financial plan - living in different countries

[Coupleinoz]

Situation:

• UK couple in early 30s, living in AU for the last 5 years
• Recently received Australian citizenship
• Plan to return and live in Europe within the next 12 - 18 months
• Thinking of returning to Australia after we have children (4 - 5 years)
• We want our financials to give us the freedom and flexibility to live in different countries
• Ambition to retire early (within next 15 - 20 years)

 

Questions:

1. We won't be making any contributions to super while we are away, so what should we do? Should we cancel our insurance to minimise fee erosion (as we don't have any kids or debts and unsure when we will return to AU)? We are currently with AusSuper, 100% in balanced fund.
2. Has anyone got experience saving and investing for early retirement while moving countries every several years? How have you managed savings, currencies, investing accounts and retirement funds? 
3. We have a pot of cash savings in the UK and AU, we are looking to invest a percentage of this (remainder being saved for first home deposit). As UK savings account has very low interest, we are thinking of investing our sterling in a UK vanguard fund from Australia. Any thoughts on other strategies for immediate investing based on our situation? 

 

[Marisawright]

1.  Ask your superannuation fund for the product disclosure document for the insurances. Read them carefully.   Most of these policies aren't valid if you're no longer legally resident in Australia, and if that's the case, you should definitely cancel them.   If you don't feel you need life insurance at your time of life (and I agree) then cancel them.

2.  I've moved countries over several years. I'd say you have to choose whether you want to travel OR retire early, as it's unlikely you can manage both (unless you have very high-paying jobs).  I say that because:

(a) Every time you move countries, you have relocation costs, and they're always higher than you expect.  It's not just the big things, it's the myriad little things that you have to re-establish.   If you avoid shipping costs by travelling light, then you have higher living costs,  because you have to rent fully furnished. 

(b) You will need expert advice on tax minimisation, so be willing to pay for it.  You need someone who's thoroughly familiar with tax in both countries. If you're living in the UK and have investments in Australia, Australia will tax you like a foreigner - even if you're a citizen. That means double the capital gains tax you'd pay as a resident, for starters. If you're living in Australia and have investments in the UK, being a UK citizen does cut you some slack, but you could still be taxed like a foreigner for some things.  So overall, if you're travelling between countries, you could end up paying more tax unless you know what you're doing.

(c) Because you're not settled, you're likely to delay buying a home, and will therefore miss out on the benefits of owning a property. It's true that if you put that money in the share market, you could theoretically make the same money - but that's underestimating the discipline of a mortgage. You can have an investment plan, but it's far too easy to miss this month's payment because you fancy a week in Corfu, or pull some money out for a special occasion, so you end up saving less compared to the enforced savings of a mortgage.

 

[Coupleinoz]

Thanks Marisa, this is really helpful.