February 17


Tax Planning in Retirement – Unlock Some Financial Relief

By Patrick Millerd

February 17, 2017

tax planning, tax planning in retirement, tax planning strategies

Boost your retirement funds by adding careful tax planning to your retirement planning. Reduce your financial stress and increase your lifestyle options.


As a start there are two tax situations you should consider:

  • Your macro tax environment -- how you internationally distribute your wealth.
  • The micro-situation --  minimizing the tax obligations within the country where you are a tax resident ... if you decide to have one!.

A word of warning.

Tax is a minefield of legislation, emotion and attitude manipulation by politicians. Eager to chisel every cent they can away from you.

The Big Picture

Since the Middle Ages wealthy people have used trusts to protect their assets. Although more recently trusts have been used together with low tax, and tax-free countries, to minimize, defer or distribute tax obligations.

People who do not think they will have enough money to retire in the country where they live. Or the growing number who don't believe they are getting value for money are now starting to look at other options to protect and extend their hard earned savings.

It is clear that tax programs are often used as political tools. This has resulted in very skewed contributions from individuals.

For example in the US where only about 50% of individual taxpayers actually pay tax. Or a country like South Africa where you have 22 million voters and 5 million individual taxpayers!.

The other tax concern is that tax laws can be changed at the whim of politicians ... so what is favorable for you today may be unfavorable tomorrow. You can be sure they are working on it!

Retirement and tax planning becomes increasingly important as taxes become more and more onerous. They will have to grow to meet the increasing welfare and health care obligations.

Countries have adopted a variety of models so you should first clarify your situation.

Minimizing your tax obligation

One way to escape from many of these regimes is to create a "PT" status. By either being a Permanent Tourist or a Permanent Traveler. The result is the same. A "PT" is someone who has no fixed tax base and consequently never  establishes tax residency anywhere.

The "PT" status is an ideal situation for a digital nomad.

This can be an advantage for citizens of most countries … except Americans and Eritreans who have "citizen based" tax. These unfortunate citizens have a tax obligation to their voracious regimes on whatever they earn, wherever they live.

This tax regime is one of the reasons why a growing number of wealthy US citizens are looking at alternate options for citizenship.

Making this PT decision can result in irrational, emotional reactions from certain people who see this type of action as a kind of “treason”! Not being patriotic. Or as they used to say in Zimbabwe “taking the chicken run”.

Yet, governments have made the rules. No more is the “spirit” of the law a concern. With the thousands upon thousands of pages of legislation we must follow the “letter” of the law. We must comply. If there are loopholes they must be used.

What is a tax resident?

Many countries define a resident for tax as, anyone living in the country for more than 183 days in a 12-month period. Therefore a PT will spend less than 183 days in one country and then move on to another country.

This could result in living an adventurous, nomadic lifestyle financed by your tax savings!

If you live in a country which has a "residence-based" tax regime you are taxed on your worldwide income. Russia, Germany, New Zealand or South Africa are examples of these countries. If you earn no income in the country where you live, your tax resident government will take a share of your worldwide earnings.

In countries with "sourced-based" tax systems (like the UK) you only pay tax on the income earned in that country and not on your worldwide income.

All the complexities require careful consideration, advice and planning. The tax implications of retirement and tax planning could have a significant impact on your retirement funds.


If done correctly, it can increase the amount you have to live on.

Some Simple Tax Strategies

Retirees may receive income from a variety of sources. Including social security benefits, and distributions from pensions, annuities, IRAs and other retirement plans.

Be aware that some of these strategies may only be applicable in certain countries

Through careful retirement and tax planning using some tried and tested strategies and the amount and timing of withdrawals you can keep your taxes as low as possible:

  • Take full advantage of deductions and personal exemptions. Together, these represent tax-free income. Where possible reduce tax by offsetting taxable income with mortgage  loan payments, real estate taxes and medical expenses .
  • Accelerate retirement distributions when you have excess deduction. If your standard deductions exceed your taxable income, consider withdrawing more retirement funds than you need.
  • Accelerate income when you have zero or low tax rates. With this you will potentially avoid paying more taxes in future.
  • Take all credits for the elderly. Special tax credits usually start applying to taxpayers over 65 years of age. But qualifying for these may take careful planning for your gross income to fall below certain limits. 
  • Maximise tax free income. Get the maximum deductions from capital gains tax when, for example selling a primary residence. Also interest earned from certain sources may be tax free. 

Take Action - Tax Planning in Retirement

The above are a few selected examples for retirement and tax planning but taxes and rebates are handled differently country by country.

Understand your situation. Get individual advice and test it. The tax implications may be further complicated by having options.

Ensure that you get objective and complete advice … a second opinion is often the best course of action!

If you are resident in the US the publication "Tax Planning for Retirees" provides comprehensive information on tax. It includes sections on elderly and disabled tax relief, estate and gift taxes on retirement benefits and, retirement benefits of foreign retirees.

Legislation is being enacted and updated all the time. All of this is aimed at maximising tax collections.

There are many international tax publications. But as these can be very complex my advice is to consult an international tax expert.

Be warned again.

Retirement and tax planning is a very complex exercise. The one man you don't want to cross, or make cross, is the tax man.

But the benefits are too good to ignore. Who can use your hard earned money better? You or a bloated bureaucrat?

Patrick Millerd

About the author

I support small and medium-sized business (SMB) owners to drive profitability and cash flow, managing the financial health of their business through understanding and using their numbers.
Helping them build a complete management system that puts them in control.

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