Beer and Tax in Retirement
By The Daily Reckoning Australia | October 3, 2012 2:39 PM EST
Even though we were only 13 at the time, the decision to move to Australia was made by your editor.
At the time, our family was a complete mess. And so the move from Germany was up in the air, although the furniture was already on its way to Brisbane. But Australia was the chance to get away from the shemozzle and so we wanted to go through with it. We departed on New Year's Eve.
Looking back, it was the biggest and best decision your editor ever made. Everything else since has flowed from it.
We think Australia is still the greatest country on earth to grow up in. But is it the best place to spend your working years? It might be. We're still working that one out.
One thing it isn't is the best place to retire.
That's why we've been preparing a report on some places you might want to escape to as you think about working less and living more.
Moving overseas for your retirement could be the most financially rewarding decision you ever make. A better lifestyle, cheaper cost of living and the experience of somewhere new. But is Australia really so bad that you need to escape it in your leisure years?
The Great Beer and Tax Rip Off
Congratulations Australia, you have the second most expensive beer and second most 'progressive' tax system in the world. The world being 'select OECD countries'. And 'progressive' meaning higher income is taxed at a higher rate. So whether it's working hard or drinking hard, Australia isn't the place to be.
It gets worse. Our resident Japan expert informs us that a pint will set you back far less in Japan than here, making us number 1, even if the Economist disagrees. As for tax, our bet is that if you throw in the recently raised tax free threshold and the higher compliance costs, we'd beat America for top spot.
Worst of all for retirees, passive income (income from investing) is taxed at your marginal rate in Australia. Many countries tax dividends and capital gains at a lower rate to help out retirees who are cashing out of their investments.
Of course, it's not just the two certainties of life which are more expensive in Australia (beer and tax). Just about everything is. For earners, that's offset by high wages. But retirees who want to enjoy life are reliant on rising asset prices and high interest rates. Neither is on the cards.
Luxurious, Cheap, Cultured, Safe and Free
Taking a look at Australia's cost of living, high dollar, and tax system, it's hard not to come to one conclusion: There's never been a better time to make the move overseas. Of course, it's not for everyone.
But everyone should at least take a moment to ponder the idea. When my family first came to Australia for a holiday, only one of us expected it to be our eventual home.
There are a whole bunch of obvious reasons not to make a move overseas. It's difficult moving half your life and beginning the other half over again. But you need to be aware of the benefits to make an informed decision.
For example, regular travel back and forth to your new home in paradise might cost a fortune. But that paradise might be closer to parts of the world you want to see anyway, saving you money in the long run.
Or you might find yourself saving more than a thousand dollars a month in living costs and taxes by making the move. That makes up for a few flights pretty quickly. More importantly, your hard earned retirement dollars could go much further. It will last longer and buy you more too.
It's no secret that the last few years have been disappointing for Australians trying to get their finances up to shape in preparation for retirement. Many will have to cut back on the lifestyle they expected.
Moving overseas could be the solution that sees you improve your lifestyle and save money at the same time. Spending less for a better quality of life sounds like a pretty good trade off.
You might also find some great investment opportunities in your new home country. Australian property prices are outrageously high, but there are great real estate bargains in promising locations around the world.
And developing countries, where the cost of living is cheap, feature rapidly growing economies for you to take advantage of.
It's not much good telling you all this without mentioning a few specific places to think about. Right now, we're polishing off a report on three retirement havens Australians should think about moving to. It probably still sounds like an outlandish daydream to you.
But so did moving to Australia for my family many years ago. Back then, someone was willing to give us the advice to move. Without it, we could have ended up in somewhere like Melbourne and not sunny Queensland...
We'll be releasing the report with the launch of a new newsletter in coming weeks. Moving overseas is just one way of dealing with the difficult decisions Australians have to make for retirement. There are two other big opportunities brewing to solve the problems you face.
More on them soon...
for The Daily Reckoning Australia
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