Lately I have been meeting many offshore oil workers
in Thailand. They are unlike the majority of my clients. Most of my
clients are retired and we manage their portfolios for income and
capital preservation. However, offshore oil workers have the distinct
advantage of being able to live in Thailand and also bring in a very
nice income. I remember in 1993 I was a project mechanical engineer for
a US research base in Antarctica for 1 year. All food was provided and
housing paid for. With no malls or places to spend money I saved 85% of
The problem is that most offshore / contract workers make two very
common mistakes. For one, most are not even thinking of retirement. Due
to the dangers of their jobs, they have a live in the moment attitude.
While a great many make over $100k, very few save much of that money.
The second mistake is that many get suckered into buying unit-linked
life assurance products from insurance companies like Friends Provident
International. These products have not only upfront fees, but recurring
fees every year, poor performance, and 7-10 year lock in periods. I
could go on and on about how bad these products are. Anyone that knows
about these products knows to run away as fast as they can.
What offshore oil workers should be focused on is saving their money in
a low cost discount brokerage account held in their own name only and
reaping the magic of compounded interest. First off, even if you’re a US
citizen, the first $97,600 is tax free as long as you are not in the US
more than 30 days of a calendar year or are a resident of another
country. If we consider how cheap it is to live here in Thailand, the
average worker making $100k a year can easily save half of that.
Now this is where it gets interesting, say the worker is able to save
$50k a year for 10 years. That’s $500k in total. Well, the key is
putting that money to work in a diversified portfolio exposed to the
stock market, which over time appreciates in value. You see, the goal is
to be able to retire in just 10 years.
One investment that I have talked about in my columns is the Vanguard
REIT ETF. For the past 10 years, it has achieved an annual return of
9.29%. This return was achieved even with the real estate crash of 2008
and 2009. That’s why it’s important to invest for the long haul. Over a
10 year period, if the Vanguard REIT ETF was the only holding in the
portfolio, and by investing $50k a year, there would now be $963,351 in
the portfolio. In Baht, that would be 31,013,658, which is plenty to
retire here in the Land of Smiles.
The best part about this program is that it’s only saving half a year’s
salary. The rest can still be spent and enjoyed. The key is setting one
up so that they can retire in 10 years and not have to work anymore.
With an actively managed portfolio, there would be even more than $1
million in the portfolio.
Since July of last year, shares of Facebook have gone from just above
$20 to almost $80. The NASDAQ stock market is up 27% in the past year.
There are a lot of options for those with the income and a 10 year time
horizon. There are international stocks like the Thailand ETF, which is
up almost 25% so far this year.
So what happens when the 10 years is up and you’re all set to retire? Do
you have to stop spending money? No, not at all. The good news is that
the person learned to live on $50k a year here in Thailand. Once the 10
years is up, we adjust the portfolio and become more conservative and
look for a 5% annual return. This is just a little more than half of the
9% that the Vanguard REIT ETF delivered in the past 10 years. What is 5%
on $963k? Yep, you guessed it. It’s $48k.
So at the end of 10 years, the person has a roughly $1 million nest egg,
retired and living on the same amount of money as when they were working
offshore on the oil rig. This is the plan to have and why I’m signing up
offshore oil workers to be part of this program.
The critical components to make this work which also applies to any
1) Open your account in a low cost regulated discount brokerage firm
held in your name. This ensures you control your money and can login 24
hours a day.
2) No lock in periods and no surrender charges. If you need to access
your money in an emergency it is there for you to be wired out in a
matter of 3 days to any bank.
3) Use a fee only independent investment advisor.
4) Diversify globally using US stocks and funds that trade on the Nasdaq
and New York stock exchanges.
If you’re an offshore oil worker and would like to know more, give me a
call, email or Skype and we can discuss your options.
Don Freeman is president of Freeman Capital Management, an independent
US Registered Investment Advisor. He has over 20 years experience and
provides personal financial planning and wealth management to
expatriates. Specializing in UK and US pension transfers. Call
089-970-5795 or email: [email protected]