How to Invest Pension Money

Guest post by Adam Barney

One key way of ensuring you can retire comfortably – and possibly early – is by investing your pension money wisely. Most of us save for the majority of our working lives to set up a nest egg for our leisurely years, so we want to know our pensions are looked after in worthwhile investments which will enable us to make the most out of our money.

In the past, this would have been looked after for us, usually through buying an annuity. However there are many more options available to those out there with a pension, which may prove to be better for you as an individual than annuity. Here are just some of the things you can do with your pension:

Annuities

Currently the most common form of pension payout, annuities may not return the most money but they do provide security in the form of a return guaranteed not to run out before someone passes away. The annual return is only about 5-6% and certainly pales in comparison to other investments. However inflation could prove good for annuity policies which are index-linked, which is the main draw for most people.

Retail Bonds

Retail bonds are basically loans that individuals can make as investments in companies. A lot of major companies take part in this, such as RBS and Tesco, which can provide some sort of reassurance to investors. As can be shown by the banking crash and subsequent nationalisation of RBS, this might not always provide a positive payout. There is essentially more risk than with an annuity, but there is also a certain level of control. These bonds have a fixed maturity date, so you know when they’ll pay out and roughly how much. You can get a similar payout from this type of investment than as with an annuity, with the certainty that you’ll get all your capital back at one time, which could more of an advantage. If all goes well you can again expect a return of 5-6% but this is not guaranteed, as some investors learned over the last decade.

Low Risk Bonds and Shares

The appeal of this type of investment is in the name; it’s low risk. This usually breaks down into 60% of your invested cash going to popular bonds, with the remaining 40% ending up invested in equity funds. Having a higher percentage of bonds, especially low risk bonds, is a positive way to combat inflation as it stops your pension fund dramatically losing value. The return is only 4% annually, however low risk bonds and shares are considered more secure than retail bonds.

Invest in Gold

Although a lot of pension savings are usually tied up in stocks or investments until they are withdrawn, a much less risky option would be to invest your cash in gold. Unlike the stock market or currencies, the value of gold has not seen as many crashes, and in most instances its value has increased far higher (and therefore promising a higher return) than other investment options. If you don’t know how to spot good gold IRA company, then there are plenty of IRA gold comparison websites you can track down on Google, helping to trace the perfect investment for you.

There are of course many other investment options for your pension fund, with many high risk options available to you should you feel daring enough to make the investment. However the above is a selection of some of the most common ways you can invest your pension and hopefully make a gain from it.

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Laundry Service

Laundry cleaned, folded and delivered!

Laundry cleaned, folded and delivered!

One of the services we receive from Compass Living’s all inclusive stay is laundry service. It’s just so great to be able to put our used clothing in a bag and fill out a form that lists our items. Two pairs of socks 3 pairs of shorts, our pajamas… I then give it to housekeeping when they come in to the residence in the morning. They count our items and weigh the amount of clothing and then a couple of days later it comes back all clean and folded.

I don’t even have to drop it off and pick it up! How easy could it get?

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Banana Sheets

Lady making banana sheets on the sidewalk

Lady making banana sheets on the sidewalk

We are staying at the Compass Parkview in Saigon, Vietnam. As part of my Pampered Package I receive weekly massages, manicures and pedicures.

One week, as a surprise, my manicurist brought me some tasty banana sheets. What are these? You might ask. A vendor slices bananas lengthwise into narrow strips and places them on a grill to heat. Because of the sugar in the banana strips, they begin to adhere together and eventually form a flattened grilled “sheet” of crispy bananas. They are surprisingly delicious!

We liked them so much that when our gift package ran out, we began the search to purchase more. For the next several days, we went from store to store but we couldn’t locate this tasty treat.

Then one day when we walked outside our residence, we saw a vendor cooking up waffles and banana sheets! What luck!

Since I don’t speak Vietnamese, sign language had to suffice and I found out that a package of these yummy delights cost 24,000VND or just over a dollar. I bought two! And now I’m all set to enjoy a local delicacy at my leisure.

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I Am a Happy, Homeless Pet and House Sitter

Guest post by Francien Daniels-Webb who found herself divorced in her 60’s and began house sitting around the world. You can find her through her business, Home Sitters Worldwide.

2014-07-10 14.48.44My decision to leave my marriage was an instant one, and as luck would have it my husband was on the same page. My role in the marriage had become one more of a carer then a wife, dare I say it – the mother figure he had missed out on. I was 15 years older and at 60 I was over the chaos and, having already raised my three children and taught 1000s of students, it was time for me to move on.

I left the home and virtually everything in it. What he didn’t want I donated to Opportunity Shops or gave away things to those who could use them. Items such as thousands of dollars of quilting must haves. It was unbelievably easy, cathartic and I was thankful for the opportunity to do so. We agreed on a figure he would pay me for the home. It wasn’t much, but it was a cushion to land on.

Plans to build a self-contained granny flat at my youngest daughter’s home was soon ended. My two grandsons have autism as does her husband, so the chaos I had left in my own home would be pushing onto them. Meanwhile their home would be pulled apart with strangers coming into the home to build the granny flat. I made my decision not to do this and let my daughter and her husband know.

So what was I to do? Renting was out of the equation as my part of the pension did not come close to match any place to rent.  At midnight, my daughter and I Googled options, with the first coming from nowhere; ‘house sitter’!

Another life and lifestyle opened before us. It was unbelievable, and I signed up and paid for a year membership, on an Australia only site.

Life is very interesting when you are open to a different way of thinking, and calls to action soon come along. Friends of my daughter came over for a BBQ and I told them I was researching home and pet sitting. The couple faced each other with a grin and voila! Here was my first booking for 2 weeks! One of them would have had to stay home with the dogs and since it was Christmas, family and neighbors were not available.

I applied to owners’ listings and within a few days I was contacted by owners and I soon had the next 6 months booked. Most of these were conveniently back to back. Colleagues at the school where I had worked as a casual relief teacher also booked me to home sit, so within 5 days I was 15 months booked out in Victoria, Tasmania and Queensland, all the way until early 2013.

I decided this was a perfect way to experience the UK and my birth country, the Netherlands. I spent an amazing 133 days between both countries and my inner gypsy was born.

Today I am booked until March 2015 in Edmonton Alberta Canada, the springboard to my travels from Canada to Panama until January 2016. Back to Australia to celebrate my darling daughter’s 40th birthday and then off to enjoy Europe’s Summer in 2016 sitting anywhere I am asked to sit. I have many repeat assignments and I have made very dear friends besides experiencing amazing cultures, foods, cities and villages.

Being constantly in demand I realised this was the opportunity to create my website alongside my daughter who needed to have an escape from her Autism World 24/7. She works on the dashboard when needed and supports the business by promoting the services we provide. We launched our business on the 1st  of June 2014, and are promoting Free Membership Trials to both Owners and the Sitters.

I haven’t charged any owner for my services as the release of worldly goods led me to Pay it Forward, but House Sitters Worldwide will eventually support my travels and allow my daughter to earn some pocket money for the first time in 13 years since her boys were born.

If you envy my lifestyle then you are not the first, and my being 63 now proves that you can begin this lifestyle whenever you wish. To be honest, the grey nomads are very appreciated by all ages of home owners.

We can all sit and watch the world and time pass by through our curtains but being part of the growing number of sitters travelling the world will be the very best decision you have made for a long time. Who wouldn’t like to travel and have FREE accommodation?

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Stop Telling Me I’m Old

Guest post by Laverne H. Bardy whose humorous, often irreverent, slant on life in general, and aging in particular, draws a large readership. She has been syndicated with Senior Wire News Service since 2004. Her book, How The (Bleep) Did I Get This Old? was released in January, 2012, and is a compilation of the best of her columns.

LaverneStanding at Macy’s jewelry counter, I was having difficulty making a purchasing decision. A saleswoman, recognizing the look of confusion on my face, asked if I needed assistance.

“I’d like to buy a gift for a special  friend,” I said, as I surveyed the enticing array of gold bangles, brooches and earring.

“How old is your friend?” asked the perky, size six, twenty-something redhead.

“She’ll be celebrating her sixty third birthday,” I answered.

“Oh,” she frowned, “then perhaps you should consider a comfy flannel nighty or a floral house dress. They love to walk around the house wearing those things.”

They? Around the house? Wearing those things?

I had all I could do to keep from slapping her wrinkle-free face. Where on earth did she get such a distorted concept of older women? I, personally, do not have a single female friend who wears floral house dresses, or hangs out around the house. They’re all vibrant women, involved in life, who actually leave their homes to shop, attend classes, play tennis, and work out at the gym – in spandex.

Life is an adventure. Follow your dreams.

Another recent unsavory memory occurred while I was pushing my cart through the supermarket. I’d just had my hair and nails done and was feeling pretty darn good about myself.  Walking neck and neck with me was a handsome, dark haired man, perhaps in his early forties. He smiled broadly, prompting playful feelings to stir within me, so I fluttered my eye lashes and flashed him a flirtatious grin.

With a twinkling smile he asked, “Excuse me ma’am, do you know where I can find the laundry detergent?”

Ma’am???  Ma’am???

Talk about crashing smack into reality. My fanciful thoughts were instantly dashed.

I was at a wedding, cutting a rug with my man of the hour. There we were, feeling chipper, limber, and dancing to the beat of Donna Sommer’s fast paced disco number, “Hot Stuff.”

At the end of the dance a teen-aged girl sauntered up to us with a huge, condescending smile.

“You two are absolutely adorable,” she said. “I hope I have your energy and spirit when I’m your age.”

Adorable???? Your age???”

Poof! The bubble burst as my date and I stared blankly at each other and were suddenly aware that we were not as young as we felt.

When, exactly, did I become the old person that others perceive me as? One moment I was young, the next I was mature and the very next I was ancient. But I, somehow, missed each transition.

Sure, there are certain occurrences I’ve observed that indicate the passing of time, but only a few. For instance I’ve noticed that authoritative people, such as policemen, teachers and presidents, are being hired and elected at a considerably younger age today than they were years ago. Also, street signs and reading material in general are now written in much smaller print than they use to be, and clothing sizes are no longer accurate; they’re made much skimpier.

In my heart and in my mind I am the very same person who drew chalk marks on the playground macadam in preparation for a game of hopscotch with Mary Lou and Nancy. My wonder and excited anticipation of the unexpected have not diminished one iota since my days of waiting for my prom date to ring my doorbell, or for the impending birth of each of my children.

Why are my exterior signs of time often viewed with disdain, intolerance and indifference? I’m the same person I was when I wore a younger body.

I think it’s only fair to warn you that this spirited senior will never be found wearing comfy flannel nighties, floral house dresses or hanging out around the house. You’ll find her instead, at the playground, playing hopscotch with her grandchildren, while the sunlight bounces off of her large, gold, hooped earrings.

Other posts by this author

Growing Up Dangerously

Watching Real Beauty

Hell, Not on the Map, but I Was There

Cellulite: A Rite of Passage

Camping: Not for Sissies

Don’t Count Me Out

Aging, Not All Fun and Games

Challenging My Legacy

Behind Closed Doors

Battle of the Bulge

How the Home Shopping Network Turned Me into a Zebra

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Buying and Selling Real Estate (Foreign or Domestic) from a Tax Perspective

Guest post by John Ohe, IRS Enrolled Agent and chartered Financial Analyst.

John Ohe 1In this article, we discuss U.S. expats and real estate. The most frequently asked questions on this topic include: (1) what are the tax implications when buying foreign real estate? (2) I still own real estate in the U.S. – what are the key issues to consider?

Buying Foreign Real Estate

From a tax standpoint, buying and selling foreign real estate is not much different than in the U.S. Currently, there are no reporting requirements when purchasing foreign real estate. However, U.S. expats should be aware that if one transfers money to a foreign bank to facilitate a real estate transaction (and the balance exceeds $10,000), then this would trigger a requirement to file an FBAR (FinCen 114).

Property taxes are deductible on your tax return. So are mortgage interest payments, including home equity loans. The same restrictions apply as in the U.S. (e.g., acquisition debt limited to $1M, home equity debt limited to $100,000). One can deduct mortgage interest on up to two homes. Keep in mind that deductible amounts paid in local currency will need to be converted to USD for tax reporting purposes.

Open up to new possibilities abroad.

When it comes to selling foreign real estate, the tax-related similarities continue. If the home has been one’s primary residence for at least 2 out of the past 5 years, then one can exclude capital gains up to $250,000 ($500,000 if married filing jointly). Similar to the real estate deductions, amounts denominated in local currency will need to be converted to USD.

From a non-tax standpoint, there are a number of issues to consider. Property rights differ by country. Transferring money should be conducted carefully – fees and Foreign Exchange transactions can be costly. It may be wise to seek professional guidance (e.g., a reputable real estate broker).

Holding onto U.S. Real Estate

Many Americans are aware of the $250,000 ($500,000 if married filing jointly) exclusion on the gain from a sale of a home in a qualifying transaction. The following general requirements must be met to qualify for the exclusion:

  1. Person must have owned and occupied the home as a principal residence for at least 2 out of 5 years prior to the sale; and
  2. During the two-year period ending on the date of the sale, the person did not exclude gain from the sale of another home.

What is lesser known is the fact that any portion of the gain attributable to non-qualified use of the property is ineligible for the exclusion. Non-qualified use includes periods during which the property is not used as an individual’s principal residence (including when it is rented out). The maximum exemption amount is reduced on a pro-rated basis

Let’s use a simplified example to illustrate. Jane Smith (a single taxpayer) buys a house for $100,000 on January 1, 2000. She lives in the house for five years, then moves abroad. On January 1, 2012 (seven years later), Jane returns to the U.S., and begins living in her house again. On January 1, 2014, she sells the house for $350,000 (at a gain of $250,000). Jane meets both of the above requirements. However, 7 of the 14 years she has owned the house falls under non-qualified use. Therefore, only half (or $125,000) of the maximum exemption amount applies. Jane will have to pay capital gains tax on $125,000.

There is one important exception to the non-qualified use rule. Non-qualified use does not include any portion of the 5-year period preceding the sale that is after the last date that the property is used as a taxpayer’s principal residence. In plain English, if you own a home and leave the U.S. without selling the property, sell it within 3 years (and don’t move back into the home). That way, you qualify for the 2 years of 5 years requirements, and you will not be subject to a reduction in the maximum exemption amount.

Other articles by this Author

U.S. Expat Taxes – An Introduction

If you would like to submit a tax-related question, please visit us: HolaExpat.com.

All responses are provided by John Ohe (IRS Enrolled Agent and Chartered Financial Analyst).

Hola Expat helps Americans living abroad with their U.S. tax returns. Our professionals are IRS Enrolled Agents with expertise in expatriate tax return matters. Take a look at our fee schedule. We offer the most sensible pricing among our competitors.

Disclaimer: The answers provided in this article are for general information, and should not be construed as personal tax advice. Tax laws and regulations change frequently, and their application can vary widely based on the specific facts and circumstances involved.

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Is Falling in Love Inevitable?

Guest post by Linda DeBlanco. Linda got tired of the grunt and grind of money earning and packed it all up to travel the world. She shows how you can too, in her book, Get Packing: If not now, when? To find out more about Linda or to purchase her book, visit her website.

get packing2Other than getting through a working life affording only one or two week vacations for decades, I hadn’t really traveled in most of my entire lifetime.  Although I used my passport a fair amount and saw lots of places and hotels, I came to realize that vacations don’t count.

When I was 49 I got a small pile of extra sales commission money.  Rather than buy more dinnerware and/or shoes, I got a wild idea to take a year off from the grunt and grind of money earning and did some serious exploring outside of the USA.  What an eye opener!  But duty called and I didn’t know any other way, so the grunt and grind continued after that glorious year of escape and adventure.  Fifteen years later, at the age when people normally retire, I did the “normal” thing and waved goodbye to my cubicle.  With plenty of time and very little money I did more exploring of the planet and came to a conclusion.

Travel should be a REQUIRED activity for everybody before they get too old to heft a backpack!

Open up to new possibilities abroad.

How can we really understand what it means to live on planet earth if we don’t get some tasty glimpses of a much broader view of it than we do in a typical lifetime as working stiffs?

Realizing how fearful so many of my friends were about leaving home (the USA) for exotic lands, I decided I had no choice but to shout to the world how important it is to seize every opportunity to get out there and travel WHILE WE STILL CAN!

get packingOne wonderful spring day, while sitting by Lake Atitlan in the beautiful highlands of Guatemala, I realized I’d better pen a book to offer encouragement to anybody and everybody who might miss out on seeing the world while there’s still time.  I just felt it was my duty.  I always was pretty hooked on “duty.”  But more on some good reading material a bit later.

First I must admit that it’s not really fair to say this epiphany happened on a spring day because at Lake Atitlan it’s ALWAYS a spring day – even when it’s raining.  In truth this moment of epiphany was in January and was the dead of winter in many places, including the California Sequoias where my car had gotten snowed in.  The poor old Buick sat in front of my daughter’s cabin on a road that is NEVER plowed.  I was only with her for a short visit when she informed me on December 15th that I could get my car out from where it sat in the spring!!!  I’m not a cold weather, rustic living person.  So all I could think was ESCAPE!  I could get myself and a couple of suitcases past the wall of snow created by my daughter’s four wheel drive truck.  But the car was pretty much stuck for the next several months and how does one function in California without a car?  I had no choice but to head south for the winter, which is how I ended up at Lake Atitlan in the first place.

And it’s only fair to report that Lake Atitlan is where I’ve finally decided to spend the rest of my days!!!  It took a few years but by now I am truly in love with Lake Atitlan and I don’t believe in falling in love at first sight.

So, about falling in love.  While we wouldn’t buy a pair of shoes without trying on a few styles, I wasn’t about to settle on a final “living” place without even more exploration.  While falling in love and settling down at some point in life may become a necessity since we aren’t getting any younger.  But wouldn’t you just hate to do that in the wrong place?   To solve that problem it’s my suggestion that we get packing.  Get out of our comfort zone and go see the world and find that place that we can fall in love with.  And, further, that we do this exploration as soon as possible.  Because if not now, when will we get around to that very important global exploration so we can make that extremely important decision on where to live out our golden years.

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Grape Vendor

grapes on the streetIn Vietnam there are many vendors selling all sorts of food. Sometimes they will cook you a waffle on a grill or they will sell you fresh coconuts with the cold juice inside the nut. You will see vendors sitting on the sidewalk cooking snails and duck eggs over hot coals.

This vendor was selling the most beautiful grapes ever. Look at them, aren’t they magnificent?

We wanted to take a photo of the vendor with her wares, but she did not like this idea so I had to settle for a quick shot of the grapes only. But by looking at the result of this photo, I’d say it was enough.

For more stories and photos of Vietnam, click here.

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French Baguettes

french baguettesFrance and Vietnam have had a relationship since the 17th century when missionaries first arrived. While the relationship has been at times complex and difficult, one of the best things France has left behind is the influence of their cuisine.

Here you see some very delicious fresh baguettes made in the French style, and you see them everywhere here in Vietnam. In Asia the use of wheat flour is not very common and neither are sandwiches, but in Vietnam we see both.

The other day we had a pate sandwich with some Gouda cheese on a fresh baguette. All that was missing was a bottle of wine!

For more stories and photos of Vietnam, click here.

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How Would You Structure My Portfolio?

Dear Billy and Akaisha,

Heartfelt thanks to you for your inspiration and helpful guidance for those of us who are not sure if we’ll be able to retire.  I’m writing to ask for your help and expertise about my situation regarding possible retirement.

Briefly, I’ve been a low wage earner most of my life and was late getting into investing.  However, the last twenty three years I’ve made every effort to put together enough for some kind of retirement.  I’m 73 at present and hope that at 75 I’ll be able to begin the last phase of my life in retirement. At this point I have almost $300,000 in investments.  By the age of 75 I’m pretty sure I’ll have that amount and, perhaps, a little more.

 My question for you is, how would you structure that money that it would last 25 years ?  I will have 17,000 a year from S.S. and a miniscule pension.  I live a fairly frugal life, I’m fluent in Spanish (Peace Corp-Colombia 65-67) and plan to spend a few months in Latin America every year of so.  I have some ideas of how I would structure my portfolio, but I would really like your input.

Thank you, again, for all that you have shared.  I enjoy all your stories and the other information you include on your site.

Best wishes and good luck,

 John

Reduce your cost of living. Pay less for medical care. Find better weather. Create a healthier way of life.

Hi John,

Thanks for your interest in our site.

Although I cannot give out specific investment advice, I can talk in generalities.

Your 300K divided by the 25 years you want it to last will give you 12K per year. This amount, plus your 17K from SS will equal 29K per year or $2400 per month. You can easily live on that in Mexico or other parts of Latin America as well as Asia. These numbers are using the 300K with it not being invested. If you invest the money your returns could be better either by stretching the money out longer or leaving it intact. With your investment, you just have to average 4% of your 300K to make 12K a year, and then you will be leaving your original investment intact. Some combination of bonds and stocks funds should be able to produce that 4%.

I hope this helps.

Regards,

Billy

 

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