After making the choice to retire in France, you will want to make the most of what the country has to offer, hopefully well into the future.
This may be longer than you expect.
Thanks to medical advances over the years and a better quality of life, people are generally living longer than the previous generation.
French statistics show that life expectancy for males currently aged 65 is 84, while for women it is higher at 88.
Of course, these are just averages.
Many of us will live longer, maybe much longer – it has become more common to hear of people reaching their 100th birthday.
Living to a ripe old age does sound rather appealing, provided we are healthy enough.
It allows much more time to watch our grandchildren grow up and to enjoy our well-earned retirement in France, for example.
There are, however, implications at both personal and government levels, with the key issue being: can we afford it?
The longer we live, the longer we need our savings to last in order to live as comfortably as we are accustomed to.
For peace of mind, it is vital to assess whether your resources are on track to last throughout your lifetime.
Here are the key considerations
1. Income and inflation
Let us start with the big topic of the moment – inflation.
We are getting used to headlines about rising inflation and the levels we have seen this year are certainly an eye-opener on how it can impact our monthly living costs.
Although inflation will hopefully start to come down before too long, even low levels, compounded year after year, will reduce how far a fixed income will stretch in the future.
Say, for example, you spend €5,000 a month.
Assuming an inflation rate of 3% a year, in 10 years’ time you could need €6,720 a month to maintain the same spending, and €9,030 in 20 years.
So your capital and income would need to grow by the same amount to maintain your standard of living.
2. Making your savings and investments last
Many retirees favour low-risk, ‘safer’ investments such as bank deposits in their later years, but with potentially 30 years or more to fund in retirement, this can actually be a risky strategy.
British expatriates also need to factor in exchange rate risk.
If you receive income in pounds while spending euros in your daily life, depending on currency movements, you might find your money does not go as far as it once did, even without the inflation factor.
By following key investment principles and taking specialist guidance, you can invest capital to give it the opportunity to keep pace with inflation, while keeping risk at a comfortable level.
Start by establishing your risk profile then carefully build a well-diversified investment portfolio to suit your circumstances, needs and objectives.
Look for investment arrangements which provide some currency flexibility to try to avoid the exchange rate risk.
You could get currency flexibility through some assurance-vie policies, a specialised form of life assurance that allows French residents to hold a range of investments in a highly tax-efficient package.
There are many different assurance vie options based in various jurisdictions, not just France, and not all offer currency flexibility, so choose carefully.
3. A taxing problem – not just for governments
Rising life expectancy is also expensive for governments.
The higher the proportion of older people in a population, the greater the costs of state pensions and healthcare – and the lower the number of taxpayers to fund them.
The solution usually lies in pension or healthcare reforms and tax increases to finance these escalating expenses.
The issue has been exacerbated over recent years with the amount of money governments have had to spend as a result of Covid.
Higher taxation can be a considerable threat to your financial security in retirement.
Just like inflation, it erodes your income, and in France we have social charges on top of income tax, giving us quite a high tax burden.
This is where personalised tax planning is vital to make use of available opportunities – in France, the UK, or elsewhere – to ensure you do not pay more tax than necessary.
With many of these arrangements, you can combine your tax and investment planning in one exercise, allowing you to tackle the twin threats of tax and inflation at the same time.
4. Getting the most from your pensions
Pensions can often be the key to financial security in retirement, so take care to do what is right for you.
You need to consider all your options, carefully weighing the pros and cons.
Look at your income needs, investment options and risk, currency risk, what happens to the balance when you die, and the tax implications.
There may be ways for expatriates to make pension funds go further, but before making any decisions, take regulated advice to avoid pension scams and establish the best approach for your particular objectives and circumstances.
You may be best advised to leave your pension where it is.
5. Leaving wealth behind
If you want to leave a lasting legacy for your family, you have to make sure you do not spend it all in your own lifetime – without compromising your quality of life today.
A strategic financial planning approach that considers estate planning alongside investing and tax planning can prove invaluable here.
Estate planning in France is complex, with succession tax based on the beneficiary and succession law imposing forced heirship.
If your family includes children from previous marriages, be particularly careful to ensure everyone benefits as you wish them to.
Whatever your stage of life, good financial planning can help you afford the lifestyle you want, for as long as you need.
That leaves you free to focus on enjoying your retirement in France.
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