When you get your act together and set aside time to plan for your financial independence, there is a veritable jigsaw of choices and all pieces must be considered.
Before you sit down and talk to your chosen and trusted broker you must be clear in your own mind that all the areas in the jigsaw have been looked at. Short term planning will involve the setting up of a tax-free regular savings plan which will cover various eventualities, like supplementing your income in the shorter term, say after 5 years, or covering a blast for a world trip over a long term break from life’s work routine, or to budget for the fact that the family kids will be in need of school costs over many years, or that beach house purchase might become the priority. One way or another, a regular savings plan or three must be on the cards.
Regular savings plans could be for a minimum registered term of 5 years and never more than 10 years, due to the high end costs and charges for longer term plans. The point I’m making is that if you terminate longer term plans, or any plan for that matter, you get ‘back-end’ charged based on the fees the company would have made if you had stayed till maturity. These fees will be based on the commission fees paid out to brokers who prefer to set up long term plans because they make much fatter commissions – beware the Ides of March!
Even long term retirement plans do not have to be set to mature at age 65 or whenever. It may be 25 years till your proposed retirement age, but still, only commit to a maximum 10 year regular plan since you can just extend it after 10 years without further heavy costs. This way your money is working for you and you are in control should circumstances change, and you cannot or do not wish to carry on a regular plan. When taking out any regular plan ask what would happen should you terminate early… and then make your commitments to suit your own finances, rather than lining the pockets of brokers in greed.
On the lump sum side, there are always investments offering guarantees and guaranteed returns, which make a lot of sense for short term holdings of less than 5 years. Currently, bank interest rates are pathetically low and even negative in some cases, which, when added to annual inflation figures, means you are getting a ‘guaranteed’ loss from your bank deposit holdings at present. Guaranteed holdings are giving positive returns on your cash holdings but may have lock-in periods so that you cannot just take out your cash at any time, so this side needs to be considered prior to commitment periods.
Portfolio Management considerations are a whole new ball game. By far the most popular structure is an umbrella vehicle, whereby you can purchase this that and the other under one roof so you have diversification and a wide spread of holdings. This is particularly used when investing US$100,000, but is also often used by people starting with just US$25,000. Some low risk holdings, some medium term medium risk purchases and even some aggressive purchases which might make you a killing, but with a sum you can afford to lose, since the risk either way is unpredictable.
Lump sum tax-free investments are also a possibility if structured correctly, and this may involve the naming of beneficiaries or setting up a Trust. This is where your broker, accountant and lawyer need to be consulted to make sure you are doing it all correctly to fit in with current legislation in your home country, and ensure that your offshore residential status is established to give you the necessary financial planning advantages.
Offshore banking is another part of the jigsaw and is needed to make transfers quick and easy and controllable prior to sending capital to your home country, where tax becomes a big bad leech ready to suck out your potential profit margins. Most countries don’t tax their nationals when they are working offshore, but the USA wants tax on all holdings wherever a US citizen is living. Big brother IRS wants a cut on everything. There are however ways and means to limit this worldwide take by the IRS, and, again, careful consultations are needed with your trusted lawyer, accountant and broker. Many things are possible that ensure profits stay in your pockets rather than go to governments far away at home!
Life insurance planning is part and parcel of every plan, and insurance umbrellas often make a substantial and positive difference for offshore investors from many nationalities. They are widely used and very beneficial at many levels. Pure life insurance is one thing, and a vital component of every jigsaw, but investment holdings within insurance structures are a popular and long standing solution for most people from many different countries wishing to maximize their financial planning requirements.
The overall jigsaw is a big one, and the many pieces must be fitted together into the final whole to make sure the future is a secure and bright one. Plan, plan and plan again before you dive in at the deep end in order to secure your independent financial formula for success.