Whenever I chat with some of my best friends, who, for the most part, live as expats in Japan, I feel a guilty sense of pride when we talk about our savings, finance in general, and retirement in particular. It sounds obvious to me that most of these friends are stuck in the “high income, high expense” lifestyle that I’m trying to avoid, and I must admit I feel proud I escaped that trap a while ago (which is majorly thanks to my wife who is a very frugal person).
But after the pride comes the worry. I’m of course worried for my friends, who will ultimately have to retire. Are they thinking of their retirement plans? I’m not sure.
For many people, retirement plans consist solely in saying “I’m saving a bit, but 95% of my retirement will come from social security”. That in itself is a dangerous assertion in the current world. Even though Social security is still up an running in most civilized countries, it doesn’t feel like a sustainable model, and nobody can tell for sure what it will look like in 30 years.
Specifically in Japan, the money you get from the national retirement system is crap, and definitely not enough to live. Most expats are subscribed to an additional pension from their company, but few of them even look into that. I actually had one of these things, with a significant amount of money into it. It got “frozen” when I left Japan. In theory I’m supposed to be able to get access to it when I turn 65, but they never sent me my new password to access their interface, and I’m not really counting on it still being here when I turn 65. The same is true for the national pension system, and honestly the only reason I didn’t cash it out (you can cash out up to 3 years of pension money when you live Japan, and you lose the rest) is because I intend to come back to Japan one day, and who knows, that money might still be there then.
So, my expat friends in Japan might be well off, or maybe not. In general they don’t know.
Expats also tend to travel a lot. I’ve lived in 3 countries. The more you travel and work in various countries, the more your retirement/pension situation becomes complex. There are treaties between countries that ensure you won’t have to work 3 times 40 years before you become eligible for social security, but as you add countries to your list, leveraging and understanding those treaties becomes a huge burden.
I’ve worked in 3 countries, and at this point I think I won’t even bother, when I turn 65, to look into how to get my social security. I’ve taken the following approach: if social security shows up for me when I’m older, I’ll gladly take it, but I will do my best to not have to rely on it!
Expats navigate a complex financial situation, as they are not always attached to the social security system of only one country. They sometimes get taxed differently, or double dipped by both their country of origin, and the country they live in.
The result, to me, is that expats should strive to become financially independent as early as possible, because they will receive little to no government help.