Unless your situation is really exceptional! It is interesting
that when I hold a first meeting with the relatively few expatriates
in their late twenties or early thirties many still state
optimistically that they plan or aim to retire at 50 or 55.
Perhaps they consider that 50 or 55 is an old age and that
they will have made their fortunes by then. Needless to say,
those whom I met around 15 years ago in their mid thirties
at the time are now approaching 50 and it is a different story.
The target is now 60 or even 65. As people approach 60 I now
hear more and more often that thought of retirement has been
cancelled! Not a bad idea for those who enjoy their work and
can continue beyond current official retirement dates.
Where Bali has an advantage
One benefit of living in Bali as an expatriate is that age
does not appear as relevant as it does in the West. Although
the US has laws preventing age discrimination it is still
very prevalent in other countries. There may be fewer job
adverts specifying an age group of say, 28 to 35 but anyone
in his or her fifties, or even late forties, will be hard
pressed to be offered a job if competing with candidates 10
years younger. It is also perhaps easier to own or manage
a business in Bali than it is in the West. There may be different
challenges and obstacles but age is not one of them.
So what is happening in the West?
Things are certainly changing, but more through economic necessity
rather than choice. Statistics are unlikely to ever be produced
but I would guess that a high proportion of expatriates in
Bali in their sixties are still working, many of whom will
be self-employed. In the West on the other hand, things are
very different. In Italy, for example, fewer than 20% of those
in their early 60’s are now in the labour force. Astonishingly,
fewer than 50% of those in their late 50’s are still
working. In France and Germany too, very few people are likely
to remain employed in their 60’s. To a degree, their
own governments are to blame since the generous state handouts
to the unemployed provide little incentive to work. But all
this will have to change. By the year 2050 in many countries
in Europe there will be just one worker for every retired
person. That will impose an impossible burden on the working
taxpayer. Sky-high taxes or near-zero pensions are both unattractive
options. So what is left is an increase in the official retirement
age. All this will do is delay the time when governments or
private companies are obliged to start paying out pensions.
The saving can be negated however if older workers still find
it difficult to find a job or for any reason are incapable
of working. This is where the state steps in generously at
the moment in many countries. But once again, they cannot
continue to do so. The burden on taxpayers is too great. Over
the next few years we will see a major reduction in benefits
and greater emphasis on persuading people to provide for themselves.
Self-funding pensions are replacing the old defined benefits
schemes. In future, the individual will bear the investment
risk as opposed to his or her company as was the case in the
past.
So let’s all stay in Bali instead!
Indeed, people in the West are seriously worried about how
they will survive in retirement. Many however are partially
shielded by the value of their homes which has shot up in
recent years. As a last resort they will at least have the
option to sell up or take an ‘equity release’
loan against their home. These are not worries that many expatriates
in Bali dwell upon. Perhaps this is due to the relaxed mood
of the island and its partial detachment from the world outside.
But failure to recognise reality can be very dangerous. While
it may be possible to work much longer in Bali, this presumes
continued ability to work. In reality, unless sudden death
steps in, there will usually come a time when sickness or
disability makes it impossible to continue working. Some may
be lucky and own a property or business that continues to
generate income. But if all the assets are in Bali there are
inherent risks. There must also be adequate provision for
medical care in later life.
Work longer, live longer!
Good luck to anyone who can retire at 50 and have enough wealth
amassed to support him or her potentially for the next 40
years! In reality I believe we are all going to have to continue
working much longer than our parents did. And it’s not
such a bad thing. Many years ago when I worked in the British
industrial Midlands (a far cry from Bali!), I recall how many
men retired and collected their gold watches at 65 only to
die of boredom within a year. Far better to keep going and
accumulate more wealth to enjoy a comfortable life during
the additional years you did not expect to be around!
Colin Bloodworth is a senior financial adviser with Financial
Partners International. The views expressed are his own. If
you have any questions related to personal finance you may
contact him at 021 520 8099 or
colin.bloodworth@financial-partners.biz
