One obvious answer to the question is to die early! But that’s not the answer we want to hear.

This is the follow-up to my last article ‘Will you outlive your pension?’ The fact is most people seriously underestimate how much wealth needs to be built up to provide a liveable income over an unknown number of years in retirement.

If you are a long time expatriate living in Bali you might have observed many very old and seemingly happy Balinese. It is extremely unlikely that they are drawing pensions each month yet it doesn’t seem to bother them. In fact very few Indonesians will be drawing pensions as they are a relatively new feature of employment packages. True, there have been government pensions for decades but their value has been rapidly eroded by inflation. However, Indonesians and citizens of most developing countries have the support of strong family networks and tradition has always been that the family will support the older members. Westerners have long moved away from those values and those who have wandered to far-off shores have become even more isolated from family support.


So what can you do about it?

If you are already retired the options to enhance income are obviously limited so the focus has to be on how to adapt to a low income and make ends meet. This could be the subject of a separate, dedicated article but for this one we will assume you have a number of active working years until retirement.


Income from property

For most people in the western world the biggest investment they have made is the family home. For those who bought decades ago, particularly in major cities such as London or Sydney, their family homes are now worth a fortune. It’s good to have that kind of security if you are planning to   return to that home after a long spell overseas. But no matter how much the home is worth, if you move back you still have to maintain its upkeep and meet all your other living costs. You could even own a castle or a stately home but if you need cash in a hurry you cannot sell a bathroom. Downsizing is one way to retain a home and also release funds to generate income.

Many expats own investment properties to provide an income in retirement. This is indeed one way to to secure an income and you also have an asset which is likely to appreciate over time. But relying totally on this income is very risky as the income could dry up for various reasons and the property could be difficult to sell in a hurry. But it is fine provided it is backed up by ample liquid cash or income from a liquid investment such as a portfolio of stocks and bonds or a pension.


Pitfalls to avoid

There are two big pitfalls to avoid when considering a pension investment. The first is seeking high returns. Sometimes people wake up and realise how close they are to retirement and how little they have saved for it. They then panic and look for investments that offer high returns to make up for lost time. At any point in time the ‘flavour of the day’ may be commodities, gold, emerging market stocks, cyber currencies or even works of art, stamps or wine collections. (At least you can drink your losses in the case of the latter!) Peer pressure might also persuade you to follow the herd and jump on the current bandwagon, usually just before it overturns.

If you are young you can take a few risks but if you are building your wealth for retirement avoid any exotic or unusual investment. Nonsense like storage pods and car park spaces at airports have been doing the rounds in  recent years.

The second pitfall is to take fright and hold nothing but cash. Banks are generally (but not completely) safe and deposits are backed in most countries by guarantees up to certain limits. But the big enemy is inflation and while your bank is making a profit on your money by lending it out at a much higher rate your own deposit will be earning minimal interest and its purchasing power will diminish over time.

Don’t be misled by high rates of interest offered in non-mainstream currencies. Paper gains can be easily cancelled out by currency losses as inflation rises faster in the countries of those currencies.

It is essential to always keep some liquid cash that is easily accessible but holding too much cash for the long term is known as ‘reckless conservatism’. Why? Because of the missed opportunity for growth.


So how much of your salary should you be saving for retirement?

Not everyone’s needs or objectives are the same, but as a general rule of thumb, and assuming you have saved nothing to date, you should take the age when you start to save and divide by two. That will give you the minimum percentage of your salary or other income that you should be saving to ensure a healthy income in retirement. So if you are already 40 years old you will need to save 20% of salary. But if you start at 25 you need to save only 12.5%. Compounding makes a big difference when saving so the earlier you start the better.

How and where you invest your savings is also critical. There is no single product or asset class that you can count on to do the job on its own. You need several strings to your bow. Diversification is essential.

Learning more about finance is also essential. A recent   survey by Zurich in the UK found that 32% of people drawing down pensions had no hands-on investment experience and 41% had received no financial advice or guidance. Don’t end up finding your pension has been entirely invested in storage pods or car park spaces. Make sure you get involved in investment decisions.

Follow this advice and you may yet be able to drive that Ferrari into your nineties!


Colin Bloodworth, Chartered Member of the Chartered Institute for Securities and Investment (UK), has spent over 20 years in Indonesia. He is based in Jakarta but visits Bali regularly. If you have any questions on this article or related topics you can contact him at or +62 21 2598 5087.

You can read all past articles of Money Matters at

Copyright © 2018 Colin Bloodworth