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Steps to get the best of both worlds after retirement

FINANCIAL implications of striding two countries need to be assessed at the planning stage

Indians living abroad are often confused about where they will stay after retirement. The choice between going back to one’s roots and staying with the circle and infrastructure one creates during a lifetime is not easy. Some people, however, have a choice of staying a few months in each location.

The fact is the current “sandwich” generation is caught between staying where their children decide to work, which in a lot of cases is abroad, and getting home to their parents who are ageing but want to stay put. The FINANCIAL implications of striding two countries, possibly continents, need to be assessed and sorted out at the planning stage itself.

Cost of living

As is fairly obvious, overall living expenses overseas tend to be higher than what they are back home in India. If you have spent a decade or more overseas, it is very difficult to estimate what your living style and hence costs will be in India. There are small things to consider. For example, will you employ a cook or eat out often? Will both spouses have independent vehicles? Will you be comfortable driving or would prefer a driver/s?

Apart from costs, do consider benefits too. The existence of social security in most developed countries may cover some of the living expenses. Health benefits, too, ought to be checked in advance.

Tax status

How will dual residency impact your tax liability? Many countries are in the process of or have already reduced the qualifications limit of resident status from 182 days or more in a country to 60 days along with the fulfilment of a few other conditions. It may be appropriate to connect with a legal expert to determine whether a particular citizenship or permanent residency status ought to be surrendered.

CURRENCY allocation

It will be prudent if you can build your nest egg in each country in a manner that the currency risk is reduced after retirement. As we explained in an earlier column (http://goo.gl/m1Hz0A ), the difference in 10-year government securities’ yields reflects the expected depreciation in the currency. For example, the differential between India and the US yields over 10-year instruments at present is 6% and it is reasonable to expect an annual depreciation to that extent over the medium term. Short-term fluctuations, such as the current movements, are exceptions.

Asset allocation

Both the houses that you live in, across the two countries, become unproductive assets, unless you are fine with renting out your apartment and living in a SERVICE APARTMENT when you visit the country. That way, you continue owning an asset and will be able to participate in capital appreciation. In case you require funding, you could consider a reverse mortgage. Apart from property, you will be better served by investing in MONEY market, fixed income and equity assets in the proportion as deemed fit by your FINANCIAL adviser. Ensure that you do not have all eggs in one basket.

Cash flow management

Estimating living expenses, keeping in mind how many months you are allocating to which country, is the next step. Are you in a position to INVEST a lump sum in each country, returns from which will match your living expense requirements? Ensure that you have taken into account local and global taxes and have adequate protection against medical needs.

Travel costs

Apart from annual trips from one location to another, you should provide for unplanned visits. With family back home in both countries, there could be emergencies as well as happy occasions which warrant travel.

It is never easy relocating from one home to another and when you have to straddle two, across different countries, it certainly gets more complex. Start involving your family to assess potential scenarios and talk to people who are in such a situation to get the real picture. Next, get in touch with your financial adviser and start creating different baskets of your assets.

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