Retirement Income

living overseas, retirement income, expat, pensions, overseas pension.I was never a good saver, I was careful with money and how I spent it, but saving for a rainy day, nope, I was not the best saver at all. I lived for the day mostly, spending huge amounts of money on travel especially to visit my family in England and Scotland, whilst i was living in Australia, USA or Mexico. I spent a ton of money on travel just for the fun of it all, this 40 years of experience helps me add credence to this website. Right?

I never gave retirement, the idea of not having to work but still getting an an income, much thought. I never stressed over it because somehow I just knew that all would be well, that “the Universe would supply me with what I need”. Yep I have actually believed this line of thought for about 20 years now and so what we receive in our life is related to what we think we are worth and think about. Did you ever read The Secret? This book covers what I just mentioned, which for me is an amazing gift that we all have if only we knew it!  I digress…

So, rushing headfirst into 60 years old,  I began getting statements from the USA Social Security Administration that informed me that if my income trend stays the same from 55 until when I retire then my pension payment was going to be about $1,800. A month! Woah….  and even MORE if I delayed retirement.

I always thought that the SSA, in the USA, pension was around $500 a month and you were such a loser and totally screwed if that is all you had to look forward to in your 60’s. But $1,800+ a month at the earliest possible retirement age of 62, now THIS gives me options. I think. To think, in my 20’s and 30’s I tried like heck to get that “FICA thing” removed from my paycheck deductions. So glad I wasn’t successful. That was my retirement fund and I WAS saving after all. Lucky me.

Many people are FORCED, thank goodness to pay a tax which funds their government pension, in the USA this is FICA tax. The more you earn the more you pay in tax and the more you receive back with this forced savings account with your government in Europe, USA et al. Unfortunately, the ceiling of how much you get back as an high income earner, pre-retiremnt is much lower than those with lower incomes. See this chart for an explanation:

Can your retirement income plan skip the savings account  - The Globe and Mail copy

For example, where I worked in the USA for 30+ years this chart shows a “replaced” retirement income from the government of about 33%. I wish!! Mine is around 25% of my pre-retirement income. Low income earners seem to be better off, but not necessarily, what they get back in the case of USA is 38%, but of their low pre-retirement income. Make sense?

So what does this mean for us all? Well, this is good news for low income earners prior to retirement. Because their lower income could only support  a lower standard of living, they are more likely to be happier in their retired years with their government paycheck. High income earners that rely solely on a government pension, well, you will have the biggest adjustments to make. Not at all a horrible position but your attitude and acceptance of what must be, is paramount to enjoying your golden years. In expat communities in Ecuador, Mexico and Thailand there are many miserable expats, who are often complaining about their lives and how unlucky they are with love, money and health. I suggest they look around at the people who are indigenous to their new home country and count their blessings!!

A side note: If you are young and no where near retirement age, then do yourself and friends a favour: pay retirement tax! As it turns out I have many friends who were realtors, business owners and other self employed positions. They paid ZERO FICA, which means they have zero pension from the SSA (Social Security Administration). Assuming they have zero savings then what happens to them? Its not pretty at all.

So if you are pushing 60 and have worked most of your life in the USA or most European countries, you are probably not as bad off as you think. Be willing to make some changes and sort out your priorities and your Golden Years will be waaaay better than you ever could have ever imagined possible. I know mine are. So far.

About John Arnold