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Offshore Retirement Plans

 
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jtomstone



Joined: 12 Nov 2008
Posts: 14

PostPosted: Thu Jan 03, 2013 1:55 am    Post subject: Offshore Retirement Plans Reply with quote

I'm considering teaching in many different countries over the course of my life. The problem is I still want to save money for retirement, but as far as I know I cannot contribute to a retirement plan in my home country (RRSP in Canada).

Are there any offshore plans that are reliable? Are most of them a scam?
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tttompatz



Joined: 06 Mar 2010
Posts: 1951
Location: Talibon, Bohol, Philippines

PostPosted: Thu Jan 03, 2013 2:46 am    Post subject: Re: Offshore Retirement Plans Reply with quote

jtomstone wrote:
I'm considering teaching in many different countries over the course of my life. The problem is I still want to save money for retirement, but as far as I know I cannot contribute to a retirement plan in my home country (RRSP in Canada).

Are there any offshore plans that are reliable? Are most of them a scam?


It depends on how long you are out of Canada for an whether you have finite plans to return.

The only difference between a retirement plan and an RRSP is the tax shelter (RRSPs are before (Canadian) tax income and retirement plans are after-tax income).

For an offshore Canadian it makes no difference since, as a non-resident, your income is essentially not taxable in Canada anyway and chances are that your tax bracket in your foreign country of residence is substantially lower than your tax bracket in Canada.

IF you are only out for a year or so you can be deemed to be resident in Canada and since your worldly income is taxable you can also hold and contribute to an RRSP.

Since off-shore (private) plans are taken from after tax income you can use any combination of savings that suit your need for your future plans (mutual funds, purchase of land, certificates of deposit(term deposits), etc.)

.
.
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scot47



Joined: 10 Jan 2003
Posts: 12302
Location: Ultima Thule

PostPosted: Thu Jan 03, 2013 12:21 pm    Post subject: Reply with quote

Mutual funds ? Maybe getting some real estate that you can rent out.

I did not take my own advice !
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johnslat



Joined: 21 Jan 2003
Posts: 12684
Location: Santa Fe, New Mexico, USA

PostPosted: Thu Jan 03, 2013 2:06 pm    Post subject: Reply with quote

Dear scot47,

Which is why you are now sleeping in doorways after having wrapped old newspapers around your shivering frame.

Regards,
John
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Hod



Joined: 28 Apr 2003
Posts: 948
Location: Home

PostPosted: Thu Jan 03, 2013 8:14 pm    Post subject: Reply with quote

You need independent financial advice from at least three advisors in your home country. Plenty of people abroad will claim to be qualified and look to sell you some offshore scheme, but don’t talk to them even if it means delaying for a year until you’ve researched and can get home to set up a scheme. Financial regulation in Canada must be a lot tighter than some destinations you’ll choose to teach in.

The problem with offshore schemes is they require a lot of management and are very expensive. This is where salesman pull wool over eyes, tell you nothing good comes cheap or other rubbish such as 3% commission isn’t much. Einstein said the most powerful force in the universe is compound interest. If you deposit $25000 for 25 years with an interest rate of 3%, you’ll have over $45000. The same sort of thing will happen in reverse with those “little” fees. Your money will be syphoned off for the fund managers and salesmen.

In the UK, if you ask any independent financial advisor if they are 100% independent, they have to answer truthfully. If they’re selling one type of scheme only, they have to tell you. That one scheme might not even suit you, but if that’s all they sell, they will try and sell it to you anyway. That’s legal but very wrong and happens every day. The best way to avoid this is to use only an independent advisor. Pay him 100$/£/€ an hour if necessary, because you’ll paying a thousand times that in commission otherwise.

As for the question “are offshore schemes reliable?”, all private pensions are made up of investment funds which contain stocks and shares, property, etc. If the stock market performs badly, so will some of these investment funds. In theory, you can avoid being wiped out by a collapse by having a diverse portfolio which is regularly reviewed as you can change to better investment funds if need be. Again, financial advice…

For me, I avoided offshore funds because the fees were huge. I chose to take pensions in the UK and Germany, because I paid tax in both these countries. If you are 100% sure of being nomadic for the next decade or two, maybe an offshore scheme is the only way, but the fees and the problems with the right product mean it’s one of the hardest pensions to choose.

Finally, doesn’t Canada offer any sort of state pension? If so, I would certainly make sure you are eligible.
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naturegirl321



Joined: 04 May 2003
Posts: 8996
Location: home sweet home

PostPosted: Sun Jan 06, 2013 2:34 am    Post subject: Reply with quote

I avoided offshore as well. I did research, asked around here and there and on Dave's. Spent my vacation at the library and looked at figures about the top advisors and the index and decided to do it on my own.

Also, offshore seems a bit iffy. Check the legalities of it.
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Guy Courchesne



Joined: 10 Mar 2003
Posts: 9401
Location: Mexico City

PostPosted: Sun Jan 06, 2013 10:30 pm    Post subject: Reply with quote

We've gone with real estate and will build from there with other properties, outside Canada in our case.
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jtomstone



Joined: 12 Nov 2008
Posts: 14

PostPosted: Tue Jan 08, 2013 2:18 am    Post subject: Reply with quote

Thanks for your replies.

I'm not sure exactly where I'll be over the next decade, but what I want to do is just throw my money into a low-cost index fund and let it grow, tax-free if possible.

I don't know the best way to do that if I'm outside Canada (if I was in Canada for the long-term I would put it away in an RRSP). I was looking into buying some Vanguard funds as they are highly regarded. Can I purchase those through an online brokerage and then pay tax in whatever country I'm in?

I'll probably move back to Canada eventually, but I could see myself teaching overseas over the next 5-10 years, and I want my money to grow during that time.
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Perilla



Joined: 09 Jul 2010
Posts: 783
Location: Hong Kong

PostPosted: Tue Jan 08, 2013 7:43 am    Post subject: Reply with quote

jtomstone wrote:
I'll probably move back to Canada eventually, but I could see myself teaching overseas over the next 5-10 years, and I want my money to grow during that time.


I know it's stating the obvious, but be careful where you put your money. In 1999 I placed 5,000 UK pounds in a single US-invested unit trust managed by Fidelity Investments. Following 9-11 and the dotcom crash etc. its value had dropped to about 2,500 pounds by 2003. In 2006 I spread the investment across three different unit trusts and by 2008 the value had climbed to nearly 6,000 pounds (whoopee!). But then in 2008 it crashed again. Current value is around 4,800 pounds - still 200 short of my initial investment. Of course, after factoring in inflation it's probably worth about half of its 1999 value. If only I'd stashed it under the bed!
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spiral78



Joined: 05 Apr 2004
Posts: 9484
Location: On a Short Leash

PostPosted: Tue Jan 08, 2013 7:53 am    Post subject: Reply with quote

I'm also probably stating the obvious here, but it's also tough to move around a lot, as you note you aim to do, in some respects. Without local reputation and connections, you're most likely always looking at entry-level positions; the better (and better paid) jobs nearly always go to people who have paid some dues locally and where people know them. This may ultimately impact how much you are saving as well.
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Perilla



Joined: 09 Jul 2010
Posts: 783
Location: Hong Kong

PostPosted: Tue Jan 08, 2013 8:11 am    Post subject: Reply with quote

Perilla wrote:
jtomstone wrote:
I'll probably move back to Canada eventually, but I could see myself teaching overseas over the next 5-10 years, and I want my money to grow during that time.


I know it's stating the obvious, but be careful where you put your money. In 1999 I placed 5,000 UK pounds in a single US-invested unit trust managed by Fidelity Investments. Following 9-11 and the dotcom crash etc. its value had dropped to about 2,500 pounds by 2003. In 2006 I spread the investment across three different unit trusts and by 2008 the value had climbed to nearly 6,000 pounds (whoopee!). But then in 2008 it crashed again. Current value is around 4,800 pounds - still 200 short of my initial investment. Of course, after factoring in inflation it's probably worth about half of its 1999 value. If only I'd stashed it under the bed!


I should add to what I've written above that my 1999 investment was done with the advice of an independent UK financial advisor. The Fidelity fund I invested my 5,000 pounds in had increased steadily in value for the previous decade and there was nothing to indicate that this trend wouldn't continue. What I did learn is that I should have spread my investment across different sectors. Actually, my financial advisor should have told me this - as Hod says above, be very careful who you take your advice from.
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fladude



Joined: 02 Feb 2009
Posts: 432

PostPosted: Wed Jan 09, 2013 4:00 pm    Post subject: Reply with quote

If you can do your own stock trading, do it.

As you get more money buy rental properties.
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scot47



Joined: 10 Jan 2003
Posts: 12302
Location: Ultima Thule

PostPosted: Wed Jan 09, 2013 10:25 pm    Post subject: Reply with quote

Save it all up and put it on the favourite at Cheltenham Races. Much more fun than putting it into one of those dodgy "Investment Funds" !
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jtomstone



Joined: 12 Nov 2008
Posts: 14

PostPosted: Fri Jan 11, 2013 12:38 am    Post subject: Reply with quote

Yes, I would prefer to do my own stock trading. I'm in Korea at the moment, is there an online discount brokerage I can sign up for? And let's say I buy a low-cost index fund that tracks the S&P 500 or something. I would have to file a tax return and pay tax on it here in Korea? I don't know how this works. Clearly I need to book an appointment with a financial adviser.
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tttompatz



Joined: 06 Mar 2010
Posts: 1951
Location: Talibon, Bohol, Philippines

PostPosted: Fri Jan 11, 2013 1:06 am    Post subject: Reply with quote

jtomstone wrote:
Yes, I would prefer to do my own stock trading. I'm in Korea at the moment, is there an online discount brokerage I can sign up for? And let's say I buy a low-cost index fund that tracks the S&P 500 or something. I would have to file a tax return and pay tax on it here in Korea? I don't know how this works. Clearly I need to book an appointment with a financial adviser.


Shades of grey.

As a Canadian (as compared to the Americans who have been giving you advice based on their tax system) who is in fact non-resident your income that is not generated in Canada is NOT subject to Canadian taxation (unlike Americans who still need to file annually and whose worldly income is taxable (yes, I know they have a large deduction for off-shore income but it is still taxable income)).

As a K-resident your worldly income is technically taxable in K-land BUT as an expat who is not a permanent resident, any income generated and kept off-shore is under the radar to the NTS and for all intents and purposes effectively not taxable.

Effectively, all your investments and their growth are not taxed (income or capital gains) so using after tax income to buy them makes sense (no tax hit when you cash out or repatriate the funds back to Canada).

Shades of grey in a global market.

It doesn't work if you are classed as a "deemed resident" in Canada or if you are an F5 in K-land.

.
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