Just because you’re working abroad doesn’t mean you should neglect your retirement plan. There are different options on how keep on track while abroad. E.g. you’re a German expat in the US. You could negotiate with your German employer to keep on paying into the German pension. As an alternative you can make extraordinary payments to your German pension.
The German pension plan works as an intergenerational contract, thus the young pay for the old. However, the plan is outdated due to the aging demography, meaning not enough young workers to cover for the retirees. It’s not a secret that you should add a private pension plan to the state one. While abroad you have the option to pause both pension plans and take the extra cash for a different investment or saving option.
In the US pension system we distinguish between social security, retirement plans offered by your employer and own savings and/or investments. A popular retirement plan is the 401(k). E.g. a company matches 25% of the first 6% of your salary each month. That means you’re getting extra pay for doing nothing.
While it remains an individual decision and you should consult an expert, employer sponsored 401(k) are highly recommend. You get the extra cash plus tax benefits, what else can you ask for. Just don’t put everything in one basket but continue to diversify. E.g. 6% of your salary in a 401(k), rest into the stock market or other investments like real estate.
The good thing about the mentioned scenario of a German expat in the US. Even if it’s not clear yet, whether you stay in the US or return back home. You don’t have to fear double taxation but only pay taxes in the country where you mainly reside. As with most of investments, time is of essence, thus don’t waste your expat years without preparing for your retirement!
Further reads
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