Indexed Universal Life (IUL) vs. 401(k)

Indexed Universal Life (IUL) vs. 401(k) – SmartAsset

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When creating your personal retirement plan, there are a variety of tools you can use to fund your long-term savings goals. An employer-sponsored 401(k) is one of them while indexed universal life insurance (IUL) is another. A 401(k) allows you to invest money on a tax-deferred basis while also enjoying a tax deduction for contributions. Indexed universal life insurance allows you to secure a death benefit for your loved ones while accumulating cash value that you can borrow against. Understanding the differences and similarities between IUL vs. 401(k) matters for effective retirement planning. Working with a financial advisor can also make a substantial difference in the amount of money you’ll have when you retire.

What Is Indexed Universal Life Insurance?

Indexed universal life insurance is a type of permanent life insurance coverage. When you buy a policy, you’re covered for the rest of your natural life as long as your premiums are paid. When you pass away, the policy pays out a death benefit to your beneficiaries.

During your lifetime, an IUL insurance policy can accumulate cash value. Part of the premiums you pay are allocated to a cash-value account. That account tracks the performance of an underlying stock index, such as the Nasdaq or S&P 500 Composite Price Index. As the index moves up or down, the insurance company credits the cash value portion of your policy each year with interest.

IUL is different from fixed universal life insurance or variable universal life insurance. With fixed universal life insurance your rate of return is guaranteed, making it the least risky of the three. With variable universal life insurance, your cash value account is invested in mutual funds and other securities so you’re exposed to more risk. An indexed universal life insurance policy fits in the middle of the risk spectrum.

Cash value that accumulates inside an IUL insurance policy grows tax-deferred. You can borrow against this cash value if necessary, though any loans left unpaid at the time you pass away are deducted from the death benefit.

What Is a 401(k)?

A 401(k) is a type of qualified retirement plan that allows you to set money aside for retirement on a tax-advantaged basis. Contributions are deducted from your paychecks via a salary deferral. Your employer can also offer a matching contribution. The IRS limits the amount you can and your employer can contribute each year.

With a traditional 401(k), contributions are made using pre-tax dollars. Any money you contribute is automatically deducted from your taxable income from the year. When you begin taking money out of your 401(k) in retirement, you’ll pay ordinary income tax on withdrawals. Any withdrawals made before age 59.5 may be subject to a 10% early withdrawal penalty as well as income tax.

Traditional 401(k) plans allow you to invest in a variety of securities, including mutual funds and exchange-traded funds. Target-date funds are also a popular option. These funds automatically adjust your asset allocation based on your target retirement date.

There’s no death benefit component with a 401(k). This is money you save during your working years that you can tap into in retirement. Unless you’re still working with the same employer, you’re required to begin taking minimum distributions from a 401(k) beginning at age 72. Failing to do so can trigger a tax penalty equivalent to 50% of the amount you were required to withdraw.

IUL vs. 401(k): Which Is Better for Retirement Savings?

Indexed universal life insurance and 401(k) plans can both be used as investment tools for retirement. But there are some important differences to note. With IUL, returns are tied to the performance of an underlying index. If the index performs well, then your policy earns a higher interest rate. If the index underperforms, on the other hand, your returns may shrink. Your insurance company can also cap the rate of return credited to your account each year, regardless of how well the underlying index does. For instance, you may have a cap rate of 3% or 4% annually.

In a 401(k) plan, you have the option to invest in index mutual funds or ETFs but you’re not locked in to just those investments. You can also choose actively managed funds, target-date funds and other securities, based on your time frame for investing, goals and risk tolerance. Your rate of return is still tied to how well those investments perform but there’s no cap. So, if you invest in an index fund that goes up by 20%, you’ll see that reflected in your 401(k) balance.

A 401(k) also affords the advantage of an employer matching contribution. This is essentially free money you can use to grow retirement wealth. With an indexed universal life insurance policy, you’re responsible for paying all of the premium costs.

Another big difference between the two centers on tax treatment and withdrawals. With an indexed universal life insurance policy, you can borrow against the cash value at any time. You’ll pay no capital gains tax on loans and no penalties unless you surrender the policy completely or fail to repay what you borrow. Death benefits pass to your beneficiaries tax-free.

With a 401(k), you generally can’t tap into this money penalty-free before the age of 59.5, even in the case of a hardship withdrawal. You may be able to avoid a tax penalty if you’re withdrawing money for qualified medical expenses but you’d still owe income tax on the distribution. You could take out a 401(k) loan instead but that also has tax implications. If you separate from your employer with an outstanding loan balance and fail to repay the loan in full, the entire amount can be treated as a taxable distribution.

Qualified distributions in retirement are taxable at your regular income tax rate. And if you pass away with a balance in your 401(k), the beneficiary who inherits the money will have to pay taxes on it. Talking with a tax professional or your financial advisor can help you come up with a plan for managing tax liability efficiently both prior to retirement and after.

The Bottom Line

Indexed universal life insurance and a 401(k) plan can both help you build wealth for retirement but they aren’t necessarily interchangeable. If you have a 401(k) at work, this may be the first place to start when creating a retirement savings plan. You can then decide if IUL or another type of life insurance is needed to supplement your workplace savings as well as the money you’re investing an IRA or brokerage account.

Tips for Investing

  • When using a 401(k) to invest for retirement, pay close attention to fees. This includes the fees charged by the plan itself as well as the fees associated with individual investments. If a mutual fund has a higher expense ratio, for instance, consider whether that cost is justified by a consistently higher rate of return.
  • Consider talking with a financial advisor about how to maximize your 401(k) plan at work and whether indexed universal life insurance is something you need. If you don’t have a financial advisor yet, finding one doesn’t have to be complicated. SmartAsset’s financial advisor matching tool makes it easy to get personalized recommendations for professionals in your local area in just minutes. If you’re ready, get started now.

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Rebecca Lake Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She’s worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.
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How to Retire in Barbados: Costs, Visas and More

How to Retire in Barbados: Costs, Visas and More – SmartAsset

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An island in the West Indies, Barbados is a jewel of the Caribbean. Its turquoise waters and golden beaches are a perfect match to many people’s idealized days in the sun that they hope is waiting at the end of their working life. While this commonwealth country, where English is the official language, does have good reason to boast, you may wonder whether it’s right for you to retire in Barbados. Before contacting your financial planner to see if your finances are in order for the move, here are a few matters to consider first.

Cost of Living and Housing

Barbados’s cost of living tends to run a little higher than the U.S.’s on average, according to Numbeo, a cost-of-living database. At 12.24% above the U.S.’s average, without taking into account rent, the difference is not as significant as some other percentages found between the two.

For example, although Barbados has a higher cost of living, it has a much lower rent average. In comparison to the U.S., Barbados’s rent is generally 48.53% lower. You’ll find that renting is the cheaper way of living in Barbados, with a single-bedroom apartment in a city center at about $654.55. However, purchasing is a different story. At about $3,087.21 per square meter to buy an apartment in the same setting, it’s in the same price range as the U.S. There, it’s around $3,533.12 per square meter.

So, if you’re looking to stretch your retirement funds further, it makes more sense to pursue renting Barbados rather than purchasing a property.

Retire in Barbados – Visas and Residence Permit

For those who want to retire in Barbados, the process is relatively simple. Individuals over 60 with sufficient funds to support themselves can apply for immigrant status. After living in the country for five years, those people can then apply for permanent residence. You’ll have application and approval fees, in this case, $300 and $1,200, respectively.

Another option open to retirees is a special entry permit (SEP). This permit is offered to retired property owners and allows them to visit the island and leave as they please. The main requirements include owning Barbados real estate valued at $150,000 or higher and health insurance coverage. The latter’s value depends on the person’s age; below 50 has to have $350,000, and over 50 has to have $500,000 worth of coverage.

There are flat fees to cover for the SEP. It’s $5,000 for those below 50 and above 60 with $3,500 for those in between 50 and 60. Once you hit 60, this permit is indefinite, but you must renew it until then.

Retire in Barbados – Healthcare

Barbados enjoys a high standard of living and, thus, its people’s health is overall quite good. Its healthcare system is even viewed as among the best in the Caribbean. However, if you’re not a Bajan (as citizens of Barbados are sometimes called), you are not included under the island’s universal healthcare system. Therefore, if you’re an expat looking to retire in Barbados, you should ensure that you have private health insurance. Otherwise, numerous travelers and potential residents seek out the U.S. for treatment instead.

This outsourcing is also partially due to the difficulty in accessing professional care, such as rehab services. Otherwise, you’ll generally find four types of institutions: hospitals, both private and public; polyclinics; alternative healthcare clinics; and somewhat specialized hospitals, such as the five geriatric hospitals on the island.

Retire in Barbados – Taxes

After you spend 182 days of one year in Barbados, you are considered a resident. So, it’s important to know the tax distinctions between resident and non-resident status. Residents must pay taxes on their worldwide income, or the income they earn both inside and outside Barbados. In contrast, non-residents only pay taxes on income earned in Barbados.

For residents, they must file their income taxes on a minimum threshold of BBD50,000, or approximately $24,786. Incomes up to and including BBD50,000 incurs a 12.5% tax rate, while going over that amount leads to 28.5%. Residents are ensured a basic personal allowance of BBD25,000 ($12,500) and BBD40,000 ($20,000) for pensioners older than 60.

Non-residents receive the same tax rates. However, it’s important to note that even if you live outside the country, you must file taxes with the U.S. as an expat as well. Barbados and the U.S. have a tax treaty that can offer benefits and help ease the burden. There are also opportunities for U.S. expats through the foreign earned income exclusion and foreign tax credits to avoid double taxation on their Barbados earned income.

Retire in Barbados – Safety

While U.S. expats are not specific targets of crime in Barbados, they are still susceptible to crimes of opportunity and violence. Theft, such as burglary and gun violence, among other crimes, exist in Barbados. So, it is essential to remain vigilant, to avoid walking alone, particularly at night, and to know who you’re with at all times.

In particular, the U.S. Department of State advises against traveling through specific areas on the island to avoid these dangerous interactions. Areas to avoid include Crab Hill, Nelson and Wellington Streets and general nighttime party cruises.

Be cautious about which activities you enjoy, such as water sports or tourist events. This advisement comes more from a practical, safety concern than a pointed targeting of tourists, though. So, keep your wits about you.

The Takeaway

Barbados is the island of dreams for some retirees. Thanks to the prominent U.S. community as well as an English-speaking citizenry, there’s less of a culture shock to shake you up. There is also the gorgeous weather, a location out of most hurricanes’ paths and the relative ease in becoming a resident. However, before you start to plan out your future on this island, it’s best to speak with a trusted financial advisor. Such a person can lay out the commonwealth’s tax and healthcare systems and help you determine whether the high purchasing price of property is in line with your long-term goals.

Tips for Achieving Your Retirement Goals

  • Finding the most suitable financial advisor for your needs doesn’t have to be complicated. SmartAsset’s free tool matches you with local financial advisors in as little as five minutes. If you’re ready to be matched with your financial advisor, who will help you achieve your financial goals, get started now.
  • Barbados may not have a high cost of living compared to the U.S., but the difference could still affect your finances. To see  if your finances will support this, try our retirement calculator. Just put in a few details about where you want to retire, when you want to retire and the value of your current savings.

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Ashley Chorpenning Ashley Chorpenning is an experienced financial writer currently serving as an investment and insurance expert at SmartAsset. In addition to being a contributing writer at SmartAsset, she writes for solo entrepreneurs as well as for Fortune 500 companies. Ashley is a finance graduate of the University of Cincinnati. When she isn’t helping people understand their finances, you may find Ashley cage diving with great whites or on safari in South Africa.
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How to Retire at 50: A Step-by-Step Plan

How to Retire at 50: A Step-by-Step Plan – SmartAsset

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Early retirement is a lofty financial goal, though it’s not impossible. If you’re interested in how to retire at 50 or even earlier, you’ll need a solid strategy for getting there. Having fewer years to save can present a challenge to retiring early so it’s important to invest and manage your money wisely. The more you plan ahead, the smoother the transition to an early retirement can be. One of the smartest moves in planning for an early retirement is consulting with a financial advisor.

How to Retire at 50: Start With Your Retirement Vision

If you want to retire early, it’s important to first define what retirement means for you. The type of lifestyle you hope to pursue in early retirement can dictate how much money you’ll need.

For example, you may want to retire at 50 and spend the rest of your life traveling. To do that you might plan to sell your home and adopt a nomadic lifestyle. You wouldn’t have a mortgage payment each month but you’d still need money to pay for things like airfare and other travel expenses.

Or you might want to stick closer to home but start a business at age 50. In that scenario, you’d need to be sure the money you’ve saved so far is enough to provide a consistent income until your business becomes profitable.

Do the Math

Getting clear on what retiring at 50 might look like, both in terms of lifestyle and what it may cost, can help you shape your plan for saving and investing. And it’s important to have hard numbers to follow.

For example, a modest retirement is generally considered to mean living off 60% of your current income each year. But if you have a bigger vision for retirement, you may need 80% of your current income or more to make it happen.

Your life expectancy also plays a part. Someone who’s retiring at age 65 and expects to live until age 90 needs enough income to last 25 years. But if you’re retiring at 50 with the same life expectancy, your savings need to stretch at least twice as long.

There are various strategies you can use to minimize your tax liability. At the same time, the investment choices you make can influence how insulated your portfolio is against inflation. In terms of your retirement income withdrawal rate, 4% has long been the standard rule. But if you’re planning to spend several decades in retirement, you may need to adjust your personal withdrawal rate to align with what you’ve saved.

Create an Aggressive Savings Plan

If you’re focused on how to retire at 50, time can be both your friend and your enemy. The sooner you begin saving and investing for retirement, the longer you have to capitalize on compounding interest in your portfolio. But no matter if you’re starting your savings plan at age 25 or age 35, you’ll need to take a proactive approach to build up a large enough cushion for early retirement.

The first place to start is your workplace retirement plan. If you have access to a 401(k) or similar plan, you can take advantage of free money if you’re eligible for an employer matching contribution. Financial experts often recommend saving 10% to 15% of your income in a 401(k) but if you’re planning to retire at 50, you may need to step contributions up to 25% or even 50% of your income instead to reach your goal.

If you don’t have a 401(k) or you’re able to max yours out each year, an individual retirement account is the next link in the retirement savings chain. Whether to choose a traditional or Roth IRA depends on your tax situation now and where you expect to be in retirement. If you’re fairly confident you’ll be in a lower tax bracket in retirement, then it might make sense to contribute to a traditional IRA now to get the upfront deduction for contributions.

On the other hand, if you anticipate being in a higher tax bracket when you retire at age 50, then you may be better off with a Roth IRA which allows 100% tax-free distributions in retirement. A Roth IRA also allows you to avoid having to take required minimum distributions starting at age 72.

Keep in mind, however, that an early withdrawal penalty typically applies if you take money from a 401(k) or IRA before age 59.5. You’d also owe income tax on those distributions unless you qualify for an exception. So, you’ll likely need another source of income in the meantime if you’re retiring at 50.

Opening a taxable brokerage account can help to fill the gap. Brokerage accounts have no annual contribution limits you need to observe, which is a key difference from 401(k) plans or IRAs. But you will owe capital gains tax when you sell assets in your account at a profit. The more favorable long-term capital gains tax rate applies to assets you own for more than one year. And remember also that you can use tax-loss harvesting to offset capital gains against capital losses.

If you have a high deductible health plan at work, you may supplement your savings with a health savings account (HSA). HSAs offer a triple tax benefit in that contributions are tax-deductible, they grow on a tax-deferred basis and withdrawals for qualified medical expenses are 100% tax-free. Investing money in an HAS can help you plan ahead for health care costs in early retirement and beyond.

Invest Strategically

There are different rules of thumb you can use to invest. For example, you might choose a 60/40 portfolio allocation or subtract your age from 120 to determine the mix of stocks versus bonds you should own. But those rules don’t necessarily apply when you’re trying to retire at age 50.

Just as you’ll need to be aggressive about saving more of your income, you may need to take a different approach with your investments. That means focusing on investments that will generate growth in the years leading up to early retirement, with a shift toward income-producing investments later.

Figuring out the ideal investment strategy for early retirement can be challenging and you may want to talk with a financial advisor about where to put your money. Your financial advisor can also look at your overall early retirement plan to help you find any potential weak spots that need to be addressed.

Plan for Contingencies

Retiring at age 50 can raise several important questions, such as:

  • How will I pay for health insurance until I’m eligible for Medicare?
  • Should I take Social Security benefits early or wait for full retirement age?
  • Will I be able to retire early and help my kids pay for college?
  • Should my spouse retire early too?
  • Will I still be paying off debt in early retirement?
  • How many income streams will I have?
  • Is working part-time a possibility?
  • How will I pay for long-term care if it becomes necessary?
  • Do I have enough life insurance if something happens to me?

Asking these kinds of questions can help make your early retirement plan more comprehensive. For example, Medicare coverage doesn’t begin until age 65, leaving you with a 15-year window in which you’d need to cover your own health care expenses. If retiring early means leaving your employer-sponsored health insurance behind you’d have to decide whether it makes sense to purchase your own coverage and how much that may cost.

Long-term care is something else to consider if you want to retire at 50. While you may not need it until you’re in your 70s, 80s or beyond, it’s important to plan for it while you’re still young and healthy. Purchasing a long-term care insurance policy or a hybrid life insurance policy that includes a long-term care rider are two options you might consider to avoid having to spend down your assets in retirement.

The Bottom Line

There’s no magic formula for how to retire at 50. In reality, it takes careful planning and a committed effort to saving and investing. You should be aware that early retirement means creating a contingency plan for things like health care, Social Security benefits and tax management. If it’s something you’re interested in, evaluate your current financial situation to determine whether it’s an achievable goal. Then, focus on how you can put your savings plan into action.

Tips on Retiring

  • Using a retirement calculator can help you determine how much you need to save, based on your life expectancy, current income and desired income in retirement. It’s also important to include taxes, inflation and your withdrawal rate in your calculations.
  • Consider talking to a professional financial advisor about what early retirement means and what you need to do to get there. If you don’t have a financial advisor yet, finding one doesn’t have to be difficult. SmartAsset’s financial advisor matching tool can help you connect with professional advisors in your local area. It takes just a few minutes to get your personalized recommendations online. If you’re ready then get started now.

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Rebecca Lake Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She’s worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.

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How to Retire in Turkey: Costs, Visas and More

How to Retire in Turkey: Costs, Visas and More – SmartAsset

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Turkey is filled to the brim with beautiful architecture, art and a melange of cultures that reaches back thousands of years. It’s home to artifacts from communities like the Hittites, Ancient Greeks, early Christians and Mongols, which fill this nation of some 82 million, with a rich sense of history. Lying as it does at a crossroads of Europe and Asia, visitors can see a unique blend of Western and Eastern influences. Its Mediterranean and Black Sea beaches are renowned for their beauty. Istanbul’s Grand Bazaar extends across 58 covered streets hosting some 1,200 shops. If you’re considering retiring in Turkey, here’s an overview of some basic information you’ll need. A financial advisor can offer valuable guidance as you consider retiring abroad.

Cost of Living and Housing

It’s much less expensive to live in Turkey than it is to live in the U.S. Without accounting for rent, Turkey’s cost of living is 53.56% lower than in the U.S. on average, according to Numbeo, a cost-of-living database.

U.S. rent prices are 556.13% higher when stacked against those in Turkey, on average. To rent a one-bedroom apartment in a city center will run you around $215.26 in Turkey, whereas a comparable setup in the U.S. would run about $1,340.16. If you wanted to pursue purchasing an apartment in Turkey, you would find that the price per square foot in a city center is averaged out to $83.07. In comparison, the same square footage in a similar city location in the U.S. would cost about $328.96.

To further illustrate the contrast, we can compare Istanbul, Turkey’s most populated city, to the U.S.’s New York City. To maintain the same standard of life, you would need around $8,203.10 in New York, which contrasts starkly to the approximately $1,960.45 necessary in Istanbul, assuming you rent in both.

So, if you’re looking for a country to retire in with both affordable renting prices and lower property costs to make the most out of your savings, Turkey may be a solid option.

Retire in Turkey – Visas and Residence Permit

Turkey doesn’t have a visa specifically for retirement, so you have to apply for a residence permit instead. This requirement applies to anyone who intends to remain in the country more than three months. You’ll first have to apply for a short-term residence permit, and you must do so within a month of your arrival in Turkey. There is an online application you fill out at the Turkish Ministry of Interior’s website. Once you finish, it will prompt you to make an appointment with the nearest DGMM office to continue the process and pay the fee your visa requires.

A short-term residence permit is issued on a two-year basis. After you’ve lived in Turkey uninterrupted for eight years under your short-term visa, you can apply for a long-term residence permit. These extend indefinitely.

No matter what residence permit you are applying for, you will likely need to show proof that you possess adequate assets. This can shift whether or not you have dependents, but a single person is generally required to have the equivalent to a month’s worth of Turkish minimum wage. As of early 2021, that would be around $400.

Retire in Turkey – Healthcare

The World Health Organization ranking of national healthcare systems puts Turkey’s at 70th out of 191. The central government body responsible for healthcare and related policies is the Ministry of Health (MoH). There is also a private sector and university-based care; however, the MoH is the main body responsible for providing healthcare. You can expect the quality of healthcare in Turkey to vary between regions. Although it’s cheaper than some of its European neighbors, access is limited in more rural areas. You’re more likely to have high-quality care in major urban locations like Istanbul – as well as the ability to communicate with your healthcare providers in English. This increase in quality is why most expats choose to go to private medical facilities over public ones.

All residents under 65 must have either public or private health insurance. Expats who have resided in Turkey for over a year under their residence permit can apply to have public health insurance through the state-run Sosyal Güvenlik Kurumu (SGK). Expats usually choose to supplement this with private insurance (or just choose private) to cover additional fees at private facilities.

As Turkey has grown as a country and political entity, it has experienced a great deal of reform around its healthcare system. It likely will continue to experience further changes in the future.

Retire in Turkey – Taxes

Like many countries, residents and non-residents are subject to different taxes in Turkey. Residents pay taxes on their worldwide income, whereas non-residents only have to pay taxes on Turkish-sourced income. The country uses a progressive tax scale, ranging from 15% to 35%, depending on your income bracket.

Turkey does possess a tax treaty with the U.S., which can provide some relief. You will only have to pay into one country’s Social Security program as a result, which in Turkey is a 14% flat tax for employees. Otherwise, there are also tax exemptions that may allow you to pay less on your U.S. income taxes. One example is the foreign earned income exclusion, which lets you exclude the first (approximately) $100,000 for foreign earned income if you can prove your Turkish residency.

Retire in Turkey – Safety

Each expat’s experience is unique. Some may travel through Turkey and find they encounter little to no issues on a security level. That’s not to say you shouldn’t be cautious. The U.S. Department of State’s travel advisory warns travelers either visiting or moving through Turkey to be wary of both terrorism and arbitrary detentions. The advisory heavily suggests that you avoid the Sirnak and Hakkari provinces, which are in the southeastern part of the country, as well as any area within six miles of the Syrian border to avoid terrorist activity. The State Department’s most recent report on human rights practices in Turkey bears a close reading, especially sections 1 and 6.

Although you should speak with locals and enjoy the culture, you should also be wary of your surroundings and keep an eye on political developments. It is also advised that you don’t engage with political topics online either since that can still be a red flag.

The Takeaway

Turkey is still in the process of significant political change, making settling down difficult for the average retiree. That, along with terrorism concerns, may encourage you to look at other countries instead. However, Turkey has a strong sense of identity with a warm populace who wants to share their cultural. That sense of belonging, along with the country’s beautiful features and its low living costs, may make the challenges worth it to you.

Tips on Retiring

  • Finding the right financial advisor who can help address your needs doesn’t have to be hard. SmartAsset’s free tool matches you up with local financial advisors in as little as five minutes. If you’re ready to be meet with advisors in your area that will help you achieve your financial goals, get started now.
  • Planning your retirement comes with its challenges, especially if you intend to move abroad. While Turkey may have low living costs, there still may be other financial burdens you have to address. To get an idea of what to expect, stop by our retirement calculator.

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Ashley Chorpenning Ashley Chorpenning is an experienced financial writer currently serving as an investment and insurance expert at SmartAsset. In addition to being a contributing writer at SmartAsset, she writes for solo entrepreneurs as well as for Fortune 500 companies. Ashley is a finance graduate of the University of Cincinnati. When she isn’t helping people understand their finances, you may find Ashley cage diving with great whites or on safari in South Africa.
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How To Save For Retirement – Answers To 13 Of The Most Common Questions

Would you like to learn how to save for retirement

How To Save For Retirement

How To Save For RetirementLearning how to save for retirement is how you start preparing for your future. It’s necessary if you don’t want to work for the rest of your life or if you want to do amazing things after you quit working, like traveling or trying new hobbies.

I don’t plan on retiring anytime soon, but it’s something I’ve spent a lot of time thinking about and planning for. There are lots of reasons for why you should too, such as:

  • You can retire sooner rather than later.
  • You won’t have to keep working forever.
  • You can lead a good life well after you finish working.
  • Compound interest means the earlier you save the more you earn.
  • You won’t have to rely on your children or others in order to survive.

But, many people are confused or overwhelmed when it comes to retirement savings and investing.

There are different kinds of retirement accounts, personal finance terms you might be unfamiliar with, and you might feel like you don’t have enough money to start saving. 

But, you have to remember that everyone is new to this at some point. Anyone who has already started saving for retirement started where you are today – having a lot of questions about how to save for retirement.

You might even have a lot of questions that you are too embarrassed to ask anyone. However, you shouldn’t be embarrassed or feel bad about not knowing how to start saving for retirement. 

Personal finance bloggers and retirement experts all started at the same point as you. No one was born knowing how!

Today, I’m going to try to take the stress out of learning how to save for retirement. I am going to explain some common retirement and investing terms – like what compound interest is, the difference in IRAs, and what a 401(k) is. 

I’m also going to answer some of the most common questions about retirement savings. These include topics like how much you should save, and if you should save for retirement or help your kids pay for college.

If you are worried that you don’t have enough to start saving for retirement, I have some great tips to get started.

Learning the answers to these questions now is so important because it can help you live a better life in the future. By preparing now, you can prevent future financial stress, you can reach your goals, and pursue your passions.

And remember, it is never too late to learn how to save for retirement, and it’s very important to do if you don’t want to work for the rest of your life. 

Related content on how to save for retirement:

Here’s how to save for retirement.


What is a 401(k)?

A 401(k) is a type of retirement account that you get through an employer.

It allows you to invest a portion of your paycheck before taxes are taken out, and the amount in your 401(k) can grow tax free until you withdraw. Once you reach retirement and take money out of your 401(k), the amount you withdraw from this account is taxed.

Your 401(k) is an account that holds investments, similar to how your bank account holds your money. You may choose to place investments such as stocks, mutual funds, and more in your 401(k).


What’s a company match? Or employer match?

You’ve probably heard the term “employer match” or “company match.” But, what do they mean?

A company or employer match is when your employer contributes to your 401(k).

For example, an employer may match 100% of your contribution, up to 5% of your salary. So, if you contribute 5% of your salary to your 401(k), then your employer will also match and put 5% in as well.

This is basically free money that will help you grow your retirement savings, and you should take advantage of it if you can!


What is an IRA?

An IRA (Individual Retirement Account) is a type of retirement account that anyone can open, without an employer.

If you do not work for someone else, or if the business you work for does not have a 401(k), then an IRA may be a good option for you.

This is a confusing term and topic for people who want to learn how to save for retirement because there are different types of IRAs, including:

  • Traditional IRA – Contributions to this kind of IRA are tax deductible the year they are made.
  • SEP IRA – This is a traditional IRA that offers tax breaks for those who are self-employed. 
  • Roth IRA – This account uses after-tax money, and your withdrawals in retirement are not taxed.

One way people decide between a Roth and traditional IRA is by what their tax rate (this is based on your income) will be like during retirement. If you will be at a higher tax rate, you may want to choose a Roth IRA. If you will be at a lower rate, a traditional IRA might be better.

How much per month should you save for retirement?

How much per month should you save for retirement?

What is compound interest?

This is a very important question to cover, because it’s something that may motivate you to start saving as much money as you can right now!

Learning how to save for retirement as soon as you can is a great thing, with one of the reasons being because of compound interest.

So, what is compound interest?

Compound interest is when your interest is earning interest. This can turn the amount of money you have saved into a much larger amount years later.

Compound interest is a crazy thing because $100 today will not be worth $100 in the future if you just let it sit under a mattress or in a basic, low interest checking account. However, if you invest through your retirement account, then you may be able to turn your $100 into something more.

When you invest, your money is working for you and growing your savings, and that’s because of compound interest.

For example: If you put $1,000 into a retirement account with an annual 8% return, 40 years later you will have $21,724. If you started with that same $1,000 and put an extra $1,000 in it for the next 40 years at an annual 8% return, that would then turn into $301,505. If you started with $10,000 and put an extra $10,000 in it for the next 40 years at an annual 8% return, that would grow into $3,015,055. 


How much money do I need to retire? What percentage of your income should you save for retirement?

Figuring out how much to save for retirement isn’t an easy question to answer, as this will vary from person to person. It depends on your goals, when you want to retire, and what retirement means to you.

However, many people aren’t saving enough for retirement. According to the U.S. Bureau of Economic Analysis, the personal savings rate has averaged around 5% in the past year, and averaged 8.33% from 1959 until 2016.

I’ve talked to a lot of people who think that saving between 1% and 5% of their income is enough to be on track for retirement.

Sadly, saving 5% means it may take you a very long time to retire.

For the average person, I recommend saving at least 20% of your income.

However, there is no perfect percentage.

If you have a high income, then you should probably save more of your income so that you aren’t being wasteful with your money.

On the other hand, if 20% just seems like a crazy high percentage for you to save, then just start somewhere, anywhere! Saving something is better than saving nothing.

And, everyone has different financial goals. If you want to retire early, then you’ll most likely have to save more than 20% of your income.

How much money should you have saved by 30?

Many young people who are learning how to save for retirement ask me this question. 

Some advisors recommend that you have an amount equal to your annual salary saved by 30, and others say that you should have half of your annual salary saved by 30.

I think those amounts are great to save by 30, but the problem with those guidelines is that if you haven’t started saving or are much older, you can easily feel like you will never be able to reach retirement.

Those recommendations may be very difficult for many people to follow. You have to be realistic with yourself, and start with small goals that you can build over time. Any amount helps, and it’s never too late to start saving!

What if I can’t save very much money for retirement?

You may be thinking “How much money should I save, if I don’t have much money?!”

Thinking about the above recommendations can be frustrating if you are already having a hard time paying your bills and/or living paycheck to paycheck.

However, I recommend saving as much money as you realistically can. This may be nowhere near 20% at first, heck, this might not even be 5%, but any little bit will help. If you are not able to save that much, just save something! Start with $25 a month if you have to – seriously, every little bit does help.

Even if it’s just $1 a day, set that amount aside and start saving it.

You may want to look into Acorns, which is a cell phone app that rounds up your credit card and debit card purchases, and then invests your spare change. Acorns automatically invests for you, and you can get started in under 5 minutes. This app is amazing!

So, no matter how you are doing right now, just start with something, no matter how small. Then, work your way up until you are saving a percentage of your income that you are happy with.

Start small and work your way towards your savings goal. And, if you are currently paying off debt, keep in mind that it counts too! Once your debt is paid off, you can use that amount towards your retirement savings. 

Just keep moving in a positive direction and keep getting closer and closer to reaching your financial goals.

I understand that some people have financial situations in which they may not be able to save as much money as they would like. Living paycheck to paycheck, having lots of medical debt, or having a major unexpected expense can wreck a person’s financial situation and their goals, and I understand that.

However, you will need to find a way out of that if you want to learn how to save for retirement. To find a way out, you may want to find ways to cut your spending, make more money (learn ways to make extra money), and more. You will have to challenge yourself, and it may not be easy. However, it will all be worth it once you reach your financial goals!

By spending less money, you’ll decrease the amount of money you need for the future, including money for emergency funds, retirement, and more.

Just think about it: If you are currently living a frugal lifestyle, then you will be used to living on less in the future. This means that your saved retirement amount doesn’t need to be as large, which means it may be easier to reach that savings goal.


Where do I invest for retirement?

Now we are getting into questions about how to save for retirement that focus on some specific investing questions. And there are two main ways to start investing your money.

Either invest your money yourself, such as through an online brokerage, or find an expert to manage your investment portfolio.

Part of learning how to start investing includes determining the company, platform, or person you will use to invest your first dollar.

There are many online brokers for you to choose from. My favorite ways to save for retirement include:

  • Ally Invest – This is a full service discount broker that doesn’t have a minimum investment amount, so you can start investing with them right away.
  • Betterment – Betterment offers an affordable way to invest your money. They have over 400,000 customers and over $14 billion has been invested through their platform. With Betterment, you can invest with as little money as you want each month, which is great for a new investor!
  • Vanguard – I absolutely love Vanguard and use them personally, and I recommend that you check them out.

Also, if your employer has a retirement plan, then you will definitely want to look into that as well. If your company offers a retirement plan match, then this is where you will want to start as their retirement match is pretty much free money, as discussed earlier!


What do I invest in?

After you open your brokerage account, you will want to decide how exactly you will invest your money.

I think this might be one of the biggest hurdles for those wondering how to start investing. There are a lot of what ifs in the investment world, and a good brokerage or expert will help you navigate as you decide where to put your money as you learn how to save for retirement.

Basically, where you invest your money depends a lot on the level of risk you are willing to take and the time you have to watch your funds mature. A simple way of explaining this is that more time equals more risk and less time equals less risk.

For example: if you are in your 20’s, you may have many, many years worth of investing ahead of you. You will likely be able to make some riskier investments knowing that the market will bounce up and down over time. If you are closer to retirement, you may want your funds in something that you are confident will make small but steady gains.

Choosing the stocks you invest in is not the easiest thing because no one knows what will happen in the future. This is why it’s important to have a diverse portfolio.

When you are first learning how to save for retirement, you may want to consult an expert to help you determine your goals, your risk level, and how to diversify your investments in a way that will benefit you.

Even if you do have a professional helping you, it’s always important to do your own research on the types of investments available and which ones interest you.

Please remember that I am not an investment professional and that you should do your research when choosing who/what to invest in.


How often should I check on my investments in my retirement portfolio?

After you’ve started investing, you will want to regularly track your investments. This is important because you may eventually have to change where your money is invested, put more money towards your investments, and so on.

Now, the key here is to not go crazy. Checking on your portfolio can be an exciting thing when you first start investing. But, you do not want to become a person who checks their investments every hour of the day. That won’t help you at all. Your investments will make small changes throughout the day, and these likely won’t matter to you, especially if you are investing for your long-term future.

However, you do want to occasionally check your progress as things may change in the market, your investment interests may change, and you may even change your retirement and/or investing goals.

A free tool that I recommend using to monitor your investments is Personal Capital.

You can see your investment portfolio all in one place so that you can easily track your performance, see your investment allocations, and easily analyze everything related to your investments. The Personal Capital Retirement Planner will also tell you if you have saved enough for retirement, which is great when you’re learning how to save for retirement.


Should I risk my retirement and help my children pay for college?

If you are not currently saving enough money for retirement, and you are in jeopardy of not retiring, then I do not recommend risking your retirement to help your children pay for college.

I have personally heard too many real life stories of parents who have $200,000 in student loan debt for their children. These parents have found that these debts are causing them to struggle financially and that they’re unable to reach their retirement goals.

These parents just honestly want to help their children get through college, but they end up drowning in debt. What they don’t realize, though, is that there are other ways to help your kids graduate from college.

I recommend learning more at Parents Paying For College – Is This A Good Idea?


What are the best retirement and investing books?

There are many great investing and retirement books if you want even more about how to save for retirement. These books can clear up any other questions you have, as well as dive deeper into the many different ways to retire.

Here are some of the investing and retirement books that I recommend:

There are many more out there, but these are great books to start with. I have read each of them, and they are all very helpful.


How do I actually start saving for retirement?

There are many different ways to save money for retirement.

Actually getting started can be difficult, so in this section I wanted to list out the steps so you can learn exactly how to save for retirement.

  1. Start setting aside money for retirement. If you want to learn how to save for retirement, you need to start setting aside money specifically for it. The amount of money you save is entirely up to you, but in general, the more the better. You can take money out of each paycheck, set up direct deposit, etc.
  2. Research and learn more. I recommend learning more about investing and retirement if you are unsure about anything, such as by reading retirement books, websites, and so on. Sure, it can be easy just to hire someone to do it all for you – but how do you know that they are doing the correct thing to begin with? So, I recommend at the very least having a basic knowledge of everything yourself first.
  3. Choose a brokerage or someone to manage your investments. Like I said earlier, there are two main ways to invest your money – yourself through a brokerage or you can find someone to manage your investment portfolio for you. You will need to choose one of these options to actually start investing your money. Personally, I like to do everything myself through Vanguard.
  4. Decide how you will invest. How you invest depends on your risk tolerance, the time period for which you are investing (when will you retire?), and more. Generally, the sooner you need your funds the less risk you will take on, whereas the longer your time period is, then the more risk you may be willing to take.
  5. Track your investment portfolio. This is important because you may eventually have to change what you are invested in, put more money towards your investments, and so on.
  6. Continue the steps above over and over again. To invest for years and years to come, you will want to continue the steps above over and over again. Now that you know how to save for retirement and the steps it takes to invest your money, it only gets easier.

As you can see from the list above, saving for retirement is attainable, and you can do it!

What else do you want to learn about how to save for retirement? When do you think you’ll retire?

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How I Repaid $65,000 In Student Loans and Invested at the Same Time

How I Repaid $65,000 In Student Loans and Invested at the Same Time #payoffstudentloans #studentloans #moneysavingtips

How I Repaid $65,000 In Student Loans and Invested at the Same Time #payoffstudentloans #studentloans #moneysavingtipsToday, I have a great guest post to share. Here is how this person paid off $65,000 in student loans all while investing at the same time.

Student loans… everyone’s got ‘em everyone wants to get rid of them. This is a story of my battle with student loans and how I found success in the middle of a vicious cycle of urgency to invest, save for a house and pay off debt.

My background on student loans

I went to a fairly large out of state school, which resulted in a huuuuge annual tuition payment along with room and board, food, annual travel expenses, etc. I had to pay for it somehow. Just like everyone else I had to revert to student loans… For all four years. Yikes.

But, that wasn’t all of it. Student loans only covered tuition expenses. I had to work part-time while going through college because I had to pay for food, rent, living expenses and more. Solely on my own. This ended up being a blessing in disguise as I graduated without any credit card debt.

As a finance major throughout college, I always had this fascination with personal finance. I read it during my spare time and always seemed intrigued about how I could better myself for the future.

Upon graduation, I found an extreme urgency to: 1) find a career that was finance related, and 2) use that job to improve my financial future.

This urgency for financial planning lead me to create a wealth strategy roadmap that I could follow, These wealth creation tips would enable me to:

  1. Invest;
  2. Get rid of student loans; and
  3. Save for a house.

I knew I wanted to accomplish all of these at the same time. By creating my financial roadmap, I realized I had to make a lot of sacrifices.

A sense of urgency to pay off student loans, invest AND save for a house

By graduating with a finance major in college, I developed this sense for ‘money optimization’ combined with traditional personal finance thinking.

I incorporated a different approach to student loan repayment because I wanted to invest and save along the way.

Here was my exact roadmap for how I accomplished all three.

Step One: Bite the Bullet Early with Investing

Right out of the gate from college, I knew that if I needed to take advantage of the benefits of compound interest and free money such as my 401k match from my employer.

I bit the bullet early. I made the max amount of contributions to my 401k as possible (the full $17,000, which was the max at the time!). Combined with that I made it a point to max out my Roth IRA, which was $5,000 at the time.

Ouch! That hurt initially. My eventual take home pay was basically nothing. I had to scrape by for food while managing rent payments.

However, while it hurt initially. This was one of the greatest things that I have done for my personal financial planning.

I had this sense of confidence that if I bit the bullet early, I would be in great shape. My income will only increase over time (as long as I focus on my career).

I did just that though. While I was at work, I stayed late and got in early. I aimed for early promotions.

I love the upside with investing. My strategy with my 401k and Roth IRA accounts includes investing in low-cost index funds to ensure I’m not eroding too much of my retirement gains on fees.

Investing was my top priority because unlike debt it has unlimited upside (it doesn’t go to 0) and I had a long runway for capital appreciation.

Step Two: Quantify My Student Loans

My second step in my debt repayment strategy was to create a table of the weighted average cost of debt.

Nearly all of the personal finance influencers I followed told me that debt is bad. Get rid of all of the debt you have. Immediately.

I took a slightly different approach. I wanted to get rid of all debt that was at a higher interest rate than the long-term average of the returns of the stock market and/or real estate.

Why would I contribute $1 to something that is lower returning, goes to 0 and has no upside? I would rather put that $1 into something that hits on the opposite.

Here is what my student loans situation looked like out of college when I put together my weighted average cost of debt:

Yes, I found out right when I graduated that I had a private loan that had an interest rate of 10.50%! I couldn’t believe it. I was appalled. This loan was actually accruing interest while I was in school. I since have refinanced that student loan.

In this weight average cost of debt scenario, you should pay off the highest interest rate debt first until you reach a threshold below the after-tax returns of the stock market.

The stock market has returned 7%-9% historically on a pre-tax basis, which is conservatively estimated at 4.2%-5.4% on an after-tax basis. This can be much higher as I conservatively assumed a 40% tax rate.

With that being said, I would want to repay any form of debt that is higher than 4.2%-5.4% interest rate. I ended up doing just that.

Here is a snapshot of my current student loans picture. I actually ended up refinancing my ‘Student Loan 1’ to 4.625% interest. I think I could refinance it again with a lower rate. I might end up doing that.

These are the types of personal financial ratios that I love to follow to determine my appropriate financial situation. The numbers never lie.

Any extra income you have should be swept to repay debt with interest rates higher than 4.2%-5.4%. Luckily, I had the extra income to be able to do so.

Step 3: Use Side Hustle Income to Fill the Basket Elsewhere

Once I hit below the threshold of 5.4% interest rate, I turned my attention to filling up my other financial goals. For me it wa

s buying a house. However, these goals could include investing more to live off dividends forever (a newfound goal of mine) or index investing. 

However, I was a bit tapped out from my urgency to repay student loans. If you want to invest, but don’t have any money what do you do? You go out and make more money.

I found a few side hustles to increase my income, which included freelance consulting, graphic design and selling photography. This was great because this enabled me to bifurcate my work savings goals and my side hustle income savings goals.

I love side hustles as they feature so many benefits outside of the income component:

  1. Side Hustles Create Relationships
  2. Side Hustles Diversify Your Income
  3. You Can Use Side Hustles to Accelerate Your Personal Finance Goals and Unlock Financial Flexibility
  4. By Using Side Hustles, You Learn Every Single Day

You can’t have side hustle income to solely just go out and spend it. I created separate accounts to pour all side hustle income into in order to hit my goal of purchasing a house.

This was relentless and took a lot of discipline, but it is achievable. I suggest you focus on 3-4 side hustles and get very good at them. Be passionate and don’t stop working.

In order to make all three objectives work, you need to sacrifice weekend parties for ‘armchair parties.’

Fast forward four years from graduation, and through these side hustles, I was able to purchase my first home.

Lessons learned from repaying student loans and buying two houses

There are so many key takeaways from this journey of being -$65,000 of net worth to a $500,000 net worth. Let me touch on a few that will help my plan become a reality for you:

1. Debt is not the devil

There are instances in which debt can be good. Let’s go back to my house purchase. If I would have focused on repaying my 4.625% debt off completely early, I may not have been able to purchase my first home. Thanks to the recent runup in housing prices, I was able to sell my condo 3.5 years later. This resulted in a 3x return on my original downpayment. I was able to roll this into my first single-family home purchase.

Due to savings along the way while I was living in my condo, I am now turning my attention to buying an investment property incrementally to my recent single-family home purchase.

Leverage is good in the right situations. As a private equity investor in my current role, we use debt all the time on our investments. When used appropriately, debt increases your investment returns.

So, be strategic with your debt practices. If you diversify enough, debt can do wonders. Especially when tied to income producing and appreciating assets.

2. Flexibility is key, but stick to the plan

Be flexible with your personal financial plan. It is okay to focus on several things at once. However, proper planning upfront pays off big time. If you can maintain the steps along your plan, you will unlock significant value as you overperform your plan.

Remember to diversify your income streams. Not all of them will increase over time, so you need to ensure that you have proper protection in case of a downside situation.

3. Start early, work harder

For the younger generations, you need to work as hard as possible and start as early as possible. Make your desk an income producing machine by staying to 11 pm certain nights. Turn your desk into a side hustle project by working on projects after work hours. Invest in yourself by buying a laptop that you can take everyone and work on anything at any given moment.

My favorite types of side hustles are the following:

  • Side hustles that rely on no-to-limited equipment
  • Side hustles that can be performed anywhere
  • Side hustles that are scalable

Work on side hustles, but don’t lose focus on your career. Your career can take you a very long way in your financial freedom goals.

4. Find what inspires you

For me, I was inspired by finding an answer to a problem. I was also inspired by the fact that I could achieve a number of things at once if I wanted to… I was able to create my own plan. One little trick that helped me was to print out several quotes about financial freedom and keep them in my wallet.

If you are feeling down, take a read through your favorite financial freedom quotes. These will help you look at the bigger picture and follow the process.

Here is one of my favorites for you to take with you.

“Money speaks one language… If you save me today, I’ll save you tomorrow.”

Your goals are achievable no matter the situation. Remember that personal finance is all relative to your financial situation. It is called personal finance for a reason. Stick to a plan that you are most comfortable with. Only you know your risk tolerance the best.

What will you do to repay your student loans and achieve financial freedom? Please let me know in the comments below. I’d love to hear from you.

Author Bio: Millionaire Mob is where people come together to find the best travel deals and financial advice. We specialize in dividend growth investing, passive income and travel hacking. Our advice has helped others travel the world and achieve financial freedom. Follow me on Instagram or Twitter.

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How to Retire in South Africa: Costs, Visas and More

How to Retire in South Africa – SmartAsset

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Home to both lively landscapes and a highly diverse and fascinating culture, South Africa stands out as a place of opportunity for many potential retirees. Bask in a glowing sun while out on the golf course or relax in the shade on a beach. If you are a foodie or oenophile, you can enjoy this country’s culinary treats and excellent wines. Between all the things to do and see, this southernmost African nation, where English is widely spoken, can sound like a dream. So, if you’re considering how to retire in South Africa here are a few areas to look into first. A financial advisor can help you determine if your U.S.-based assets will cover expenses in the Rainbow Nation.

Cost of Living and Housing

A common draw for U.S. expats when selecting a country to settle down in is a low cost of living, and South Africa tends to suit that criteria. Generally, its cost of living is 41.77% lower than that in the U.S., with rent 60.88% lower on average as well.

According to Numbeo, one of the largest cost-of-living databases, these averages stay relatively consistent across the country’s most important cities. Whether you examine one of its three capital cities, Pretoria, Bloemfontein and Cape Town, or its most populated urban location, Johannesburg, both the average cost of living and rent remain low.

For example, Johannesburg’s cost to rent a one-bedroom apartment in a city center averages around $470.22, and the price to purchase an apartment, by foot, in the same location is $92.53. According to World Population Review, Johannesburg’s 2021 population sits around 5,926,668. A comparable city is the U.S.’s New York City with 8,622,357. The cost of living in comparison to New York is less than half at 54.59%. For example, the average single bedroom in New York City is $3,269.65 for rent and $1,515.09 per square foot to purchase.

So, if your ideal retirement location has lower-cost housing, regardless of whether you want to rent or buy property, South Africa may be a suitable location.

Retire in South Africa – Visas and Residence Permit

While South African does have a visa that foreign nationals can apply for in the hopes of retiring there, there is no set age range for such a visa. Anyone of any age can apply for the retired persons’ visa as long as they meet other requirements.

It’s important to note that none of these rules concern working in South Africa. Generally, to retire in a foreign country and obtain a retirement visa, work is barred from the applicant. They have to have a sustainable pension to support them instead. However, while you still must prove a set amount of assets or funds, you are free to work.

Retirees tend to take two routes when retiring in South Africa: a retired permit or an independent financial person permit. The main difference between the two is that the retired permit allows for a temporary residency basis. A retired visa for a temporary residence is valid for up to four years and asks for a minimum income per month or year to be proven. Similarly, a retired permit application for permanent status asks for an increased minimum monthly income. Still, it lasts forever as long as the holder visits South Africa once every three years.

Lastly, the independent permit requires a minimum net worth of about $800,000 at time of writing and fee of about $8,000 at time of writing, but it has the same lifespan as the retired permit.

Retire in South Africa – Healthcare

The majority of South Africa’s hospitals are public, which tend to be overcrowded and under-resourced. They often have issues you would expect from an overburdened staff, including a need for updated equipment.

Expats are more likely to find excellent healthcare through the country’s private hospitals and practitioners, which can mostly be found in major urban areas. There, you’ll find several well-established, nationwide hospital chains that offer a high standard of care. You also won’t run into the issue of non-English speaking staff at these hospitals. However, their services are expensive. While South Africa’s Bill of Rights demands healthcare for all, it is based on a sliding scale. Typically, expats are put into a category that forces them to pay for healthcare out of pocket, so it’s a better idea to have private health insurance.

Retire in South Africa – Taxes

South Africa experiences extreme income inequality. The Gini coefficient, the standard index to measure inequality, of the country is 0.58 – one of, if not the, highest among any nation. South Africa, as a result of this and historical instability, is only just beginning to recover. However, because of this wealth disparity, personal income tax and most forms of revenue are only collected from a small percentage of the population.

South Africa’s personal income tax rates for residents are progressive and range from 18% to 45%, depending on your income bracket. Non-residents are only subject to taxes on income made from South African sources. The country defines a resident as someone present in the country for more than 91 days during the current and preceding five years.

It’s important to keep in mind that the U.S. requires all of its citizens to file taxes regardless of where they currently are in the world.

Retire in South Africa – Safety

The U.S. Department of State warns its citizens that South Africa is a location that experiences crime and civil unrest. More than the petty theft you may find in a travel advisory, South Africa experiences violent crimes, such as rape and mugging, which generally only occur at a higher frequency in central urban locations after dark. It’s also possible to find a demonstration or protest that has devolved into violence, disturbing the area and its traffic in the process.

On a lower level, some crimes, such as scams, also call for caution. It’s essential to be careful with your money, where you walk (especially at night) and keep your wits about you when interacting with things such as ATMs. Some are tampered with to obtain your cards and information.

The Takeaway

South Africa offers many potential benefits to the average retiree. It’s a naturally beautiful country that hosts a number of exciting sights and events to keep anyone entertained. Not only that, it’s a low-cost option in comparison to many countries and doesn’t put as many regulations in place for its retired foreign-born residents. There are legitimate safety concerns for the average tourist and a healthcare system that needs fine-tuning. Depending on your preferences for your retirement, the benefits may outweigh the difficulties or vice versa.

Tips for Achieving Your Retirement Goals

  • Finding the right financial advisor who can help you towards your goals shouldn’t be hard. SmartAsset’s free tool pairs you with financial advisors in your area in as little as five minutes. If you’re ready to be matched with your local advisor, get started now.
  • Retiring can come with all sorts of unexpected costs and obstacles. This is true even when you’re looking at a low cost of living country like South Africa. To prepare yourself, stop by our retirement calculator. All you have to do is input a few details about where you want to retire, when you want to retire and the value of your savings.

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Ashley Chorpenning Ashley Chorpenning is an experienced financial writer currently serving as an investment and insurance expert at SmartAsset. In addition to being a contributing writer at SmartAsset, she writes for solo entrepreneurs as well as for Fortune 500 companies. Ashley is a finance graduate of the University of Cincinnati. When she isn’t helping people understand their finances, you may find Ashley cage diving with great whites or on safari in South Africa.
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How to Retire in Poland: Costs, Visas and More

How to Retire in Poland: Costs, Visas and More – SmartAsset

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For those exploring a retirement abroad, Poland has plenty to offer the budget-savvy retiree. Poland is a relatively low-cost retirement destination when compared with some of its European nation neighbors, even in its capital, Warsaw. You’ll find that the country sits at centuries-old crossroads between Western and Eastern Europe, blending the best of their architectures, foods and cultures.

If you want to retire in Poland, speak to a financial advisor to help you reach your retirement goals and needs. 

Cost of Living and Housing

The cost-of-living database Numbeo says that consumer prices in Poland are roughly 41.53% more affordable than in the U.S., when you exclude rent. If you factor in rent, the cost of living in the eastern European country is 55.60% lower than in the U.S. This makes Poland an attractive destination for American retirees who are looking to cut spending and live off a pension comfortably.

For a specific comparison, let’s take a look at the Eastern European capital Warsaw, Poland’s most populous city. Rent in this capital is significantly lower than in New York City — 74.76% less. If you rent a one-bedroom apartment in Warsaw’s city center, you will pay approximately $772.02 each month. But if you rent a one-bedroom in New York City’s center, it will cost you roughly four times more — $3,269.65.

If you want to compare the cost of living in Warsaw with other big U.S. cities, consumer prices, including rent, are 53.38% lower than in Los Angeles, 47.57% lower than in Chicago, 32.81% lower than in Houston, and 31.73% lower than in Phoenix.

And if you are interested in comparing the cost of living in Warsaw with popular U.S. retirement cities, consumer prices, including rent, are 34.57% lower than in Orlando, 41.04% lower than in Tampa, 44.72% lower than in Charleston and 48.19% lower than Miami.

Poland has a lot to offer, especially if you’re looking for a cost-effective place to retire.

Retire in Poland: Visas and Residence Permit

U.S. citizens are allowed visa-free entry into Poland for up to 90 days. But to become a legal resident in the Eastern European country, you will have to contact a Polish consulate in the U.S. to apply for a temporary or flat residence permit. You may have to show proof of sufficient funds to support your stay, so make sure that all of your documentation is in order.

When your residency permit has been approved, you’ll receive a residency card that will help you find housing and pay your taxes. The first residence permit’s lifespan is only up to three years, but it can be renewed for longer periods.

Once you’ve lived in Poland for about five years, you will have the opportunity to pursue a permanent residence. This comes with two conditions: stable income and a property you either rent or own that you live in. Your permanent residence card then has to be renewed every 10 years.

Keep in mind that you will have to pay some base processing fees for your permit application, and they depend on the type. So, prepare to pay upwards of $120 for yours.

Retire in Poland: Healthcare

Article 68 in Poland’s constitution guarantees free medical care and hospital stay for all of its citizens. The eastern European country’s health service is financed through a national health fund, and American retirees could join that fund to get emergency care and coverage for pre-existing conditions.

Many Polish citizens use private insurance to supplement their public health care coverage. While Poland’s public facilities have more treatment options than their private health center counterparts, private insurance allows covered individuals to sometimes get medical appointments and treatments faster.

Expats will have to obtain a personal identification number (PESEL) before they can apply for public health insurance. And they should also consider looking into private medical insurance to get the most comprehensive coverage for their health needs.

Retire in Poland: Taxes

Like many European countries, Poland has different income tax regulations based on your residency status. Those who are naturalized are taxed on their worldwide income, whereas non-residents are only taxed on income earned from solely Polish sources. So, if your employer is not a Polish resident, you are not subject to the income tax.

However, you can expect to pay a flat-rate tax for approximately 20% of your revenue during the first 183 days of the tax year in Poland. After you have resided in the country longer than six months, you will be subject to the same progressive tax rates as a resident, ranging between 18% and 32%.

Note that even when you’ve paid your taxes accordingly to your residence status in Poland, you will still have to file a U.S. tax return.

Retire in Poland: Safety

The U.S. Department of State says that Poland has a low crime level. This implies that both citizens and foreign nationals can live and travel in the Eastern European country with relative safety. General precautions are advised, as in other countries, to avoid crimes that as infrequent as they may be could target tourists and other expats. You should also note that crime in Poland is still significantly lower than in the U.S., and the public healthcare system can be a valuable safety net for unexpected travel injuries and other physical accidents.

Bottom Line

Poland is one of Europe’s most affordable retirement destinations, and it keeps up with neighboring nations in healthcare and culture. Expats will find the Eastern European country both safe and comfortable, easy to travel in and one in which they can enjoy a slower pace of life while remaining very connected with nature.

Tips to Help You Afford Retirement

  • If you have the option to move abroad for retirement, a financial advisor can help you understand all the moving parts of relocation, including the tax implications. SmartAsset’s free tool matches you with local financial advisors in your area within 5 minutes. If you’re ready to speak with an advisor that will help you hit your financial goals, get started now.
  • You could comfortably retire in Poland, even in its capital, with the average Social Security income of $1,500 per month. For some, the value of your Social Security benefit can cover your cost of living depending on the area you settle in. Use SmartAsset’s Social Security calculator to estimate your benefit amount.
  • Whether you want to retire comfortably abroad or in the U.S., both an IRA or a 401(k) plan will offer you tax benefits, and help you grow your retirement savings with compound interest.

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Ashley Chorpenning Ashley Chorpenning is an experienced financial writer currently serving as an investment and insurance expert at SmartAsset. In addition to being a contributing writer at SmartAsset, she writes for solo entrepreneurs as well as for Fortune 500 companies. Ashley is a finance graduate of the University of Cincinnati. When she isn’t helping people understand their finances, you may find Ashley cage diving with great whites or on safari in South Africa.

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How to Retire in Finland: Costs, Visas and More

How to Retire in Finland: Costs, Visas and More – SmartAsset

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For those considering how to retire in Finland, you have one of Europe’s finest countries waiting to be explored. As of 2020, Finland topped Gallup’s World Happiness Report for the third consecutive year and that ranking comes with good reason. Known as the Land of a Thousand Lakes, this country has natural beauty that stands out among the rest. Finland boasts a strong economy and healthcare system for its residents, some three-quarters of whom can speak English.

A financial advisor can help you achieve your goal of retiring abroad.  

Cost of Living and Housing

While the cost of living in Finland is 8.36% higher than in the U.S., not all expenses are higher than in the U.S., according to Numbeo. The website also shows that the rent in Finland is significantly lower on average, 32.02%, than in the U.S.

A one-bedroom city center apartment’s rent in a highly populated city such as Helsinki can run about $1,171.77 month. Alternatively, the same-sized apartment can cost around $927.86 outside that central hub. The further you look outside urban areas for rental properties, the less expensive you’ll find them to be. When compared to costs of living in a city like New York City, rent may cost upwards of $2,650.00 inside the city center and $2,375.00 outside the city center.

If you are looking to retire in Finland or spend years there, it might be best to consider buying your own home. Interest rates on housing loans in Finland have been on a steady decline for years. Helsinki, the nation’s capital, has (at time of writing) the lowest mortgage interest rate in the eurozone.

Retire in Finland — Visas and Residence Permit

One of the main things to know about retiring abroad is getting a residence permit. The process is fairly straightforward. However, it has to be done on a personal basis; no one can apply for another person.

There are two types of residence permit categories: Temporary Residence Permits and Permanent (Extended) Residence Permits. You can get Permanent Residence after living in Finland with a permanent residence permit for four or more years. You should seek out an application for the permit from the Finnish embassy located in your country or the embassy of a Schengen country representing Finland. Also, you can apply using the Enter Finland online service to help book an appointment and begin the application process.

You will have to go through a background check to obtain your permit. You’ll also have to prove specific requirements down the line to become a Finnish citizen, such as fluency in the national language.

Retire in Finland — Healthcare 

The Finnish healthcare system focuses on preventing illnesses, in part through effective health and nutrition-focused education.  Before an expat can utilize Finnish healthcare benefits, however, they have to register for the National Health Insurance (NHI). You can only do this after four months of living or working in Finland. Once you register, you’ll receive a Kela card, which can be brought to pharmacies and clinics to help you get instant reimbursement for any payments. However, the amount paid back is decided on a case-by-case basis, which can underline the importance of private health insurance for some.

Each municipality is responsible for the healthcare of those living within its boundaries. Thus, doctors are responsible for a specific number of patients and create longer-lasting treatment relationships. Patients’ needs are addressed more quickly, and they work with a practitioner they know. Public hospitals can mean wait times, however, so some supplement with private healthcare as well.

Retire in Finland — Taxes 

A person’s liability to pay for Finnish tax is dependent on their residence status. After someone has stayed in Finland for six months or has a permanent home in the country, they’re deemed a resident. Finnish residents pay progressive income tax rates based on their total assessable income and the municipality they live in. These taxes are applied to their worldwide income, or money they make both inside and outside the country. Conversely, a non-resident is only taxed on income earned from sources in Finland and pays a flat 35% tax rate. Depending on the circumstances, a non-resident can apply to pay progressive tax rates instead.

Finland is a rare country that pursues double taxation treaties with foreign countries, providing some relief to people seeking dual citizenship.

Retire in Finland — Safety 

Finland is one of the safest countries, if not the safest, to travel in. The country even has one of the world’s, “most effective and trusted police forces,” according to the U.S Department of State. As with any country, you should be aware of the possibility of petty crimes such as pickpocketing, which tends to increase during the tourist season. However, other certain low-level crimes such as bicycle theft and car burglaries have been trending downwards since the early 2000s.

If anything should concern a newcomer, it’s Finland’s winter rather than its crime rates. The country experiences extreme levels of cold. In Helsinki during February, the average temperature ranges from 19 degrees F to 28 degrees F. So, travelers and visitors should prepare for the weather with appropriate clothing and research how to handle any snow or ice ahead of time.

The Takeaway

Finland is often seen as one of the best countries to retire in, especially for anyone who wants a safe, comfortable location to retire in. Those who love being surrounded by pristine nature will feel most at home here. However, harsh winters and a high cost of living can keep the more frugal retiree at bay. Your personal situation will decide if this haven of education and the midnight sun is the right place to spend your golden years.

Tips on Affording Retirement

  • Moving abroad takes more than financial stability. A financial advisor can work with you to break down all the necessary preparations, such as what to expect with tax implications. However, finding the right financial advisor for you doesn’t have to be hard. SmartAsset’s free tool only takes five minutes to match you with financial advisors in your area. If you’re ready to work with an advisor who will help you accomplish your financial goals, get started now.
  • Depending on the individual, one’s Social Security benefit’s value may be enough to cover these expenses. Using this Social Security calculator, you can estimate your benefit amount.

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Ashley Chorpenning Ashley Chorpenning is an experienced financial writer currently serving as an investment and insurance expert at SmartAsset. In addition to being a contributing writer at SmartAsset, she writes for solo entrepreneurs as well as for Fortune 500 companies. Ashley is a finance graduate of the University of Cincinnati. When she isn’t helping people understand their finances, you may find Ashley cage diving with great whites or on safari in South Africa.

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How to Retire in the Netherlands: Costs, Visas and More

How to Retire in the Netherlands – SmartAsset

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With just under 4,000 retired Americans getting Social Security benefits in the Netherlands at the end of 2019, this Western European country may not stand out as an obvious choice for retirement among some of its neighboring countries, but its high standard of living, universal health system and centuries of rich traditions, culture and food could make this the ideal retirement place for you.

If you want to retire in the Netherlands, a financial advisor can help you create a retirement plan to reach all of your goals and needs. 

Cost of Living and Housing

The cost of living database Numbeo says that consumer prices in the Netherlands are 9.9% higher than the U.S., when you exclude rent. And if you compare the overall cost of rent between both countries, American retirees can save a small amount — the Netherlands is 4.19% cheaper than in the U.S. But when you compare rents between specific cities, your Social Security dollars could go in some cases a lot further in this Western European country than in the U.S.

For a specific comparison, let’s take a look at Amsterdam, which has just over 1.1 million people. Average rent in the Dutch capital is 41% lower than in New York City. A one-bedroom apartment in Amsterdam’s city center averages $1,932.64, while a similar apartment in the Big Apple could cost you $3,269.65.

If you want to compare the average cost of rent in Amsterdam with other U.S. cities, the Dutch capital is 19.72% cheaper than in Los Angeles and 2.32% lower than Miami. However, Amsterdam rent is 3.54% higher than in Chicago, 41.80% higher than in Houston and 53.65% higher than in Phoenix.

So while the Netherlands may not be as affordable as other European countries, it may still be a reasonable choice depending on your financial options.

Retire in the Netherlands: Visas and Residence Permit

The Netherlands, like other European countries, is part of the Schengen Agreement, which means that American retirees are allowed visa-free entry into the Dutch country as tourists or for business purposes up to 90 days. If you plan on a longer residency, you will have to apply for a permit. Requirements will differ, depending on the reason for your stay. However, you should note the Netherlands has no specific option for retirees. So your pension income needs to be sustainable.

You can apply to the Immigration and Naturalisation Service (IND) for your residence permit once you have arrived in the Netherlands. In some cases, you will need a sponsor, such as an employer or partner, who will also need to submit an application (TEV). Once the IND approves your permit, it will be valid for up to five years.

Retire in the Netherlands: Healthcare

Universal healthcare is mandatory in the Netherlands — the country’s system makes health insurance compulsory for all residents, and expats are no exception to this rule. So American retirees who are permanent residents living in the Dutch country for more than three months will have to purchase private insurance. And to do so, you’ll need to register with your local council and receive a service number (BSN).

The basic insurance plan costs between $121 to $146 out of pocket, which will then become a monthly recurring payment. The government also reviews the mandatory deductible account and adjusts it yearly when needed. For example, in 2019, this amount was $493. In addition, consumers can pay a voluntary deductible on top of the mandatory payment in exchange for a lower monthly premium.

Retire in the Netherlands: Taxes

If you are earning money in the Netherlands, then that income is subject to taxes. Those employed by a company will have the amount automatically deducted from their salary through a wage tax. But if you are self-employed, you will have to calculate and pay your income tax on the annual tax return.

The Dutch tax office divides income tax into three categories based on income bracket, worldwide income, individual gross salary and pensionable age. Non-residents are only subject to a tax on the income they earn from sources in the Netherlands.

Beyond the Netherlands, you should keep in mind that American citizens are still required to file tax returns with the U.S. government, independently from where they reside. However, expatriates in the Netherlands could get some relief thanks to a tax treaty between both countries that eliminates double taxation. On top of that, expats can also benefit from the 30% ruling. This policy allows employers to pay their foreign-born workers 30% of their income tax-free continuing for up to 10 years.

Retire in the Netherlands: Safety

While the Netherlands can be picturesque from the windmills to the tulips, general safety precautions are advised, as in other countries, to safeguard against crimes that could target tourists and other expats.

The U.S. Department of State’s Travel Advisory says that the Netherlands is a low-crime threat, but puts the Dutch country at a Level 2 due to possible terrorism threats. The Netherlands raised its own threat level as well in 2019 and put forth counterterrorism measures to address the situation.

But while individuals are urged to exercise caution, the average traveler in the Dutch country has a generally safe experience, even in major cities like Amsterdam, Rotterdam and The Hague.

Bottom Line

While the high standard of living in the Netherlands could be challenging for budget-savvy retirees, the Dutch country’s universal health system and rich culture could make it the ideal retirement place for you.

Tips on Affording Retirement

  • If you want to retire in the Netherlands or any other country, a financial advisor can walk you through all the steps that you’ll need to take for a comfortable retirement abroad. SmartAsset’s free tool matches you with local financial advisors in your area within five minutes. If you’re ready to speak with an advisor that will help you hit your financial goals, get started now.
  • The Netherlands is one of the more challenging European nations to rely on your Social Security benefits alone. SmartAsset’s Social Security calculator can help estimate your benefit amount and compare it with the costs of living that you will have to pay during retirement.
  • Whether you want to retire comfortably abroad or in the U.S., both an IRA or a 401(k) plan will offer you tax benefits, and help you grow your retirement savings with compound interest.

Photo credit: ©, ©, ©

Ashley Chorpenning Ashley Chorpenning is an experienced financial writer currently serving as an investment and insurance expert at SmartAsset. In addition to being a contributing writer at SmartAsset, she writes for solo entrepreneurs as well as for Fortune 500 companies. Ashley is a finance graduate of the University of Cincinnati. When she isn’t helping people understand their finances, you may find Ashley cage diving with great whites or on safari in South Africa.

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