Could I retire in China?

[Erbse]

Your jobs sounds like it isn't to healthy in the long run. Consider learning a new skill. You might not be able to retire right now, but you can definitely take a few years of time to learn a new skill. Think about what interests you.

[Jane_PA]

I'm a Westerner and I hate cheese. I would like a cheese-free retirement.

LeLan, you are a special westerner, I may say. I really believe that many or most persons could not change their food habit.

What ever, retiring in China is really depending on each individual's need in China. I suggest the Original Post should try to live in China for a while before making this decision. China is a developing country, many things are cheap, but many things are expensive and even some are more expensive than the U.S. So, cheap or expensive life depends on what life you need. My parents can live less than $500 per month in Beijing, with many conditions... They have their own apartment (which is very important). They don't go to restaurants often and they like vegetables and toufu, not Spaghetti and cheese. They don't buy brand clothes or shoes at all (I buy for them). They don't go to vacation. They even don't go to movies because of no interests. I know many movies in Beijing is more expensive than in the U.S. For example, the Avatar is RMB200 in Beijing vs. $11 in the U.S.

Also, as a developing country, there are many small things which is supposed to be straight forward may be complicated. I remember that one time, how difficult to pay a utility bill in Qatar when I lived in a "luxury" apartment there (the price was high and some features were very fancy, but some were very inconvenient). At that time, I began to understand how many difficulties a foreigner might have in China. So, living in developing countries, there are alwasy something unexpected. Sure, if you have enough preparation for an adventure, then, that will be exciting.

[anonymoose]

Darn. I wish I'd gone into pipe welding. I could be retired by now.

[rob07]

If you are planning to retire in the short term with a cash lump sum and don't know much about finance, then I would say it is an absolute must to start talking to life insurance companies now.

If I was you, I'd be looking at whether I could buy an annuity. This is an arrangement under which you pay most of your $600,000 to a life insurance company and in return they agree to pay you a fixed amount every year for the rest of your life. I don't think many 33 year olds retire and buy annuities these days which might make it a bit harder, but annuities have the following advantages if you can get the right one:

- As others have pointed out, it is dangerous to start spending your $600,000 rather than just the interest you earn on it because if you spend all your money before you die you are in serious trouble. On the other hand if you die with the original $600,000 fully unspent it is a bit of a waste because you could have afforded a much better lifestyle. Obviously, you don't know when you are going to die so it is difficult to plan how much of the $600,000 you can afford to spend. But if you buy an annuity you don't have to worry about this because you get the same fixed amount every year, which should be more than just the interest you would have gotten on your $600,000 because you have given all of your capital to the life insurance company and there will be nothing left when you die.

- As others have pointed out, inflation is a real concern - if you get the same amount every year (either as interest on your $600,000 or as an annuity payment) then you could be in trouble in ten years time if inflation has doubled prices. Annuities payments can be indexed for inflation (ie: you get smaller amount to begin with but it goes up every year to take account of inflation), so you don't have to worry about this.

- A life insurance company should be able to do more with your $600,000 than you could by yourself, because it can put it together with the money of all the other people who have bought life insurance from them.

- Life insurance companies, at least in the West, are subject to very strict regulation. They are subject to constant oversight by government regulators who try to make sure that they aren't doing anything too risky with your money and that they keep your money separate from other stuff they do, which in theory means you should still be OK even if the life insurance company goes bust.

- It is generally possible to cash out annuities - that is, you give up your rights to get paid a fixed amount every year and the company gives you money back, although expect to pay substantial fees and be subject to other risks if you want to do this.

In addition to what others have said, you need to work out where you will be paying tax and how much it will be. It is possible that annuity products or other life insurance products would be subject to favourable taxation rates.

When talking with a life insurance company representative or other financial advisor, there is always the risk that they will try to sell you something not so good (or outright dodgy) because they will get a higher commission from the life insurance company or someone else. Under law, the details of all such commissions should be disclosed to you - make sure you read and understand this stuff.

The above are general comments only. Of course they should be treated with a level of caution appropriate to all financial advice received anonymously over the internet. Further, in your case there is the complication that you want to retire in China. As others have pointed out, if you keep your money in US dollars or buy a US annuity, you are going to be in trouble if the US dollar collapses against the RMB (as is quite likely) and you are living in China. Similarly, it is not going to be much help buying a annuity indexed to US inflation if there is deflation in the US (again, quite possible, but who knows), but inflation in China is going through the roof.

Ideally, if you are really serious about living in China for the rest of your life, the most appropriate annuity would be a RMB annuity linked to Chinese inflation that you had the right to sell back to the company for cash just in case. (Of course, as others have pointed out and is no doubt obvious to you, you shouldn't commit yourself to anything before living in China for a couple of years to see if you like it.) For an American who doesn't speak Chinese (I assume), this wouldn't be easy to buy. But you could give AIG a try. AIG has a wholly owned Chinese subsidiary that can sell RMB annuities. It is now illegal for Western companies to sell life insurance through wholly owned subsidiaries in China but AIG is still able to do it because they were doing it before it occurred to the Chinese government to have a law against it.

[Chhhi]

It sounds to me like what you need it a long holiday. You’re way too young to retire. But the money somewhere safe. Sort out your finances to have a great year or two away. Get a round the world plane ticket. After working so hard for so long chances are you’ll get bored doing nothing.

[SiMaKe]

@rob07

I was quite impressed by your post. It provided a well-balanced, informative overview of the annuity option. It was so well presented and on-the-money that I gave you a "green one".

I would like to add a few comments to a few of the items.

1. In the US, "government regulators" are state, and not federal, and the quality of state regulation is not uniform - some are excellent (e.g. New York) while others are less so (they just don't have the funding).

2. "your money held separately" is only true if he buys a "separate account" product. The mortality guarantee (the portion of the contract that makes it "life insurance") is commingled with the company's own funds in the "general account" and is subject to the same risks as those funds. The mammoth investment problems AIG is working through are in their general account.

3. Ability to cash out is generally available only on an "accumulation annuity". It is generally not allowed for "payout" annuities (those where you receive a periodic payment). Allowing that would lead to "anti-selection" against the company where those who are about to die would cash out their annuity. The "better than interest payout" that is received on a payout annuity is due to the insurance component where those who die contribute to those who live. This is the flip side of life insurance where those who live support those who die. But this is just the underlying concept of insurance so it's not a bad thing.

Again, your post was excellent and gives the OP another option.

[attarian]

What if he buys houses(not in china) and lives on the money he gets from the rent?

[SiMaKe]

@attarian

Renting out residential real estate is certainly another option. However, if you are suggesting that he own the property elsewhere while he is living in China, then this is not an easy way to operate this business profitably. Especially on the scale we are probably talking about here. In general, the less involved the owner, the greater the need for others. Which usually means added costs. Not impossible but not something that is a "slam dunk" either.

[parasite]

*Respect*, seriously, for saving all that at such a young age.

Teaching English is definitely not a way to get rich fast anywhere in China. If you do end up doing it just for the sake of having a visa (until you find a long-term solution such as marriage or starting some small business or something) -- just to let you know, I knew people who would teach all day Saturday and Sunday only, and then have the rest of the week off to enjoy. Others did the same but went to college Monday - Friday (using teaching money to pay their tuition). Just doing it two days a week would be a good way to ensure you can still have time to enjoy just living there.

[Lu]

It sounds to me like what you need it a long holiday. You’re way too young to retire. But the money somewhere safe. Sort out your finances to have a great year or two away. Get a round the world plane ticket. After working so hard for so long chances are you’ll get bored doing nothing.

I'd also suggest this, take a year or two off, see the world, spend time with people dear to you, and then make new plans. Perhaps a job with more reasonable working hours.