How to increase your pension in ELT

If you’ve started thinking about how to retire in ELT, the first step is to work out how much you need and how much you’re currently on track to get. Based on these rough figures for hoped-for and expected retirement income, you might not (yet) be seeing the numbers you wanted to. Don’t worry! There are steps you can take to increase your pension in ELT.

Cut costs

As a career which is often low paid, ELT typically has a lifestyle to match. This can make it hard to see where to cut costs in order to pay in more and increase your pension. The key thing is to balance out the idea of saving with still being able to enjoy your life. Otherwise, you just won’t stick to a saving plan. 

So, first look to see where you could cut on fixed costs like rent, utility bills, and unused subscriptions. Then put that saving into your pensions and investments. Here’s a FREE worksheet on finding money that will help you calculate savings and see how much they could grow in something like a pension.

Don’t make too much effort to cut things that make your life feel like you’re really living. If nice coffee is important to you, don’t skimp on that. Try and find a cheaper internet provider instead. Or rent out your spare room to save on rent if moving isn’t an option. If you fly home, as most of us do, book the cheapest flights as soon as they become available. This is so easy to overlook and end up paying more, but can save hundreds. 

If you know you tend to splurge more than you should, and you want some help managing and changing that habit, check out my Smart Money course.

Plan to work longer 

The state pension age varies country to country. So the age you can start to draw on your various state pensions will be sometime in your 60s. Private and workplace pensions on the other hand may be more like mid-to-late 50s. This might mean partial retirement is an option. Another options is to choose to work longer to give yourself more earning time and therefore more time to save into pensions and investments AND more time for them to grow. 

Realistically, if you’re in your 40s now, the state retirement age in a lot of countries is going to creep closer to 70 as people live longer. You might also be able to defer state and workplace retirement and get a higher pension. (But do check the rules!). So, it’s more important than ever to be in a job that you like and you can imagine doing for longer (emotionally, physically and cognitively) and that you keep up with the technology in your field. With the increase in remote working and ways of making money digitally, your ability to earn money from home increases too. That might make the prospect of working longer a bit more appealing than if it meant being on your feet all day. 

For some people, thinking about retirement might be a push to change job to something with a good built-in pension or a more guaranteed end date. To be blunt, a private language academy set up is unlikely to pay well, or to have any kind of pension provision. If your contract is the kind that gets renewed every year, pay close attention now to the age they tend to let people go. If there is any ageism at play, the same thing will happen to you. I’d get out as soon as you can in favour of something more secure or something you have more control over, like your own business. 

Increase your pension with a side hustle

Start thinking of side hustles and skills you could make money from. What skills do you already have? Which ones could you level up so they could be more lucrative? Are there any you could start from scratch that would be worth it later on? You might even change career completely.

Ideally, a side hustle is something you enjoy or at least don’t feel drained by. Even better, make it something you’re really good at and other people will pay for. 

I don’t tend to agree with advice to make a side hustle be something you love though. Save passions for hobbies or else what will you do for relaxation if everything is now a job? 

Whatever you earn from your sideline, use it to increase your pension. That means setting the money aside into some sort of pension account or investment so it grows. If you’ve chosen the job well, it will be something you can carry on after retirement. To fit that requirement, it probably needs to be digital, passive or semi-passive. After all, something really physically demanding might not be possible later on. However, a physically demanding side hustle like gardening or dog walking could be great as a way of keeping fit. 

One thing, though.

While you’re in this accumulation pre-retirement stage. Don’t get into the trap of bartering your skills or experience for free services from other people. Yes, you’ll get something you otherwise would have paid for but if no money enters the equation, there’s no money to set aside and increase your pension. When you retire, that’s when you can stop thinking about money and trade your time instead!

Move country to increase your pension

An advantage most of us in ELT have is that many of us have experience living abroad. Some of us have given it up and actively crave going back to a lifestyle where daily life feels like other people’s holidays. One way to plan for retirement is to be pro-active and strategic about which country you live in, either now or in the future. 

Retire abroad

Where could you retire that would be comfortable to live and where your money would go further? Rather than looking to increase you pension, this is another way to make money go further.

The idea of retiring abroad somewhere cheaper isn’t as alien to us in ELT as it might be for people who’ve only ever lived in one place. Think about countries you’ve lived in, or speak the language of, or always wanted to go to. Deliberately choose one that’s got lower living costs. If you retire there, your savings will go much further. Take into consideration medical costs and care. Perhaps you could just spend the early part of your retirement there and then move back home.

Work abroad, save at home

If you’re able to remote work, you could stretch your current salary further, and save more of it back home, by becoming a digital nomad in a cheaper country. Note: you’ll need to remain tax resident in the country you’re saving in so you can take advantage of things like pensions or tax-advantaged accounts like ISAs in the UK. That might mean living half of the year in your base country. Otherwise, you might not be able to pay into those accounts. (You can keep them open though and they’ll continue to grow). As this is the whole point, it might not be worth giving up tax residency. Consult an accountant if you’re considering this as it might be that the advantages of not being tax resident are higher.

However, you might find that the place you move to has better tax advantages than the place you live now and that you’d rather become tax resident there. For example, maybe income tax is lower or there’s tax-free investing. For me, for example, I’d be much better off in the UK than Spain. This is because I could put more into a private pension and get a government top up of 25%. And I could open an ISA which means all the profits from my investing are tax free. Plus I’d have a tax-free allowance on some of the money I earn in interest from savings accounts. I’d be able to open tax-free investing accounts for my children, and I’d pay less inheritance tax. If I didn’t have children in Spain, I’d definitely choose the UK over Spain from a financial point of view. Or Andorra where taxes are lower.

Work where the money is

You could choose a country you might be less enamoured with but where the pay for what you do is higher. Or where you don’t have to pay tax like some Middle East countries. Consider a couple of years for the chance to save and plough money into your retirement pot.