Ensuring stable retirement income, Taxation across borders

I'm going to retire this year. I have about 7 million baht. Most of it is in savings and 2 million baht is in a retirement mutual fund (RMF). I have no experience in investment except for that RMF. Could you please give me advice as to what I should do with my money to make sure I can live my life modestly? I don't expect a major expense soon, but in the next few years my house may need a major renovation, which should cost me about 2 million baht.

_ Saran

ANSWERED BY... Teera Phutrakul, CFP, chairman, TFPA If it weren't for inflation, cash and bonds would be all you need. But even with modest inflation of 3% a year, your buying power would be cut in half in about 25 years, so you also need to invest for future growth.

When you add stocks to your portfolio, however, you also add risk. In retirement, people are more concerned about reliability of income than about returns on investment, and you can't chase both at the same time. But you can achieve both goals if you compartmentalise your money based on needs in the short, medium and long terms.

Another way to look at this is to use the classic risk pyramid as an example. With a traditional risk-pyramid model, you use your safest investments such as bank deposits or money market funds to build the foundation of your portfolio.

Then you layer riskier investments on top, adding bonds, followed by various types of stock funds and alternative investments that may include commodities and real estate right at the top of the pyramid.

In this classic model, even if your investments are diversified, all your assets are at risk at the same time.

By flipping the pyramid on its side, you tap the most conservative, risk-free investments at the beginning of your retirement time line and let the riskier investments grow until the later years.

Your most aggressive assets will have years and possibly even decades to grow, creating a source of stable retirement income in the future.

With this divide-and-conquer strategy, you can have the best of both worlds.

I'm a freelancer, currently based outside Thailand working for foreign companies in other countries. Recently, a Thai company hired me for a freelance job. I guess they will deduct tax from my pay cheque. How can I manage to pay the lowest rate? Or is it left to the employer to decide? Which way can I get a secured payment with the lowest fee? Do I need to open an account with a Thai bank?

_ Liu

ANSWERED BY... Teera Phutrakul, CFP, chairman, TFPA It depends on how long the job is. If you have to spend more than 180 days in Thailand, then your income will be subject to Thai personal income tax with a top bracket of 35%. Normally, the employer will deduct this from your pay cheque. Opening a bank account in Thailand should be hassle-free unless of course you are an American citizen. Most financial institutions don't want to bother with the cumbersome new reporting requirements under the Foreign Account Tax Compliance Act.

The Thai Financial Planners Association is the Certified Financial Planner (CFP) trademark licensing authority in Thailand. It is a self-regulated, non-profit group of financial advisers and experts from various organisations set up to give advice to investors. Questions can be submitted through wealthcare@bangkokpost.co.th or the TFPA webboard, www.tfpa.or.th

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Writer: Thai Financial Planners Association