How Much Should I Save?
The mantra to investing is always save early and save often! This all should begin from you first job, whether that be at the local Italian restaurant like me at 14 or not until later after you have finished your degree. The question is how much should I save and the clear answer is as much as possible.
Numbers have been thrown around from 10-25%, and as an Expat, the number sadly falls on the later side of that scale. Why? Simply because expat assignments many times don't include programs similar to 401(k)s in the US. You won't be able to make IRA or Roth contributions and therefore you will have extra tax burdens over time. Lastly, you will most likely be hit by the Windfall Elimination Provision (WEP) on your US Social Security benefits.
Your retirement is simply put the combination of Government Pensions, Corporate Pensions and Personal Savings. As seen above, many expats will come up short on two of the three.
How do I calculate what I need? Simple:
Take your monthly salary, say 2500 for this example. Multiply by 25% and you would save 625 per month or 7500 per year. This means over 45 years you will have saved 337,500.
Accumulating it at a conservative 8% per annum from age 20 to 65 you would accumulate 2,793,195. This is why it's called the magic of compounding interest, as you turned 337,500 into 2,793,195. This will bring in a non-inflation adjusted income in retirement of 111,727 which will pay for a nice lifestyle! Happy Saving!
Get a complimentary copy of the American expat guide at https://www.omniwealth.eu/american-expat-financial-guide for more information about the financial planning process as an American expat. You can also visit www.dunhillfinancial.be and www.omniwealth.eu.
DUNHILL FINANCIAL, LLC IS A REGISTERED INVESTMENT ADVISER. INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN.