Strategies For Expat Educators To Avoid Being "Broke" In Retirement

This is the fourth article in a series by my friend, Dr. Jeff Devens. He’s a humble, extremely knowledgeable advocate for overseas investors, with an impressive knowledge about investment fees, US taxes and Roth 401 plans for educators overseas.
His fourth article shares his personal financial journey, sound academic data, as well as 4 common strategies that can help put you on the path of financial independence.

How much income do you need in retirement? It’s a question often discussed in finance blogs, podcasts, YouTube channels, and various publications addressing retirement planning. My guess is you will need more than nothing. Sadly, this is the financial windfall awaiting some international educators who have the means to prepare for retirement…but aren’t. Perhaps there is a lack of financial education regarding retirement needs. Maybe it's debt. A report by The National Education Association from 2021 found that over half of the educators who took out loans to fund their education still shoulder a balance. Or, the international countries that teachers live and work in might have higher costs and/or lower pay than teaching positions in the United States. I suspect it's a combination of these factors, resulting in educators coming up short of accumulating income for retirement.

As a kid growing up on public assistance with no father, I wanted, needed, and longed for a better financial future. I lived in over 25 houses/apartments/duplexes before age 18, attending 7-8 elementary schools (I lost count), two middle schools, and three high schools. We moved lots, primarily due to being unable to afford rent. I was the only child of five to graduate from high school and was well acquainted with being broke. I neither look back on those times with nostalgia or fondness…they sucked! Yet, I made it to university with two plastic garbage bags containing my worldly possessions, a fair amount of financial aid, student loans ($58,000 in today's dollars), a few wonderful friends and mentors, and a healthy dose of fear of failure. Those early life experiences significantly impacted how I view debt, saving, spending, and giving. Fast forward 30+ years, and I have a renewed sense of concern, not for our financial future, but for fellow international educators. I’ve had the privilege to sit with and listen to some heartbreaking stories of international educators struggling to save, not saving enough, or not knowing the mechanics of how to save. I didn’t know this information either. I was not taught it in school. Serving as a school psychologist on a crisis response team in Indonesia in 2014 solidified my resolve to learn and share financial information with fellow educators. Based on these experiences, I’m compelled to communicate the following message to fellow American educators who elect or are contemplating a career working abroad:

A meager social safety net awaits American expats. Assuming they earn the required 40 quarter credits, most will receive a monthly Social Security check of no more than a few hundred dollars. Medicare premiums may be significantly higher if they have not earned 40 quarter credits. Most will not receive defined benefits/pensions and must rely on self-investing options. Finally, there will be no financial windfall due to receiving an inheritance for most. But, we have been given the opportunity to work with fantastic kids, live in fascinating countries, and experience life events many educators only dream of. Fellow educators, we can save for our financial futures if we choose not to live at the standard of the expat communities we serve, and in many cases, save more than educators who have spent their careers working in the United States.

I struggled (and still am) writing the above. The last thing I want is to “trigger” readers, yet, I feel an urgency in communicating this information. A few years ago, I shared these sentiments with educators during an orientation session and was reported for a micro-aggression. My aim in writing isn’t paralysis but action. Expats have to do the financial work to prepare their future selves for 30 years of living beyond their careers. This isn’t optimal or optional. We could elect to turn our investment management over to another, often paying excessive fees, or we can do what we ask of our students: learn. This work, initially, is intimidating because it’s foreign. Embracing the ignorance and discomfort of the unknown is the starting point for learning. A primary reason for writing these blogs is to demystify the aura of financial literacy and to be a support.

The problem of saving for retirement isn’t unique to expats. Even with a lifelong career in the United States, significant concerns remain regarding retirement savings for Americans. Survey Data from financial services company Credit Karma, in 2023, indicates 27% of all Americans have NO retirement savings, with 7.29% of these responders 59 or older. Add to this the Average Social Security benefit in 2023, equalling $1,693.88 ($20,326.56 yearly); considering the average life expectancy for women is 79 and men 73 years, the math on this does not add up well for expats who do not accrue the financial resources for retirement.

Question: Can an expat teacher spend a career abroad and retire with a few million dollars? Yes! I’ve met several international teachers who have been able to save these amounts for retirement, and I’m not speaking only of administrators. What are the commonalities they share?

They Live On A Budget. Money can be unruly if not told what to do. This is the purpose of a budget. Knowing what you will make in a given year, projecting out expenses, and having categories for allocations of funds are essential to accumulating wealth over a 25 to 30-year international career. Several times in our 28 years abroad, we chose not to travel due to exceeding the allocated amounts in our budget for travel. We don’t know how long we are going to live post-retirement. We can’t predict our costs and needs in retirement. We can, however, estimate. Over the years, our income has ebbed and flowed, but we have lived within the budget. So too, have those who have managed to save for retirement.
They Paid Off Debts. Jenny and David came overseas with one expressed purpose: to dig themselves out of debt. Their financial hole was filled with credit cards, car loans, and student debt. They needed a BIG shovel. For four years, they only stepped inside a restaurant if it was local, took on side hustles, and only traveled if they could find budget flights to low-cost countries. As a result, they paid off over $250,000 of debt! David told me they were barely living paycheck to paycheck before moving overseas. Their debt put tremendous strain on their marriage and mental health. Before repatriating, I asked Dave what these past four years provided for him and Jenny. His reply was financial peace and a resolve not to live beyond their means again. Fast forward ten years, and both work in a school district in the U.S., saving, spending, giving, and living below their income. I recently celebrated with a few “younger” teachers who paid off ALL their debt. Our income is our biggest wealth-building tool; however, it's difficult to save if it is primarily used to finance debt.
They Have An Emergency Fund. Who would have thought a United Nations endeavor for peace would result in government-sanctioned unrest? While working in Beijing, China 1999, protesters arrived at our school campus's front gates, picketing the actions of the U.N. and the accidental aircraft bombing of the Chinese embassy in Yugoslavia. During one emotionally filled staff meeting, I learned a new phrase, Force Majeure. This French phrase can be summarized as unforeseen circumstances that prevent a person from fulfilling their contractual obligations. In our case, the Force Majeure, angry protestors, threatened our safety and livelihood. While the tensions eased with time, and we were able to complete the school year, we recognized the need to establish an emergency fund of liquid cash. Over the next five years, we allocated a line item in our budget for accumulating an emergency fund. This figure represents roughly six months of income and provides us with breathing space in the event of a Force Majeure. We don’t invest this income. The goal isn’t to maximize the use of these funds; instead, it provides a buffer to address the uncertainties of life.
They Invest 20% To 30% (or more) Of Their Income In The Stock Market And/Or “Own” Rental Properties. If you cannot invest, consider a shorter overseas experience of 3-5 years instead of a career. Why? So you can receive some amount of a school-sponsored pension and earn quarter credits to be eligible for some amount of Social Security and lower-cost Medicare premiums. Many school districts continue to offer retirement savings and pension plans. A teaching couple came to this conclusion after a decade internationally. They chose to repatriate, figuring they would, at minimum, be “forced” to contribute and save into a school-sponsored plan and Social Security. Investing is a function of aligning income, expenses, budgeting, and lifestyle. I’ve known several administrators (who earned twice as much as classroom educators) who are not saving enough for retirement. While investing and saving with a BIG income shovel is easier, it has to be used for this purpose to be effective. With time and consistency, even a small shovel can produce impressive results. Andrew Hallam has written extensively on investing in his books Millionaire Teacher and Millionaire Expat. Consider these resources to be part of your retirement education.

When it comes to finance, our tendency is to measure in days what it takes decades to amass. Budgeting, emergency funds, debt reduction, and investing is a process. Each of us has our own timeline and financial number. Figuring out your finances is a personal endeavor, but the learning is meant to be shared. My aim in writing these blogs is to serve this end.

For the past 28 years, Jeff has served as an international school psychologist, counselor, and educator. In partnership with Human Resources, finance, and the schools Working on Wellness Committee, Jeff provides workshops addressing a myriad of financial topics, with a specific interest in understanding taxation mitigation strategies for Americans. You can reach him at jeffdevens4@gmail.com or find him on Facebook Messenger at Jeff Devens.