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Expatriate men give lots of reasons for moving overseas - adventure - career advancement - better weather, etc. But whatever the reasons put forward for moving abroad almost all will agree that 'more money' was at least part of the motivation.
A wife accompanying her husband on an expatriate posting most often gives up her own career in order to go with him. Not only does she abandon her job she gives up her personal earnings, her pension contributions and possibly some of her rights to social security benefits.
In short, she loses her ability to make her own money, stand financially on her own two feet and have the satisfaction of building savings with money she herself earned.
Nothing wrong with that in itself but in place of what she has given up the expatriate wife ought to be closely involved in planning for future financial security.
For starters she should know exactly what her husband’s overseas earnings are or will be and how these are supplemented by allowances for item such as housing, travel, utilities and education.
What will be the net position after tax? What retirement planning will be in place? Is there adequate life insurance?
Having established the income position how much is 'disposable' - i.e. not committed to cover essentials - and how much of that disposable income should be saved?
The expatriate lifestyle, especially at first, can be so different from that at home, that wives are often so taken up with adapting to it that they give little or no thought to financial matters. In time, it becomes a difficult subject to bring up (partly because she now has no earnings of her own).
The expatriate spouse should be closely involved in planning the family's financial future. As financial planners we always suggest that both spouses be present at financial planning sessions. We generally find that women bring a valuable measure of good common sense to the proceedings.
The areas of risk, touched upon above, include:
Life and Critical Illness Insurance
No amount of money can compensate for the loss of a loved one but the emotional problems are tough enough without financial trouble on top.
We find that many men dismiss this with "Oh! the company has us covered". Probably it does but most are surprised to find that 3 years' salary is common and 12 years' salary about the very top level of cover.
It is seldom enough to really provide long-term family security and there is seldom any critical illness cover at all.
Protecting a family need not be expensive. A non-smoking man aged, say, 35 can buy basic life cover of #250,000 ($, GBP, EUR, AUD, etc is immaterial) to age 65 for about #895 per year. That will usually work out to somewhere around the cost of one pint of beer per day.
Where does the priority lie? A pint a day or survival of the family?
What benefits would the employer provide should your husband become unable to work because of illness or injury? Six months' salary? That is a fairly standard figure.
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A LIFE INSURANCE TRUISM
It seems that many wives tend to regard every life insurance premium paid by their husbands as something of a waste.
“We could find a better use for the money"
"We don’t need life insurance”,
"No money could replace my husband”,
etc., etc.
But here’s an odd thing
No-one has ever met a widow who said:
“My husband had far too much life assurance!
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What if, through no fault of his own, his company encountered financial trouble and had to cut down on expat staff? What if his company were taken over or merged and his job no longer existed?
Would you have to return to your home country? Do you have accommodation there? If not, are you building the financial resources to cope?
Then there is the matter we don’t like to think about but really should. We all know that women tend to live longer than men. In fact when a couple are in their sixties the wife can expect to outlive her husband by 7 years on average.
What will be your income when your husband dies? Yes, it is a difficult subject to discuss but 'don't look and it might go away' doesn't hack it. It's not going away.
Retirement
As an expatriate you probably are not making contributions to your home country's state pension scheme. For some nationals, especially British this is a pity as the state scheme, contrary to the popular perception, offers good value (although not on its own anything like enough for a comfortable lifestyle).
Is your husband contributing to his company's onshore retirement scheme? Probably not, as it usually impracticable, sometimes illegal, and almost certainly tax disadvantageous to do so.
Most expatriates are on their own so far as retirement planning is concerned. Most "mean to do something" (to see an example please click HERE). Alas, many never do. Almost as bad is to rush into a long-term 'international personal retirement contract' that will almost certainly fail to provide worthwhile benefits.
Signing a contract for a 15, 20 or 25 years retirement plan will usually turn out to be a financial disappointment, possibly a disaster. Except under very special circumstances expatriates should not contract to save for more than 10 years.
More often, 5 to 8 years is enough and almost always a 'non-contractual' (i.e. you are never penalised for stopping, restarting, reducing premiums or for withdrawing monies at any time) scheme is best.
The consequences of not taking correct action can be serious because lost time can never be replaced and shortage of cash in old age is not going to be fun.
When does your husband plan to retire? Is there a programme in place which will ensure adequate income then for both of you? If not, on exactly what date do you and he plan to NOT retire?
Retirement planning is now a very different matter from a few years ago. On average we live longer and that creates a need for more money. Many would like to retire younger and that again creates a need for more money. Retired people now want to holiday abroad, change their car regularly and so on and that takes more money. Governments are finding it difficult to fund state pension schemes.
Companies are abandoning 'final salary' pension schemes in favour of 'money purchase' schemes which, without going into technicalities, are likely to be less favourable to the employee.
Your Children's Education
Do you have children at school? If so, you may be fortunate as an expatriate to have your employer pay all or part of school fees either where you live or in your home country. What would happen if your husband were no longer with that company?
What, and this happens often, if he were promoted to a home office job.
Few companies pay education costs for the children of home based executives. But your children may be at a critical stage in education and you would not want to change their school.
After school comes university or college. Even if you are then still based overseas companies seldom pay for tertiary education for executives' children. And there will be accommodation and travel costs
on top.
If you are based abroad when children go to university will they be classed as 'home' students or (more and more likely) overseas students liable to pay full tuition fees?
For more information on any of the services mentioned above please use our
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