Pension Investment for Retirees: If You Don’t Have One, Make One

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To some degree all saving and investment schemes and strategies are meant to provide a safety net for one’s golden years. Even more temporary investments like property flips or short term bonds are undertaken to establish a base of financial security that will (hopefully) support you for the length of your life. A pension (or pension-like investment program), however, is specifically designed to last for the long haul. So how best to secure a retirement-funding nest egg that’s working for rather than waiting for you?

QROPS

While pensions have been trimmed everywhere, citizens of the UK are more likely to have a pension than those from the US. If you happen to hail from Old Blighty and are approaching your most finely-aged years of peak maturity, consider an offshore retirement. Apart from the obvious benefits of retiring to some exotic, sun-drenched foreign clime, there are monetary benefits too. A number of the most historically (and recently) sought retirement destinations also happen to offer a much lower cost of living than Great Britain.

Furthermore, as an expatriate, you have access to Qualified Recognised Overseas Pension Schemes (QROPS). A QROPS allows a British expat pensioner to transfer their pension to whatever country they retire to, penalty-fee free, and have that scheme managed in their new home at their new home’s tax rate. And as QROPS become more popular the options expand. For instance, Malta has established double taxation agreements (DTAs) with dozens of other nation states.

That DTA structure has made Malta QROPS extremely popular in the last few years with expats looking for the low Maltese tax rate but interested in a retirement elsewhere. Offshore pension schemes have the added benefit of being flexible. Unlike many pension options in the UK, QROPS allow the holder to invest in stocks, bonds, annuities, etc. Of course, everyone’s needs and situation are different, so if you’re interested in an expat pension scheme, always do a lot of research and work through a qualified QROPS provider.

Early Access Scheme – No

“Early access” or “pension liberation” schemes (scheme as in “scheming” rather than “system” in this case) have become increasingly common in the UK. If anyone offers you a surefire plan to liberate your pension for you before you reach the 55-year age minimum, run the other direction. It’s killing the goose that lays the golden (years) egg. You’ll be taken for a ride- huge tax and penalty fees will take a great big bite out of your pension before it ever reaches you. It’s definitely not worth it.

401(k)

In the US, the 401(k) has effectively replaced the pension for most employees. This may be a no-brainer but take advantage of that 401(k). Even if you have to make some sacrifices elsewhere (restaurant or entertainment budget), meet your employer’s highest 401(k) matching offer. It’s free money and you’ll thank yourself for it later.

Laddered Bond Profile and Annuities

A great way to invest in a stable and (almost) guaranteed, longer-term money-producing investment system is a “laddered” system of bond buying. For example, take whatever chunk of money you have set aside for investment and buy five or six bonds- one maturing in a year, one maturing in a two/six/ten years, etc. If you pick secure bonds, there will always be a return staggered over years.

Annuities work better if you have a slightly larger sum of money to invest. Let’s say you have $50,000 USD to play with. Take that to an annuity dealer and ask for a tax deferred annuity and have them attach a “living benefit rider”. It’s an insurance-based investment that pays out while you’re around. So your $50,000 goes to a pool of assets with contract-guaranteed insurance protecting your money. From then on, for the rest of your life, regardless of the market’s bearish and bully turns, you’re guaranteed of a payout. So if you signed an annuity contract for five percent, you get $2500 a year. And possibly more if your principle investment does well in the market! There is the possibility of high fees that turns off a lot of potential investors.

Solid Assets

And there’s certainly always room for more tangible investments. At the risk of sounding like a survivalist “prepper”, two of my favorite you-can-touch-it assets are: precious metals and weapons. As you’ve no doubt heard a few hundred thousand times if you’re familiar with American AM radio advertisements or those in the back of gun and sporting magazines- gold, silver, platinum and their cousins will never bottom out, losing all value as many stocks will. You can sell them virtually anywhere because there’s always a market for them. (And if the price of gold ever falls beneath back down into three figures per ounce- buy, buy, buy.)

Furthermore, guns and antique weapons are one of the few investments of any kind that are virtually guaranteed to either keep their value or increase. There is a very complex economic and sociological explanation for this that I believe I have pinned down after years and years of vigorous investigation: people think they’re cool. And by “people”, I mean- mostly men. If you go the guns and gold route, however, either invest in a big, tough safe, a safety deposit box or something like it. Hundreds of thousands of guns are stolen every year in the United States. And keep in mind- when the time comes you will have to sell your cool stuff to make money. Good luck and good savings.

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