much about it and I didn't know much about it. Either I was not informed as I should. I think it's important to get informed when you move to a new country or in my case when I was moving back after many years abroad.

And what's the best way to go about pension planning once you start getting interested in this topic and really you want to tackle it after many years of not doing that or disregarding this topic of maybe just not knowing where to start, okay? And obviously what you want to do is to learn about the basics of how pension systems work in general.

Okay. Once you've done that, you want to look at the specific local rules that apply to the countries where you live now, where you will go, and where you have been, okay? And there are some ways to go about it. It sounds a little bit daunting if you're doing that on your own. And many people think, ah, I'm looking for an expert who can advise me on that.

And unfortunately, especially if we're talking about a multi country situation, these kind of international pension experts don't really exist. You also want to educate yourself about things like bilateral treaties because countries have agreements between themselves on how to deal with pension and assets and taxations, etc.

And so it means that the rules might be different for you if you are living in a specific country that have an agreement with that country that you're looking at. And That happened to me with regards to my U. S. pension and social security benefits and that of my husband who passed away. When I was looking into my survivor or widow benefits and orphan benefits for my children, I first looked at the local rules and it's only later that I Got to understand that actually the local rules or they are written don't really apply to me because there is a bilateral agreement between Switzerland and the US, which changes everything.

Okay. And I have a whole episode about this, which is called how I almost lost 400, 000 and that's a true story. So make sure to check it out. And another thing is you just want to think long term because most of us are caught in the moment. Trying to balance our expenses with our revenues and planning for the short to midterm.

But actually, it's important, especially when we talk about pension, about keeping our lifestyle in retirement, to really look at this long term perspective, looking at what are the contributions that I've made so far over the years and decades? How do I see my life? Going forward in the years and decades to come, what about retirement, what about contributions?

What do I need to do now in terms of additional contributions, which, by the way, are not always beneficial, but that's another topic. And in terms of investing on my own account privately to compensate for the fact that I'm an expat and that I might have some irregular Contributions or I might have made contributions for several years and these contributions don't really count in the sense that I'm not going to get benefits for them.

So it's really important to get that kind of long term thinking and mindset. It's a bit like Planting trees. At the beginning, there is not much to see and it takes a long time, but over years and over decades, then that tree grows and provides shades and fruits and becomes very valuable for our lifestyle.

And there are two tips that I would like to give you. The first one is more like pragmatic and practical and it's simply to keep a good record. of the contributions that you have made, and specifically, maybe not the exact contributions, but Keeping a good re record of any kind of number or ID that you have the names of the companies, the names of the social security, uh, institution, and to keep a good record of when you contributed and the data that's associated to it, because when you leave a country, you might not think much of it, or it might still be a little bit fresh in your mind.

But it's not going to be necessarily the case 20 years down the line. So it's really important to keep track of all these things, especially because over time, over years, over decades, things change and they modernize the system, the access, and so if you don't have your phone number anymore. If you don't have your account information or your ID, it will be very difficult to get access back to it.

It will be a lot of headaches and you might actually even give up at some point, which would be a real pity. So it's important to keep track so that when the time comes. You are able to really access your benefits. And in my case, I have made social security and pension contributions in the Netherlands, in the US and in Switzerland.

I was also in Dubai, but there obviously there is nothing. And so I know I have the records for my social security and pension benefits in the Netherlands and my social security benefits in the U. S. because at the time I was able to pull out my pension benefits out of the U. S. system, but I obviously still have my social security contributions that are valid over there.

And then another tip which is applicable to everybody But it's even more important for expats and even more important for a woman, okay, is invest privately to counter the lack or diminished contributions that you may have made over the years due to your lifestyle, okay? And I say it's important for everybody because as I mentioned earlier, Younger generations are penalized by the pension system, which is paying out too much to current retirees compared to what's available to them.

And so it's important to prepare ourselves for everybody for when the time comes. And it's even more important for expats and for women. And also, by the way, for people who work more like on a Freelance, basis, working for themselves or independent consultants, et cetera, because Often, pension planning is lacking and contributions are lacking for these people without them really looking much into it.

They have it in the back of their heads, but they have other things to worry about at the moment and the years go by and when you come close to retirement, it's really a problem. One thing you can also do that's often advantageous, although it's not available in every country and it's not advantageous to do that in every country is to look at tax advantage accounts that are linked to retirement.

So we have them in many countries, we definitely have them in Switzerland, you have very good ones in the UK, and you have them in different countries, like in Germany, where usually they are actually not very cost efficient. And so when I look at different plans from my clients, often I'm like, oh my god, this is terrible, you're better off actually skipping the tax advantage altogether.

And investing privately, because over the years, you will actually get much more, even though you are not getting a tax benefit. But recently, during one of our Q& A calls, one of our clients, Valentina, came up with an alternative in Germany. Offering a tax advantage pension link account that I actually thought, yes, this looks actually quite beneficial.

It's fairly new, so we will see how they develop. But things are starting to change in Germany as well, where usually all these tax advantage accounts were actually not that beneficial because they were crippled with fees. When you know the basics, you know what to look at, then you can start finding and planning for yourself and make decisions that are beneficial for your situation.

So in this case, Valentina, she was also looking to move back to Spain. And so that brings another aspect. Is it worth it to do that? What happens when she moves to Spain? But because of what we teach in our program, she was able to figure that out. All right. So. To conclude on this topic, here is a recap of the key strategies I recommend for future proofing your finances.

The first one is quite simple, yet important, is to keep a record of all the pension contributions that you have made, maybe not the exact amounts, but at least your ID, your account number, and also the name of the institutions that are concerned or that have received your money. And also, especially the times as in the months and years during which you make contributions in different countries.

The next thing is to educate yourself, okay, so that you are able to make strategic decisions on time to maximize your benefits when you retire, to not leave money on the table, and to ensure you can Keep your lifestyle in retirement and to really be able to do that, my last key tip is to invest privately to compensate for the fact that you might not have made contributions consistently and also to prepare for the fact that the more we advance, the less there will be for us in the pension system.

Now. One caveat to that, make sure you invest the right way, in a way that's cost effective, well diversified, in a place where your money can grow. And so for that, don't go to an insurance company selling you one of their terrible life insurance policies. Actually 99. 99 percent of all insurance life policies are rubbish.

When you do that as an investment where you get money back later. And also, don't go to your traditional bank and invest in one of the expensive regular bank funds, because this is not how your money can grow over time. But the first thing to do is to take action, to really start doing something about it.

And you can start with keeping a record. You can start with educating yourself, and then you can take it from there. Now, if you would like to take it to the next level. We do cover. Pension and tax planning in a flagship program, Invest at REST. And we are actually coming up soon with a smaller course called Tax and Pension Playbook.

And it's not quite ready yet. It's a course specific for expats. If you have any interest with that, I'm going to drop the link for our waiting list. And then as soon as we are ready, we will send you more information about it. So that was that, wishing you a very nice rest of the day, and I will see you in the next episode.