One of the main benefits of EU membership is the ability for Irish people to live, work, and retire to any country within the union.
It has become quite common for Irish people to live part of the year – or full time – in another country, often Portugal, Spain, France or the UK.
There are many reasons to consider living in another country later in life such as better weather, healthcare, lower cost of living, being closer to family etc.
What does Retirement mean to you?
To start with, we should consider what retirement means. It’s no longer the case that everyone retires at 65, draws from their retirement savings and state pension, and never works again. I prefer to think of retirement as a time when work becomes optional – i.e. creating a situation for yourself and your family that you can chose to do what you want, when you want.
For business owners it could mean bringing in new business partners to allow you to work fewer days, or working remotely from a warmer climate for part of the year. It could mean splitting retirement accounts into multiple parts, drawing down some from as early as age 50 or 55, leaving other accounts untouched until as late as age 75. It might mean not ceasing work until much later, or indeed not at all.
Planning Opportunities – and avoiding bad outcomes
Careful planning is required to ensure the financial part of the decision is properly structured, and this should be considered ten or more years prior. This would include detailed lifetime cashflow projections and investment strategy with a Financial Adviser plus tax and estate planning.
When it comes to pension accounts, another of the aforementioned benefits of being EU citizens is that we can move pension accounts to other EU countries to avail of better planning opportunities – and draw retirement income from such schemes even if we never leave Ireland.
For example, the standard procedure for someone saving for retirement is that they and/or an employer contribute to one or more pension accounts over their working life such as an Occupational Retirement Scheme (“OPS”) or a Personal Retirement Savings Account (“PRSA”). At retirement they typically take a tax-free lump sum and transfer the balance to an Approved Retirement Fund (“ARF”).
The problem for someone who may decide to live overseas in the future is that the ARF is not tax-efficient, because ARF income is taxed at source in Ireland and will also be taxed by the country of residence. With the help of a good Financial Adviser, this worst-of-all-worlds situation (double taxation) can be avoided by using an alternative EU retirement route rather than the Irish ARF. This would mean that you pay taxes only in your country of residence. It can also include features such as more tax efficient estate planning, better investment options, lower costs, and more.
The key takeaway is that someone considering living outside Ireland later in life (even temporarily) should seek advice to understand the full range of options available to them, and crucially to avoid being locked into a badly advised structure where they pay high fees, suffer double taxation, and lose their ability to do what they want, when they want.
Please feel free to get in touch with any questions or if you’d like to chat about your long-term plans.
Ardbrack Financial Limited
Office: 021-4773833 / Mobile: 083-4115277
Disclaimer: The content of this article is for general information purposes only. It does not constitute tax or investment advice as it does not take into account the investment objectives, knowledge and experience or financial situation of any particular person or persons. You are advised to obtain professional tax and investment advice suitable to your own individual circumstances. Ardbrack Financial Limited makes no representations as to the accuracy; validity or completeness of the information contained herein and will not be held liable for any errors or omissions.