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How Much Does This International Lifestyle Actually Cost You?
By Bradylee McGeough 13-May-18
In a former life, I helped people with their retirement accounts. Yes, it was that corporate style, competitive job that seemed to feed off of my very soul, but I remain grateful for the formative experience and for the lessons learned. Mentioning “retirement accounts” at the beginning of an article is precarious, as so many readers will simply toss it aside and dismiss it as so much magical math. For those of you still with us, please consider the state of the international teaching job market and the fundamental reason why so many schools don’t offer effective retirement packages. Why don’t more international schools offer effective retirement packages? They don’t have to. The job market doesn’t require it. Many people seem to be clueless about the importance of retirement savings. Many international teachers are temporary or peripatetic, and so a long-term benefit holds little appeal. Mostly, international schools don’t have to offer good retirement packages because we, as a labor pool, make few demands for it. By and large, we have no unions, so we don’t approach our employers from a position of strength. Please, don’t be alarmed: being clueless about retirement accounts is not uncommon. What is the value? folks wonder. What is the importance? Why should I do a transfer or rollover? Why not just cash it out and buy a nice leather sofa? Here is why: after you’ve sat on your sofa for thirty years, you will have an old, decrepit, worthless piece of furniture that you won’t be able to give away (not that it will last that long anyway). By contrast, US$4,000 in a modest retirement account over the same time period will end up equaling more than US$30,000, even if you don’t contribute another penny (that is 32 years at a 7-percent return). If you think that 7 percent is unrealistic, consider this: “Historically, the 30-year return of the S&P 500 has been roughly 11 percent,” (Dave Ramsey.com). You can check out the website and the calculation. Incidentally, an 11-percent return would create a US$112,000 value over the same period. So, that is one expensive sofa! I realize that we educators are a rare breed, and that international educators are rarer still. I know that, as a group, we don’t place much emphasis on money, consumerism, and materialism. But what exactly are we trading in? The salaries for even the best international schools are comparatively modest for what a similar career path would lead to in the business world. On the whole, we are overwhelmingly dedicated, spirited, committed employees. While I can’t give you financial advice, what I can tell you is that, if a school doesn’t propose retirement benefits, I don’t seriously consider working there. My wife and I were just in and out of the job market during a blessedly short recruiting season, and I asked each of our interviewers about the retirement packages. The responses were wildly dissimilar. To further illustrate what we trade in as a group, many of us, U.S. citizens in particular, are not contributing to social security (or the equivalent) while we are away from our home countries in pursuit of happiness and adventure. This means that, many years from now when all of our schools are but cherished memories in our minds, we will go down to the government office for our pensions or social security benefits and find that our monthly benefit has been drastically and irrevocably reduced because of the consistent, big fat zeros in our calculated averages. To belabor the point, I would argue that many of us are required by local laws to contribute to the pension scheme of the local government. Due to language barriers and the difficult nature of navigating this particular element of the international lifestyle, many of us don’t realize that we can often reclaim those amounts upon leaving the country. This will often take some know-how and perhaps the aid of a local agent or accountant, but that is your money. Why leave it on the table? In countries such as the Republic of South Korea and Japan, the process of reclaiming the amounts you have contributed to the national social security or retirement pensions program is standardized and foreigner-friendly. However, as most internationalists know, these things can vary dramatically from one country to the next. I would encourage you to seriously consider these nuances as part of your overall compensation package. Then, the question becomes: What happens to those amounts after you retrieve them? The end of contract “bonus” amounts can be substantial in some countries, largely due to the retrieval of retirement benefits. Unfortunately, successfully transferring or rolling that into an existing, tax-sheltered retirement account between countries is very unlikely. However, do you tuck the funds away somewhere and let them grow or do you take a trip to Paris or some other lovely place? In my former life in finance and even in my current role as an educator, I am occasionally asked “When is the best time to start saving for retirement?” Although I have worked with many different age groups and within many different cultures, my answer is always the same: now.
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This is why it's more important then ever for expat teachers to read Andrew Hallam's newest book, Millionaire Expat: How To Build Wealth Living Overseas.