Planning Your Retirement Drawdown
Mastering Retirement Income: A Drawdown Strategy Case Study for Expatriates
Written by David Rosbotham DipPFS | Financial Planner | Feb 24
Navigating the complexities of retirement planning can be daunting, especially for expatriates with diverse financial portfolios spanning multiple jurisdictions. In this blog post, we delve into a compelling case study featuring John and Laura, a retired couple facing the challenges of optimising their retirement income strategy. With assets scattered across various accounts and countries, they sought professional guidance to ensure their financial resources were working efficiently for them and their heirs. Join us as we explore their journey and uncover the crucial insights that can help expatriates everywhere craft a tailored drawdown strategy for a secure and prosperous retirement.
Meet the Couple
Meet John and Laura, a retired couple in their early 60s who have diligently saved for their retirement over the years. They have two main assets: a Self-Invested Personal Pension (SIPP) valued at €700,000 and a General Investment Account (GIA) also valued at €700,000.
Current Strategy
John and Laura had been managing their retirement finances independently for the past year. Without professional advice, they decided to withdraw €35,000 from each of their investments to cover their expenses, totalling €70,000 for the year. However, they were unaware that there could be a more optimal strategy for withdrawing funds.
Recognising the potential for improvement, John and Laura decided to seek advice from a financial planner to optimise their retirement income strategy going forward. Their journey with Rosbotham Finance began with a thorough review of their finances and a recommendation for a more tax-efficient withdrawal approach.
Revised Strategy
Tax Efficiency in Withdrawals
After reviewing John and Laura's previous withdrawals, we explained how different withdrawal strategies can impact their tax liabilities. Withdrawals from pensions (SIPPs) are typically subject to income tax, while withdrawals from General Investment Accounts (GIAs) may not incur the same level of taxation.
We recommend prioritising withdrawals from the GIA to cover their income needs. By doing so, John and Laura can potentially minimise their income tax liabilities, allowing them to preserve more of their retirement savings for future use.
Long-Term Growth and Inheritance Planning
We emphasised the importance of considering long-term growth and inheritance planning when structuring withdrawal strategies. Since pensions are generally sheltered from inheritance tax, leaving the SIPP untouched and allowing it to continue growing can be advantageous for estate planning purposes.
By prioritising withdrawals from their taxable GIA first and allowing their tax-advantaged SIPP to grow, John and Laura can potentially leave a larger inheritance for their heirs while still meeting their income needs during retirement.
Outcome
With the guidance of Rosbotham Finance, John and Laura can now implement a more tax-efficient and strategic withdrawal strategy for their retirement income. By adjusting their approach and prioritising withdrawals from their taxable GIA whilst allowing their tax-advantaged SIPP to continue growing, they can optimise their retirement finances and potentially leave a larger legacy for their heirs.
Conclusion
John and Laura's experience highlights the importance of seeking professional advice when managing retirement finances. By working with a financial planner, they were able to identify and implement a more optimal withdrawal strategy, ultimately maximising their financial well-being in retirement.
Financial Planner's Comments
In conclusion, while the case study presented here offers a simplified illustration, many expatriates we assist face a far more intricate financial landscape. Their portfolios often comprise of multiple workplace pensions, several state pensions from different countries, diverse investment accounts across various currencies, and potentially income-generating properties spanning multiple jurisdictions. In such complex scenarios, pinpointing the most advantageous source for withdrawals becomes paramount. Having a meticulously crafted drawdown strategy not only ensures that your assets are optimised for growth and tax efficiency but also secures your family's financial well-being in the long run. Partnering with a skilled financial planner who can navigate these complexities is indispensable for expatriates seeking to make the most of their assets and secure a prosperous future for themselves and their loved ones.
Partnering for Financial Success
Are you curious about how financial planning can add value to your financial journey? Take the first step towards securing your financial well-being by reaching out to us today.
We invite you to schedule a free, 30-minute introductory meeting with our experienced planner, David Rosbotham. Or find out more about our approach to financial planning.
