Work permit and M.E visa to non b

[spud67]

Hi all,

I plan to retire to Thailand in the next 5 to 10 years. This recent run of the Thai Baht has got me wondering about the security of retirement funds. I am not particularly concerned about this particular run on the Baht, but in general, how do you hedge against a devaluation of your home currency? Do you maintain income accounts in both currencies? Take on extra little jobs? Or, maybe you don't worry for some reason?

Of the major expat communities in Thailand, I assume the Aussies have held the strongest against the baht over the past 4 years. But even they must be concerned about a sustained high value Baht.

I am interested in a general discussion of how to hedge against the whims of foreign exchange rates as oppsed to seeking specific advice for my situation.

[Swiss1960]

Very interesting question, as I am in a similar situation, but closer to target. So thanks for that post and I hope that we both might find some ideas out of that. Personally, I did my math mainly based on asset and waiting for government pension later in life.

With regards to income, for me the main income will be when reaching 65 (12y) and I can do nothing about how much that money will be worth in THB, the only thing is taking todays exchange rate, devalue with a risk factor of 10% and hope for the best. Other income... I will do some "safe" investments, but of course when you calculate +5% p.a. you also have the risk of getting -10% if things go down the gutter... trying to work in Thailand is out of the question for me, otherwise i would not need to retire (besides the legal restrictions).

The problem that I have is that if I take my life expectancy at 40 years (hoping to reach 95 which actually is the worst case with regards to assets needed) in order to be on the safe side, then hedging over such a long period is pretty much reading tea leaves with regards what can happen with the economy (exchange rate, inflation).

Therefore for my situation, I assume that I will take the majority of my assets into Thailand and then I will know how much I can burn per year in order to not run out of money till I will die. Investments will be done on the safe side only, but not really calculating the interest coming from that. This will enable me to endure some bad years and hoping for better times. Leaving money back in my old home country? I will probably decide against that, as I plan to remain in Thailand 'till the end of my days.

[USNret]

For OP: Please note that "Take on extra little jobs" would be illegal. Not good, if you expect Thailand to be your forever-home.

I'm not too sophisticated in FOREX matters; I would simply wait for a favorable exchange rate & bring in a bunch of cash right then and hope for the best. Maybe enough to last half a year. I like to keep most of my money in the States because I'm good at investing in the states and get better returns than I would get in Thailand.

My primary strategy is to have a robust U.S.-based investment program, the yields of which exceed my needs in Thailand so that even with drops in the exchange rate, I'd be ok.

If you are "right on the edge" in terms of being financially ready to retire, esp retiring overseas, then probably your best bet is to keep working a few more years, build up that nest egg & have a greater cushion against the inevitable downturns that come along.

[gerry53]

My suggestion for hedging would be to have portfolios in your home country and some here also. When you need income you can cash in money in the investment that is doing best in terms of returns and currency rates. My Thai investments are doing great the last few years and I have been taking profits and buying things I want. I will let my home countries investments continue to grow while reorganizing it into a more tax efficient portfolio. When Thai stocks do badly I will re evaluate and probably take funds from my home countries portfolio and wire them over as needed.

[USNret]

My suggestion for hedging would be to have portfolios in your home country and some here also. When you need income you can cash in money in the investment that is doing best in terms of returns and currency rates. My Thai investments are doing great the last few years and I have been taking profits and buying things I want. I will let my home countries investments continue to grow while reorganizing it into a more tax efficient portfolio. When Thai stocks do badly I will re evaluate and probably take funds from my home countries portfolio and wire them over as needed.

I like this idea a lot, but it leads to another question. I am pretty knowledgeable & successful about investing in the States -- mostly individual stocks & stock options. I've been doing this for 8 years & I'm pretty confident, but I also subscribe to a newsletter (Motley Fool) and tend to follow their advice which has done quite well for me. I use a discount brokerage and do not take any advice from them at all.

How do I gain that same level of expertise in Thailand? I don't just wanna buy a mutual fund & hope for the best (although that might be part of my plan). How can I gain reliable information & get training about the Thai stock market? BTW, I'm not a day-trader by any means... I follow a buy-and-hold strategy & generally hope to own a given stock for years, if possible.

[gerry53]

My suggestion for hedging would be to have portfolios in your home country and some here also. When you need income you can cash in money in the investment that is doing best in terms of returns and currency rates. My Thai investments are doing great the last few years and I have been taking profits and buying things I want. I will let my home countries investments continue to grow while reorganizing it into a more tax efficient portfolio. When Thai stocks do badly I will re evaluate and probably take funds from my home countries portfolio and wire them over as needed.

I like this idea a lot, but it leads to another question. I am pretty knowledgeable & successful about investing in the States -- mostly individual stocks & stock options. I've been doing this for 8 years & I'm pretty confident, but I also subscribe to a newsletter (Motley Fool) and tend to follow their advice which has done quite well for me. I use a discount brokerage and do not take any advice from them at all.

How do I gain that same level of expertise in Thailand? I don't just wanna buy a mutual fund & hope for the best (although that might be part of my plan). How can I gain reliable information & get training about the Thai stock market? BTW, I'm not a day-trader by any means... I follow a buy-and-hold strategy & generally hope to own a given stock for years, if possible.

I admire your desire to jump into theThai stockmarket (SET). It took me years to get good at my Canadian stocks and in retirement I chose a great performing mutual fund anyways. Now I am retired it's nice not to have to closely monitor stocks and fret. In Thailand I personally am too lazy to get into researching individual stocks and politics in a country thats difficult to figure out how to drive safely or order dinner correctly! Besides that with a 46% return in 2012 on my Thai mutual fund (20% year to date) it ruined my incentive to work harder. I even started ordering San Miguel lite instead of a big Chang beer!

Sorry I couldn't help you on additional infomation and training.

[AlexDorneles]

You should look into options on currency.

[Swiss1960]

You should look into options on currency.

Could you explain more on that please?

[AlexDorneles]

If you don't have any knowledge of option trading it is better you read about it online. It is more advanced than trading stocks and if you are a newbie it is hard to grasp in the begining.
I never traded options on currency but I know they exist.

[spud67]

Thanks for all of the great responses.

Because I have a company pension plan that will remain in Candian funds, I expect that I will be diversifying my other investments between Thailand and Canada. I currently invest in Toronto, New York and Vancouver exchanges as well as some mutual funds and ADR's. I hope to start an investment account in the SET through my fiancee, with a small amount of cash, this fall. This would be a learning experience for both of us.

I guess I am lucky as my fiancee owns a house and 30 rai of rubber trees that will become active in another 5 years. This should help some too. I am also considering buying a condo in Thailand, if possible, as a sort of conservative physical asset investment.

I am not entirely sure as to why the baht bull run is or how long it will be but this craziness in Cyprus and the subsequent fallout throughout Europe will certainly not hold it back.

Thanks again for all of the great replies.

[fletchsmile]

Main suggestions for people to mitigate FX risk:

1) Start building some THB assets here in Thailand by transferring some of your assets here over time.

2) Pay yourself first each month before you start spending and invest/save some money in Thailand using baht cost averaging

3) Spend less than you have coming in each month as an income stream, and use the XS for number 2)

4) Rent for a while, then consider buying a home here depending on your circumstances, once you're sure Thailand is for you and where you want to be in Thailand. This will fix one of your largest outgoings, and ensure you always have a roof over your head, however else you mess up. {Obviously stay away from buying in girl-friend's name in most cases, until you've been together many years at least}

Fletch

[fletchsmile]

Thanks for all of the great responses.

Because I have a company pension plan that will remain in Candian funds, I expect that I will be diversifying my other investments between Thailand and Canada. I currently invest in Toronto, New York and Vancouver exchanges as well as some mutual funds and ADR's. I hope to start an investment account in the SET through my fiancee, with a small amount of cash, this fall. This would be a learning experience for both of us.

I guess I am lucky as my fiancee owns a house and 30 rai of rubber trees that will become active in another 5 years. This should help some too. I am also considering buying a condo in Thailand, if possible, as a sort of conservative physical asset investment.

I am not entirely sure as to why the baht bull run is or how long it will be but this craziness in Cyprus and the subsequent fallout throughout Europe will certainly not hold it back.

Thanks again for all of the great replies.

Consider starting off in mutual funds/ unit trusts, then adding shares when you understand Thailand and its stock market better. I consider myself an experienced investor of around 3 decades in stocks and shares, I'm not convinced I would be able to outperform the best Thai mutual funds I own over the long term without devoting significant amounts of time.

You can buys mutual funds and shares in your name

If you consider yourself an experienced investor and have some knowledge, as mentioned above by another poster, using currency futures is possible and can probably be done thru the same broker as you trade shares with here. For most people I wouldn't advise this route

[fletchsmile]

BTW In terms of "doing little jobs", the most obvious one would be English teaching. Pay around USD 1,500 and attend a TEFL course to get qualified, and then do it legit with a work permit. Ball park you should be able to add THB 25k - 50k a month as your experience grows.

Filling in online surveys with an address and bank account O/S Thailand could make you or your wife a couple of thousand baht a month. Some people enjoy it. I've done it myself a few times, and using alt + tab you can do them while trading/ watching business TV if a bit bored...

Edited March 19, 2013 by fletchsmile

[USNret]

BTW In terms of "doing little jobs", the most obvious one would be English teaching. Pay around USD 1,500 and attend a TEFL course to get qualified, and then do it legit with a work permit. Ball park you should be able to add THB 25k - 50k a month as your experience grows.

My comment about this being illegal was due to the OP's opening premise: "I plan to retire to Thailand..." My understanding is that on a retirement visa, it is entirely illegal to work and there is no "work around" other than to give up the retirement visa & get a different kind. Am I mistaken in that belief?

[55Jay]

Believe you are correct, USN(ret).

I "Liked" Fletch's input above. I regret not moving some USD into LOS over the past 8 years while we were still working/living outside LOS. Not as a way to make money but for later use in Thailand, instead of USD ATM pulls subject to seemingly constant fluctuations. My modest but more than sufficient USN pension at yesterday's 29.4 is worth more than 2,000 baht/mo less than it was at 30.x.

UK friend of mine retired here 6-7 years ago and built flats for rent (to Thai market not farangs) and basically lives off that baht income quite comfortably while his pension drops in the bank; doesn't access it unless something unusual comes up. The land they bought and built on has roughly doubled in value in this time frame. He made smart moves and insulated himself by creating a Baht stream of income to live in a Baht society. He commiserates with his mates on UK pensions who are subject to fluctuations, but it really doesn't impact his day to day life. Moral I guess is he decided to live in Thailand, committed to it, and made his decisions accordingly; while I've always got this "exit strategy" mentality looping around in my head which prevents me from making a smart move here when it presents itself.

In short, if you know you are going to be here in the future, start building up some Baht reserves as 1 part of a multi-pronged strategy, assuming the Baht will continue it's established trend, not forgetting it used to be 25 to the dollar. While I've got a nice pile of USD in the bank, which was fine in the days of 3% or better pa on simple investments, and the monthly pension covers our lives quite comfortably, really, my overall financial situation at the moment is akin to watching ice cubes melt.

[ExpatJ]

If you have a big enough portfolio don't overlook annuities for their 'peace of mind' value (many pensioners suffer severe depression watching their 401ks or other pension funds run down as they get older) - a year or so ago when i looked, 400,000 US$ would give a guaranteed income of @2200 $ per month for life- a nice secure foundation for your other pension revenue streams to build on.<br /><br />Obviously, the swash buckling investors on Thaivisa who laugh in the face of risk (at least during bulls markets ;-) would argue against, but for us mere mortals, a reduced stress retirement is very appealing.

[el jefe]

If you have a big enough portfolio don't overlook annuities for their 'peace of mind' value (many pensioners suffer severe depression watching their 401ks or other pension funds run down as they get older) - a year or so ago when i looked, 400,000 US$ would give a guaranteed income of @2200 $ per month for life- a nice secure foundation for your other pension revenue streams to build on.<br /><br />Obviously, the swash buckling investors on Thaivisa who laugh in the face of risk (at least during bulls markets ;-) would argue against, but for us mere mortals, a reduced stress retirement is very appealing.

first, that monthly return is based on your age when you annuitize. second, you add a new risk that the company issuing the annuity will still be in business 40 years from now.

hopefully this didn't add to your stress and reduce the peace of mind value.

[55Jay]

Thought about annuities a couple times but I'm still in my early 40's so I would like to hang on to my pile of nickels for now + I've got the pension coming in every month that covers the married visa extension and all our needs, with a comfortable surplus for travel and other stuff.

Didn't mean to hi-jack, my main thought was dollar cost averaging (for lack of better term) some cash into Baht might be a play for someone with a time horizon like the OP's. I was there 8 years ago and now I'm here, and my ass is sore from kicking myself.

Cheers,

J

[fletchsmile]

BTW In terms of "doing little jobs", the most obvious one would be English teaching. Pay around USD 1,500 and attend a TEFL course to get qualified, and then do it legit with a work permit. Ball park you should be able to add THB 25k - 50k a month as your experience grows.

My comment about this being illegal was due to the OP's opening premise: "I plan to retire to Thailand..." My understanding is that on a retirement visa, it is entirely illegal to work and there is no "work around" other than to give up the retirement visa & get a different kind. Am I mistaken in that belief?

Don't know to be honest. Better to ask that on the visa section. I was just assuming if someone wanted to work, they would get the right visa and/or extension. What I do know:

e.g. My extension is based on marriage. It is possible to overlay a WP on that.

e.g In the past I've changed from extension based on business to extension based on marriage.

In both cases it is the extension of stay basis (renewal after 1 year) that counts not the original visa purpose as long as the original was still Non-Imm status not tourist. Don't know on retirement

I do know to get a WP you need the right visa or extension, hence the advice to ensure they got that, and HR will usually advise and sort.

[spud67]

>Jay - A couple others mentioned moving money into Thailand over time. I, too, like the dollar cost option choice; it's something I do with my mutual funds now. Seems to me it could be achieved on 2 levels by buying Thai mutual funds in baht through my fiancee with a Thai broker. It might blunt some of the fast rising returns but it would certainly add stability.

>fletch - Visas and in particular the order of using visas is a big concern for me because of my want to work. Luckily I have lots of time to consider. As alluded to, I will seek more input in the visa section but I appreciate your comments.

[ExpatJ]

If you have a big enough portfolio don't overlook annuities for their 'peace of mind' value (many pensioners suffer severe depression watching their 401ks or other pension funds run down as they get older) - a year or so ago when i looked, 400,000 US$ would give a guaranteed income of @2200 $ per month for life- a nice secure foundation for your other pension revenue streams to build on.<br /><br />Obviously, the swash buckling investors on Thaivisa who laugh in the face of risk (at least during bulls markets ;-) would argue against, but for us mere mortals, a reduced stress retirement is very appealing.

first, that monthly return is based on your age when you annuitize. second, you add a new risk that the company issuing the annuity will still be in business 40 years from now.

hopefully this didn't add to your stress and reduce the peace of mind value.

Chances of established companies going bankrupt far far less than the chances of a mutual fund dropping or pension funds running down- im sure you'll agree.

[Naam]

If you have a big enough portfolio don't overlook annuities for their 'peace of mind' value (many pensioners suffer severe depression watching their 401ks or other pension funds run down as they get older) - a year or so ago when i looked, 400,000 US$ would give a guaranteed income of @2200 $ per month for life- a nice secure foundation for your other pension revenue streams to build on.<br /><br />Obviously, the swash buckling investors on Thaivisa who laugh in the face of risk (at least during bulls markets ;-) would argue against, but for us mere mortals, a reduced stress retirement is very appealing.

first, that monthly return is based on your age when you annuitize. second, you add a new risk that the company issuing the annuity will still be in business 40 years from now.

hopefully this didn't add to your stress and reduce the peace of mind value.

Chances of established companies going bankrupt far far less than the chances of a mutual fund dropping or pension funds running down- im sure you'll agree.

anybody who bought into an annuity during the interest rate environment of the last 3-4 years should see a shrink.

[ExpatJ]

If you have a big enough portfolio don't overlook annuities for their 'peace of mind' value (many pensioners suffer severe depression watching their 401ks or other pension funds run down as they get older) - a year or so ago when i looked, 400,000 US$ would give a guaranteed income of @2200 $ per month for life- a nice secure foundation for your other pension revenue streams to build on.<br /><br />Obviously, the swash buckling investors on Thaivisa who laugh in the face of risk (at least during bulls markets ;-) would argue against, but for us mere mortals, a reduced stress retirement is very appealing.

first, that monthly return is based on your age when you annuitize. second, you add a new risk that the company issuing the annuity will still be in business 40 years from now.

hopefully this didn't add to your stress and reduce the peace of mind value.

Chances of established companies going bankrupt far far less than the chances of a mutual fund dropping or pension funds running down- im sure you'll agree.

anybody who bought into an annuity during the interest rate environment of the last 3-4 years should see a shrink.

Au contraire, its those that retired with no annuities who are seeing shrinks at the moment..

[el jefe]

anybody who bought into an annuity during the interest rate environment of the last 3-4 years should see a shrink.

Au contraire, its those that retired with no annuities who are seeing shrinks at the moment..

Really??

I know plenty of retirees who have no annuity and are doing better, much better, than they would be had they annuitized. None of hem are seeing a shrink, nor should they be.

While I'm not as 100% against annuities as one of the other posters on this thread, in the current interest rate environment it would be nearly impossible to recommend an immediate annuity at this point.

[yoshiwara]

No need to get too complicated.

Aim to have on deposit up to 3 years spending money in baht in deposit in a Thai bank.

At times of opportunity when the exchange rate is in your favour change some money into baht to restore the cash balance up to the 3 year limit.

If say you have income in sterling then maybe hold dome money in another currency eg USD, so that when you want to exchange into baht you can choose which currency to do it from.

[Naam]

Au contraire, its those that retired with no annuities who are seeing shrinks at the moment...

i repeat: buying annuities in an extremely low interest rate environment is sheer madness.

[USNret]

anybody who bought into an annuity during the interest rate environment of the last 3-4 years should see a shrink.

Au contraire, its those that retired with no annuities who are seeing shrinks at the moment..

ExpatJ, I've seen a number of your comments on this discussion and others related to personal finance, and truthfully I have to say you scare me. It's none of my business, but I'm afraid you'll do yourself some serious financial harm one of these days.

This is not meant as a personal attack, but for your own benefit please try to seek a solid foundation of finance basics before putting more of your money at risk. At a minimum, you should understand (1) How to calculate & express ROI (return on investment), (2) Understand the nature of risk vs return plus individual risk tolerance, and finally (3) How to annualize returns so you can more realistically compare investments of different time frames.

I've seen you make mistakes in all three of these areas, and worse you don't seem to be aware of your lack of understanding. You are charging forward confidently where in fact a large degree of caution is warranted.

I'm not a financier by trade but I've taken the time to educate myself over the years. In regards to your comment above, I am currently retired (although I may re-enter the workforce one day), I have no annuities, and my portfolio is thriving. I have ridden the stock market up & down over the past 7 years, at one point seeing "paper losses" of 50% but gains of 350% in the last 3 years. More recently, I have gotten into stock options which complement stock ownership and tend to level out both the risk & fluctuations of stocks. I am finding that annuals returns of 15% on stock options is not unrealistic and I am well on my way toward exceeding that for 2013.

There's a lot of opportunities out there, and it sounds like someone has been selling you on annuities. Truthfully, I don't see any circumstance that I would ever get an annuity, but that comes back to the question of individual risk tolerance. While you are chasing a guaranteed income stream of $2200 on an investment of $400,000, my goal for that same principal is a monthly income of $5000 which compounds (grows) annually.

[55Jay]

That's what put me off annuities. I like the idea of returns on my money without giving it away completely + at my age, I need to keep control over and work my pot of nickels for a long time to come.

The fact that I'm totally out of the market and in fact my money isn't doing much at all is my gaff, but I don't want to give it all away.

[fletchsmile]

If you have a big enough portfolio don't overlook annuities for their 'peace of mind' value (many pensioners suffer severe depression watching their 401ks or other pension funds run down as they get older) - a year or so ago when i looked, 400,000 US$ would give a guaranteed income of @2200 $ per month for life- a nice secure foundation for your other pension revenue streams to build on.<br /><br />Obviously, the swash buckling investors on Thaivisa who laugh in the face of risk (at least during bulls markets ;-) would argue against, but for us mere mortals, a reduced stress retirement is very appealing.

first, that monthly return is based on your age when you annuitize. second, you add a new risk that the company issuing the annuity will still be in business 40 years from now.

hopefully this didn't add to your stress and reduce the peace of mind value.

Chances of established companies going bankrupt far far less than the chances of a mutual fund dropping or pension funds running down- im sure you'll agree.

anybody who bought into an annuity during the interest rate environment of the last 3-4 years should see a shrink.

ExpatJ

While I'd agree annuities have their time and place and can be useful sometimes, as Naam says this is one of the worst times to be buying one.

Interest rates close to all time lows = govt bond yields close to all time lows = annuity rates very poor.

Interest rates can't get much lower. So even if someone decides an annuity may be for them, it would make sense for many people to wait to buy an annuity if they can, until rates improve.

Fletch

[CaptHaddock]

I recommend a different approach for expats in Thailand.

1. Do not transfer your financial assets into Thailand. The obvious reason is that you may not be able to take them out with you if you leave. The other reason is that fraud and theft protections are likely to be less at local brokerages than in your home country, if there are any at all.

2. Therefore, do not invest directly in the Thai stock market. Like other emerging markets, the local market is much less transparent than the market in your home country. Transaction and mutual fund management costs are likely to be higher. For Americans, investing in Thai mutual funds exposes you to more tax reporting and liability.

The case can be made to ignore the Thai stock market completely, since an expat will be at a disadvantage knowing less about business and accounting practices. Emerging markets are insider markets and we are outsiders. There's much less transparency here than in your home country even if you are fluent in the language, which you probably aren't.

This approach should reduce the risk of catastrophic loss, i.e. you want to leave Thailand because, say, a civil war has broken out, but you can't take your assets with you. I wouldn't say such a scenario is likely, but it is a risk we don't have in the developed countries and I, for one, do not want to take on any additional risks that I can avoid. After all, you don't have the right to live in Thailand.

However, the disadvantage of such a program is that now you are fully exposed to currency risk. Your assets are in the currency of your home country while your liabilities are in THB. Not ideal.

So, now you diversify out of your home currency by buying low cost mutual funds and ETFs that hold foreign stocks and bonds, including Thai, if you like. For instance, if you have access to US brokerages, the iShares MSCI Thailand Capped Invstbl Mkt (THD) ETF holds 91 Thai stocks and has a management fee of 61 basis points, which is higher than a US domestic stock ETF should be, but not too bad for a foreign stock fund. THD has a trailing 1 year total return of 27%. Are you going to do better than that picking Thai stocks on your own? I doubt it. In your US brokerage account the commission on a trade for such an ETF would probably be only a few dollars, perhaps even free. I don't know how much Thai brokerages charge for commissions, but I'll bet it's more. I pay $2 commissions for trade in the US myself, effectively free.

In addition to foreign stock ETF you buy foreign bond mutual funds in your home brokerage account also. Now you have a relatively low-cost balanced portfolio that hedges your currency risk without requiring you to do transactions that you don't understand. Let the ETF or mutual fund manager does the currency transactions for you. He knows more than you and gets a better rate.

You can forget about buying currencies or currency forward contracts. They are too expensive. You will have to roll the contracts over as they expire since you have a perpetual, not a one-time, exposure to the THB. The expected gain from holding actual currency itself is zero, which would be pretty detrimental if it were both a lot and long term. And if it were not, it wouldn't protect you very much from currency risk.