How much money?

fine dude
Posts: 651
Joined: Tue Dec 18, 2012 7:12 pm
Location: SE Asia

How much money?

Post by fine dude »

As an international school teacher with at least ten years of experience, what do you think is the right net pay per month or year that can let you focus on your teaching and stay beyond two or three contracts without having to worry about retirement?
joe30
Posts: 230
Joined: Thu Jul 07, 2016 4:10 am

Re: How much money?

Post by joe30 »

Assuming it's tax free and in a country that doesn't cost extortionate amounts to live in, and you have accomodation provided...about $4,000 a month. Spend $2,000, save $1,000, and put aside $1,000 for when you have your vacations.
PsyGuy
Posts: 10789
Joined: Wed Oct 12, 2011 9:51 am
Location: Northern Europe

Response

Post by PsyGuy »

So many factors go into that, many of them depending on location. USD$4K would be well below average somewhere like Switzerland, but somewhere isolated like a compound with all living expenses provided would be very different. Another factor is what you have to do for that coin. You could easily be working 3 to 4 times a typical workload for USD$4K, where a typival workload you could find for USD$3K.
The average global IT salary is just under USD$30K, USD$4K a month would be tier 1 ISs if you wanted to grossly generalize. For most floater tier ISs with a low cost of living $3K would be fine.
joe30
Posts: 230
Joined: Thu Jul 07, 2016 4:10 am

Re: How much money?

Post by joe30 »

I was assuming after 10 years of experience, our hypothetical IT would be working at a first tier school.
PsyGuy
Posts: 10789
Joined: Wed Oct 12, 2011 9:51 am
Location: Northern Europe

Comment

Post by PsyGuy »

@joe30

If they are already at a tier 1 IS, why are they asking how much coin the profession pays?
joe30
Posts: 230
Joined: Thu Jul 07, 2016 4:10 am

Re: How much money?

Post by joe30 »

Well I interpreted the OP to be 'how much money do you think a teacher with 10 years exp should be aiming for in order to live comfortably'. That'll obviously give a range of different answers and to be honest it's pretty difficult to just throw out a figure ($4k USD after tax plus a free apartment would be a ton in Europe, whereas if you're working in Saudi Arabia it's nothing to write home about).

I still think $4k is about right. Spending $2k a month surely isn't some sort of overly lavish lifestyle, and to make up the deficit of not getting a pension provided for you you'll need to save a LOT of money. This amount is frequently underestimated by everyone, but if you go to an online pension calculator, put in your expected retirement date, amount you want to live on per month etc...you'll see to even have a couple of thousand dollars income a month requires hundreds of thousands to be saved prior to retirement - hence you're going to need to be saving at LEAST $1,000 a month there.

The remaining $1,000 for vacation spending...well, I'll happily admit I enjoy nice holidays, and don't much feel like penny pinching when I'm having them. $12,000 budget for 8 weeks vacation time...yep, seems fine, not over the top nor super restrictive.

Of course if one of these variables doesn't apply (i.e. you work in Europe where a good pension is provided already, or you live in some backwater village in a poor country where spending $2k a month would make you the wealthiest guy in town) then you might need a bit less. But for a normal IT, working outside Europe in a reasonably large city I think my figure holds up well.
sid
Posts: 1392
Joined: Sat Dec 02, 2006 11:44 am

Re: How much money?

Post by sid »

It's such a "how long is a piece of string" question.
fine dude
Posts: 651
Joined: Tue Dec 18, 2012 7:12 pm
Location: SE Asia

Re: How much money?

Post by fine dude »

@sid
Typical management perspective. Why do these so called administrators pretend as if money isn't a priority when it comes to teachers compensation?
sid
Posts: 1392
Joined: Sat Dec 02, 2006 11:44 am

Re: How much money?

Post by sid »

???
Money is great. I readily admit it, and I find it hard to understand how you interpreted my post to mean that I undervalue it.

My perspective on this question is that there are so many variables in the equation that there is no single agreeable answer. Reasonable people can reach wildly different valid conclusions.

Some of the variables: what lifestyle do I want to lead now? What lifestyle do I want in retirement? Am I saving for a retirement, or living life for today, or looking for a country where it will be taken care of for me (the OP mentions retirement, but is not clear)? If I'm saving, am I totally responsible for funding my own retirement, or only partially? Am I now, or will I someday be, responsible for the wellbeing of a spouse, children and/or aging parents? What is the cost of living in my country of residence? In my intended country of retirement? Will there be national health insurance in my country of retirement, or will I have to pay for health care? What does the OP mean by "without having to worry about retirement"? What level of security, or national scheme, will reach that level for the OP? What is my risk tolerance for retirement investing?
My needs are not the same as your needs. The same salary does not go as far in Country A as it does in Country B.
fine dude
Posts: 651
Joined: Tue Dec 18, 2012 7:12 pm
Location: SE Asia

Re: How much money?

Post by fine dude »

The OP is based on salary that leads to substantial personal savings and this is the major variable in the question. Others might be of some relevance, but the cash that ends up in teachers bank accounts at the end of the month is what matters whether you are in Oman or Oslo. There isn't so much of a difference if you compare net salaries of experienced teachers at tier 1 schools in Switzerland or Singapore. I also don't think majority of the veteran teachers will simply accept a job with mediocre salary just because they are going to earn a small monthly pension 20 years down the line. Net pay is the deciding factor for many and I agree with joe30 that 4K is reasonable, with or without pension.
sid
Posts: 1392
Joined: Sat Dec 02, 2006 11:44 am

Re: How much money?

Post by sid »

Ok, I'll try to be more helpful.
Let's run some numbers.
First, assume that inflation and raises are not in the picture. Perhaps they cancel each other out. Also assume the OP started working at 25, is currently 35, and will retire at 65. Further assume the OP wants to maintain the same lifestyle as now, so an income of $36,000 per annum - the $2,000 per month living expenses plus the $1,000 per month towards vacations.

Then, let's look at what total savings and what retirement income our OP would have in various scenarios.

If the OP is just now starting to save for retirement at the age of 35, and has a balance of 0 in his retirement accounts. If he puts in 1,000 monthly until age 65, and earns a 5% return, he'll have a total of about $840,000 in his account at age 65. With a safe withdrawal rate of 3% per annum, that give him a retirement income of about $25,000 a year. And that would be a problem, since it's $11,000 less per year than he's currently getting.

If he started to save 10 years ago, at that same rate of $1,000 per month (making him quite a rare breed among new teachers), than at 65 he would have about $1.5 million, a much nicer sum, with an annual income of about $45,000, which would do the job nicely. Perhaps. See below.

A higher rate of return would improve both these scenarios, of course, but it would be foolish to count on that. After paying taxes and fees along the way, that 5% total annual return is a safe-ish assumption.

Problems with these scenarios include:
1. It is likely there will be taxes when money is taken out to live on in retirement. That will lower the income.
2. Currently the OP presumably pays for neither housing nor health insurance. He will definitely have to provide himself with housing of some sort, and quite likely with health insurance, depending on where he chooses to retire and travel. Those expenses require thousands of $ per year.
3. Both scenarios require that the OP put in the money each month come hell or high water, and never take any out. So we must assume he will never be unemployed, underemployed, have an expensive health event, dip into his funds for a special vacation, go back to school for another degree, anything. How many of us are confident we can achieve that?
joe30
Posts: 230
Joined: Thu Jul 07, 2016 4:10 am

Re: How much money?

Post by joe30 »

Yep, it's an awful lot of money that's needed for sure. Of course there's those that scrape by on $1,000 a month in their retirement but who wants to live like that, really?

One thing I would implore all UK IT's to do is still pay national insurance while they're abroad. It's £14 a week, so £728 a year. 30 years of doing that (so about £22,000 invested) and you get the state pension, which is currently £150 a week, or £7800 a year. That gets you started on the road to a decent retirement for quite a low investment, although of course it's only the beginning, and more needs to be done besides this.

With that said, I think you can withdraw much more than 3%, since you can and should be drawing down part of the principle each year, since nobody lives forever. Assume you'll live for 20 years post-retirement, since that's slightly above average (retire at 65, die at 85). That leaves you able to withdraw around 7% each year, meaning around $500,000 should cover it assuming you have no other income. Still a lot of money, of course.

My retirement goal (this is a LONG way off, since I'm still in my 20s) would therefore be around $400,000 total (since I'll get the UK state pension, so I don't need to save quite as much). That should provide me with 20 years of a decent income. If I happen to live longer then that, well I guess I'll just have to pitch up somewhere in SEA and live off the UK state pension alone. At that point though I'd be quite an old guy, so likely wouldn't have the energy to do much anyway.
sid
Posts: 1392
Joined: Sat Dec 02, 2006 11:44 am

Re: How much money?

Post by sid »

Good points.
If you have the option of continuing with a national scheme, definitely do. But it's only available to some - other than UK citizens, can other nationalities do it? US and Canadian, so far as I know, do not have this option.
As for living 20 years in retirement, stats are showing that this would not be enough for a significant percentage of Westerners. And personally, I refuse to plan on the (ridiculous, unbelievable) assumption that I will die some day. Nope, not me. So I stick to the 3% that professionals advise us will ensure my money will last. Perhaps after several years of retirement, if and when I start to slow down or feel the pinch of mortality, I might up the percentage I spend to 4% or even 5%, but I can't see myself going beyond that unless I get a fatal diagnosis. It's perhaps more important for those of us who cannot rely on a guaranteed income from the government - if I run out of money, I will literally be out of money, so I'd best plan to take care of myself.
shadowjack
Posts: 2138
Joined: Sat Oct 06, 2012 9:49 am

Re: How much money?

Post by shadowjack »

Property as an investment is good. Yes, you will have to pay for maintenance and upgrading over time, but someone else is paying your mortgage and you have a tangible asset you can rent, sell, or live in. If you have a few properties, you can realize some 3000 to 5000 a month if you buy in the right places. You should also have overseas savings. The trick is, in the end, to have monthly revenue. Having 500,000 invested is not guaranteed to make you 10% when the market goes south. But having 500,000 to 1,000,000 worth of properties is guaranteed to gross you at least 3K a month, which comes in almost every month. That means you don't have to sell off your investment assets.

Factor in how long you worked in the home country as well. You might have some income coming in at retirement age - and if you leave it longer, it accrues more when you finally start to draw on it. Be realistic about how long you plan to work as well. If, unforeseen circumstances don't crop up, you plan to retire at 65, then plan to have all your mortgages etc paid off - or else factor them into your plans. As well, if you don't plan on retiring right away, you need to think about where you will be - at that point you shouldn't be worrying about saving so much as you are about not spending down what you have saved. If you are making 3 to 5K a month on property, and making 20K a year teaching, you are still banking around 24,000 to 40,000 a year after taxes on your property revenue. That is nice coin that will tide you over when you finally retire - and can be used to top up your income as needed, provided you are not profligate.

Lots to think about - but don't be the grasshopper - nothing lasts forever. Good luck!
shadowjack
Posts: 2138
Joined: Sat Oct 06, 2012 9:49 am

Re: How much money?

Post by shadowjack »

I also forgot to mention, that if need be, or when you hit a certain age, you can sell off those assets and increase your savings for estate planning or unexpected expenses. You might not want to sell them off at age 65 - but at age 80, you might feel more comfortable with another 700 K in the bank and less hassle of dealing with property.
Post Reply