Mike at Oblivious Investor has a great blog post on retirement calculators and their problems. I think the right retirement calculator can be very useful. But like anything that tries to predict the future, the farther off the event you are trying to predict is, the less accurate your prediction will be.
I believe a retirement calculator is a useful tool with some caveats. For one, I believe you should not take it as gospel. Many, as the Oblivious Investor shows, are overly optimistic and may even fool some people into complacency over their savings rate. The key to a prosperous retirement is to save as much of your income as possible and put that savings in responsible investments. There is no other way to say it.
Another issue with retirement calculators as Mike points out in his blog post is that they may misguide an investor into how much he or she can safely and regularly withdraw once they have retired. There is no good answer to this issue. There are many assumptions however. The risk in withdrawing too much is that you will outlive your savings and end up dependent on your state pension.
I do not think proclaiming a fixed percentage is a good idea, in terms of withdrawal. I believe a retiree should look at how much he or she has saved upon retirement, and then withdraw as low a percentage as he or she is comfortable with for living expenses. A person in retirement is expected to spend less than a person who is working. You no longer have expenses related to dressing for work, car expenses related to commuting, and your healthcare expenses are reduced. (if you’re American). You have probably paid off a house or may consider moving into less expensive accommodation. Regardless, retirement is typically a time to reduce expenses, and not increase them. Plan accordingly.
How does this relate to being an expat? Again, as I have stated on many occasions on this blog, most people who retire overseas do so to save money and to maintain or improve their lifestyle. Moving abroad does not mean spending like a drunken sailor. It simply means a change of lifestyle that may strengthen one’s budget somewhat. It is easily possible to overspend while retiring abroad. One of the easiest ways to do that is to buy a property you cannot afford or to invest locally in risky investments that you do not understand.
In essence the recommendations for a retired expat are the same as the recommendations to any retiree. In retirement your income is reduced. It may not be reduced the same extent if you retire abroad, depending on where you retire abroad. But it will be reduced somewhat. That means to plan accordingly, and make the same prudent decisions you would make in any environment be it at home or overseas.
