Retirement assets in multiple currencies
International clients can accumulate assets in one currency, earn income in another and expect to retire in a third.
That creates a planning problem that is broader than simply choosing an exchange rate.
The client needs to understand which assets will fund which future expenses, how much currency risk they are carrying and whether their investment strategy reflects the currencies they actually expect to spend.
Josh Clancey works alongside tax advisers, pension specialists and other professionals where currency forms a material part of the client's retirement plan.
Currency should be considered in the context of future spending
A client may hold:
- UK pensions in sterling
- US retirement accounts in dollars
- European investments in euros
- cash in dirhams
- property in another local currency
- investment portfolios denominated in several currencies
The relevant question is not simply which currency has performed best.
It is where the client expects to spend money in retirement and how their assets will support those future liabilities.
A client retiring in the UK, for example, has a different currency exposure from one planning to live permanently in the UAE, Europe or the US.
Common planning areas when retirement assets span currencies
Sterling pensions and non-sterling spending
A UK pension may provide income in sterling while the client spends in euros, dollars, dirhams or another currency.
That creates ongoing exchange-rate exposure.
US retirement accounts
A client may hold a substantial 401(k) or IRA in dollars while intending to retire outside the US.
Cash reserves
Holding all short-term retirement cash in one currency can create a mismatch if the client expects to spend in another.
Property and local liabilities
The client's home, mortgage or future living costs may create a natural currency exposure that should be considered alongside investments.
Multi-country pensions
Different pension systems can produce future income in different currencies and at different ages.
Retirement destination uncertainty
Where the client does not yet know where they will retire, over-committing to one currency can reduce flexibility.
Questions to ask when retirement assets span multiple currencies
Where does the client expect to live in retirement?
Future spending currency is more important than the currency shown on an investment statement.
Which currencies are the main pension assets denominated in?
Guaranteed pension income can create a structural exposure to a particular currency.
What short-term spending needs does the client have?
Cash reserves may need to reflect the currency of expected near-term expenditure.
Does the client own property in the retirement country?
That can create a natural hedge against future housing costs.
Are future liabilities denominated in a different currency from the assets?
This can create a mismatch that becomes more relevant as retirement approaches.
How diversified are the underlying investments?
Portfolio currency exposure is not always the same as the currency in which an account is reported.
Is the retirement destination still uncertain?
The plan may need to retain flexibility rather than optimise around one assumed country.
Useful resources for advisers working with multi-currency retirement clients
The Professional Adviser's Guide to International Retirement Planning
A broad guide to coordinating pensions, investments, income, residence and currencies across jurisdictions.
The Professional Adviser's Guide to Cross-Border Financial Planning
A wider resource covering the planning challenges created by internationally mobile clients.
The Professional Adviser's Guide to UK Pensions for International Clients
A guide to planning around UK pensions where the client lives or retires overseas.
401(k) Planning for Clients Living Outside the US
A technical brief covering US workplace retirement plans for internationally resident clients.
IRA and Roth IRA Planning After Leaving the US
A technical brief covering Traditional and Roth IRA planning for clients living outside the US.
Client Retiring Abroad Checklist
A practical checklist covering pensions, investments, residence, currency and other retirement-planning issues.
Account currency is not the same as economic exposure
A common planning mistake is to focus only on the currency in which an account is valued.
An investment account reported in sterling can still hold global companies whose revenues and assets are spread across many currencies.
Likewise, a dollar-denominated portfolio does not necessarily mean the client has pure US-dollar exposure.
The more relevant questions are:
- what the underlying assets own
- where the investments generate returns
- which currencies the client's future liabilities are in
- how much short-term liquidity is needed
- which pension income is contractually paid in a particular currency
This distinction becomes increasingly important as the client moves from accumulation into retirement.
Currency risk becomes more visible when withdrawals begin
During accumulation, exchange-rate movements can feel abstract.
In retirement, they can directly affect spending power.
A client drawing a sterling pension while living in the eurozone, for example, may see the local value of that income rise or fall even though the pension itself has not changed.
The financial plan can therefore consider:
- maintaining cash reserves in the spending currency
- aligning near-term withdrawals with expected expenditure
- avoiding unnecessary concentration in one currency
- coordinating several pension-income streams
- deciding which assets should fund different stages of retirement
- retaining flexibility if the retirement destination may change
The objective is not to forecast currency movements.
It is to reduce the client's dependence on getting those movements right.
When should the referral happen?
A referral can be useful where the client:
has pensions in more than one currency
lives in a different currency from their main retirement assets
is approaching retirement
is planning to move country
holds large cash balances in one currency
has property or liabilities in another
is unsure which assets should fund retirement spending