Archive for February, 2012

Student Loans – the new mortgage

by DIY Offshore on February 25, 2012 in Education Savings with No comments

Expat Savings for Education

Recently in the office we were debating the optimal mix of debt repayment vs international pension contributions. We made hundreds of calculations and observations about behavioral finance. It was a fun discussion but also explained why we aren’t invited to more parties.

Eventually the topic of student loans as the new mortgage for young people came up. We all have friends, relatives and clients who are in their 30′s and still paying off the student debt they acquired during their 20′s.  It’s quite remarkable, and a rather scary trend (for those of you with children, start investing for your kids’ education NOW!).

This week Business Week came out with an article this week taking the idea one step further. They pointed out that student debt wasn’t just the new metaphorical mortgage, it was beginning to replace mortgages. Simply put, young people have acquired so much debt that they aren’t getting approved for new mortgages. This is hurting the recovery of the US real estate market, and hurts young people’s chances of building home equity.

The article can be found at http://www.businessweek.com/magazine/student-debt-is-stifling-home-sales-02232012.html If you are an expat savings towards your children’s education will save them and you a lot of grief in the future.

Expat Retirement Panic Solution

by DIY Offshore on February 13, 2012 in Expat Retirement with No comments


Expat Retirement Panic Solution tag

We ALL know we need to take significant action to create the retirement we deserve. This is particularly important for expat retirement. In many cases expats need to substitute a national pension scheme with an international pension solution, and expats may not have any home equity they can tap in their later years.

There is an interesting article in Canada’s Globe and Mail newspaper this week about what to do if you missed the bulletin to save for retirement. It’s meant for Canadians, but applies to everyone that has some home equity they can access in their future years. The idea is to sell your home and invest in equities paying a good dividend. A home sold for $375,000 invested in dividend paying equities can generate a low tax income of over $13,000 per year.

Sadly, $13,000 is not a lot even when combined with national pension assistance. Another option might be a reverse mortgage, but the results from that option might be substantially worse!

Obviously the important take away from the article shouldn’t be what you can do to barely survive in retirement, but the importance of investing early and often. Expats should maximize their contributions into an international pension solution to ensure that retirement works out the way it was meant to, and you don’t need to sell your home. You can view the full article at:

http://www.theglobeandmail.com/globe-investor/investment-ideas/portfolio-strategy/a-retirement-plan-if-you-missed-the-bulletin-to-save/article2334647/