Each age group has its own specific pension related issues. We will now specify several of those aspects for three different age groups: Age 25-34/Age 35-55/As of age 56.
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A] Age 25-34
I. Old Age Pension
The essence of pension optimization in an investment based pension plan is to make use of the great effect of compounded return on investment.
The longer the investment horizon, the higher the expected return on investment. Thus investing extra at a young age is probably one of the best financial decisions you will ever make.
Which effect is even further increased by using all tax benefits. It seems advisable to check if you have the option to invest additional tax deductible pension premium. Maybe even with a substantial back service effect towards the past.
Please also check the amount of tax benefits in an Occupational Pension Plan versus a Private Pension Plan and if they tend to influence one another.
If you also compare they pay-out flexibility and options for international pay-out, then you are getting a better insight in what is best for you.
II. Next Of Kin Pension
For Expats with a family, it might be advisable to check the existing level of governmental and occupational next of kin pension coverage.
Due to the young age and very low interest rate, buying additional risk based coverage is still very inexpensive. If you really need it. Many young Expats with families have chosen for an additional insured capital of € 500.000,- to € 750.000,- for a period of 5 to 7 years.
If you might prefer such additional coverage and if you might relocate to another country in the near future, make sure that the coverage stays intact when you move. It is also advisable to check if the premium is guaranteed and if the General Conditions of the coverage are client friendly.
Finally the benefit of acquiring additional coverage within an Ocupational Pension Plan might be that medical tests are not allowed. Which often depends on national legislation.
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B] Age 35-55
I. Old Age Pension
If you participate in an investment based pension plan and if your preferred retirement age starts as of age 60-65, you will in general have a long enough investment horizon to go for
the highest expected return on investment within your Personal Risk Profile.
Which optimization is even increased by using all options to invest additional tax deductible pension premium. Which might even be possible towards the past and thus with often very attractive back service effect.
Please also check the amount of tax benefits in an Occupational Pension Plan versus a Private Pension Plan and if they tend to influence one another.
If you also compare they pay-out flexibility and options for international pay-out, then you are getting a better insight in what is best for you.
II. Next Of Kin Pension
For Expats with a family, it might be good to check the existing level of governmental and occupational next of kin pension coverage.
If your total coverage might not be of the desired level, you will have the option to increase this by insuring an additional risk based capital.
As of age 45 this coverage is getting increasingly more expensive. Coupled with the often required medical questions and tests, we often see that extra private risk based coverage is not a perfect solution as of age 45-50.
If you might require extra coverage and if that would be possible within an Occupational Pension Plan, that might reduce costs and prevent medical questions and tests. Which depends on national legislation.
III. National Tax
If you have already build up a substantial occupational pension claim, then it seems advisable to check in the related country if there is a maximum of tax benefited pension claims you can acquire. And if so, how to act before that moment. Thus trying to prevent additional tax exposure.
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C] As of Age 56
I. Old Age Pension
Expats often have a personally preferred retirement age. Which can differ from the in certain countries more rigid State/Occupational/Private Pension Plan related retirement age.
If you have investment based pension claims, please make sure that you have a good insight in your own Personal Risk Profile and how the investment risk should be reduced towards retirement age. And if this requires action on behalf of yourself or if the current investment reduces the risk automatically as Life Cycle Fund.
If you would like to retire before the State Retirement Age of the country you are living in, please check if it would reduce your tax exposure by financing this early retirement by means of your savings and investments and not by using existing formal pension claims.
II. Next Of Kin Pension
Due to your age acquiring additional risk based next of kin coverage would in general be very expensive. It is probably advisable to only do this if your specific situation and wishes absolutely require this.
Finally please make sure that you know the difference between the next of kin coverage before versus as of retirement age and that you know the type of pay-out.
III. National Tax
If you have already build up a substantial occupational pension claim, then it seems advisable to check in the related country if there is a maximum of tax benefited pension claims you can acquire. And if so, how to act before that moment. Thus trying to prevent additional tax exposure.
IV. International Tax
When you retire and you will receive pension payments from other countries, then please check probably existing double tax treaties between the related countries in order to prevent or mitigate double taxation in both countries.