Hi all.

I've been living in Thailand for many years and I imagine that I'll be here for many years longer. I'm not really putting anything away for the long term, and ya taxes are eating away at my income. I'm trying to find some long term plan for people living and working here. Yes, I have a work permit.

I've looked at the various "life-insurance" policies that the banks have. Essentially they let you deposit up to 100k a year with the tax break, you deposit the money for so many years, then you get interest and a lump sum back after so many years. Is this worth it? There are differences in the rates of different banks, so it does matter which one you pick. Does anyone have any advice which is the best? The best rates so far that I've found has been CIMB Bank and Bangkok Bank. Does anyone have any knowledge about their policies?

If anyone could recommend another retirement policy, I'd be very happy to hear it.

Thank you so much for your information.

-Ryan

It's best if you separate your question into 2 parts:

1. Retirment planning in general

2. Investments that are specific to Thailand

From your post, it sounds like you don't have a lot of knowledge about the first point, so the first thing you need to do is get yourself some good books on retirement planning and assest allocation. Do not rely only on internet sites. You need to become familar with the different investments available and the risks associated with each one, and then determine an allocation that suites your own individual capacity for risk.

Investments may include: US stocks, international stocks, corporate bonds (US & International), gov't bonds (US & International), real estate, fixed income, and cash. These asset classes can be further divided into sub-categories like large-cap, mid-cap, small, and micro cap stocks (value & growth), high yield, corporate, and investment grade bonds. International stocks can be divided into developed markets, emerging markets, frontier markets, asia, europe, etc...

Factors that may affect your individual capacity for risk include: age, current expenses, career, estimated retirement income needed, health, family situation, taxes, etc.

Once you've done your homework and put together an outline for a diversified porfolio that takes all the above into account then you're ready to start picking individual investments. The best way is to open a brokerage account in your home country and manage it yourself from Thailand. I would stick to low cost ETF's from companies such as Vanguard ori iShares.

So that's the core of your portfolio.

Now onto the Thailand specific part. If you're working in Thailand the best thing you can do is max out your LTF and RMF contributions. You can do a search on this forum since there's lots of info already out there. Those funds will save you money on your tax bill. But make sure the amount you put into LTF's and RMF's is still within your capacity you determined earlier for emerging market risk, minus the benefits of decreasing currency risk (keeping more money in the currency of the country you're currently living in)

The life insurance you mentioned above could fall under the fixed income part of your portfolio, but realize even with the tax savings those types of plans will only return an average of 2-3% per year (you need to calculate it as an endowement because there's inflows and outflows at the same time, which is quite difficult to do (excel is needed) and it's something most banks won't show you), but unless you're very close to retirement a large fixed income portion is something you don't want.

Be very careful with any company that runs a retirement plan based in Thailand. Same goes for financial advisors here. The do-it-yourself method I described above is much better if you're willing to put the work into it. Even if you don't want to do it all yourself, your research will be invaluable to understanding what someone else wants to do with your money.

There's lots of posters who have more knowledge than me and I'm sure they will be along shortly, but that's enough to at least get you started.

Separate out completely life insurance and investment. Use life life insurance to insure your life and keep investments away from insurance. All the policies are traps and watch out.

A few basic questions:

(1) Do you have dependents? If not, there's no need for life insurance.

(2) Where do you expect to retire?

SheungWan is absolutely right that the policies combining insurance and investment are bad in many ways, including value for money. Keep investment and insurance separate.

Definitely the first thing to look at is RMF (Retirement Mutual Funds) which have significant tax advantages. However, which funds you should invest in very much depends upon where you're going to retire, when, and in which country, as well as your personal attitude to risk.

life insurance not on your nelly.your better off just putting x-amount into a fixed acc.and carry it forward on maturity.

then it can also be used for extension of your stay.

Separate out completely life insurance and investment. Use life life insurance to insure your life and keep investments away from insurance. All the policies are traps and watch out.

Spot on. Those mixed life insurance investment policies are not really good life insurance and return dismally on the investment front.

The LTFs etc are good value generally allowing you to save pre tax and get the returns tax free.

Retirement wise, I'd suggest looking at retirement plans in your home country if you don't pal to spend the rest of your life in Thailand.

Edited April 2, 201412 yr by samran

Ludacris sums up things pretty well.

I'd also agree to stay away from the mixed savings and insurance products. Better to buy term assurance and invest separately, as people state above.

Just a couple more things: on both LTFs and RMFs you can obtain tax relief at your marginal rate of tax (rough guide: up to 35% if you have taxable income after allowances of THB 4mio+ ; 30% if 2mio+; 25% on 1mio). The tax relief is on the lower of THB 500k or 15% of your earned income. You can therefore do up to THB 1mio in total max. RMFs you have to reduce by other provident fund contributions you make in Thailand.

LTFs and RMFs are not capital guaranteed tho. Your money will rise and fall according to the stockmarket or gold or whatever you invest in. That said the tax break offers an excellent cushion. eg THB 500 effectively costs only THB 325 for a 35% tax payer, so your THb 500 would have to fall 35% before your losing out. The worst single years in Thailand in the 2000's have been falls of about 40%+ to put into perspective.

Personally I would always max out my LTFs first, as you only have to hold for 5 calendar years, whereas for RMFs you need to hold for a minimum of 5 years or until your 55 if later. For a young guy that may be a long wait.

For RMFs because of the longer time frame they may not always be suitable for expats who don't plan on being here or are uncertain. Whereas 5 calendar years is more reasonable.

The advantage of RMFs over LTFs is the range of funds you may invest in. LTFs is only mainly Thai equities or a mixed Thai equity and fixed income fund - min about 2/3s equities. RMFs allow Thai equities, Thai fixed income, Global equities (tho' there aren't many), global bonds and gold. Not as good a range as outside tax efficient funds, but a good start, so you can get a better mix/portfolio diversification which is what Ludacris mentioned.

On LTFs tho, personally I don't mind going over my Thai asset allocation to get the extra tax break as I think it more than compensates. Once they mature you can switch the allocation. LTFs are my favourite investment full stop: tax relief + THB + equities. Great for someone who plans being here long term and wants assets to at least keep pace with inflation.

For both products actually if you want your money back before the agreed time frame, you can do so. You just forfeit the tax break.

Bottom line as Ludacris says you can go a long way with these two products alone as a core part of your retirement planning. They are tax efficient and easy to set up, with reasonably low fees: average about 0-1% entry and about 1.5%pa. No capital gains on either.

Cheers

Fletch

Edited April 3, 201412 yr by fletchsmile