Considering retiring abroad? Investing offshore gives you options

South Africans have become increasingly comfortable with investing offshore in recent years. Exchange controls and limits on offshore allowances have steadily relaxed, and new products and platforms have made offshore exposure easier and more affordable than ever.

South Africans have a discretionary yearly allowance of R1 million that lets you invest offshore. Plus, if you apply for a tax clearance certificate, you can move even more capital offshore. Any offshore investment forms part of this allowance.

Why invest offshore for retirement?

In the context of saving for retirement, offshore investing is a compelling proposition. But your decision on how much of your savings should be based offshore must be based on where and how you're planning to spend your retirement.

For example, if you travel a lot or have family overseas, or you plan to retire in another country, it might be a smart idea to base a part of your retirement savings offshore. You'll have access to that money when and where you need it, and won't need to transfer it back and forth from South Africa.

1. Diversify your portfolio and access new opportunities

Global investing offers many benefits, such as a far bigger range of investment options. The Johannesburg Stock Exchange (JSE) has fewer than 500 listed companies, compared with the tens of thousands available globally. Plus, there are sectors and markets that are simply not available on our local market, like social networking, e-commerce, motor manufacturers or biotechnology.

As a local investor, even if your portfolio is correctly diversified, you're likely locked into funds and annuities that are rand-based. This carries with it an inherent level of risk. Investing offshore in a hard currency (like dollars) allows for true diversification and can help to protect against currency weakness.

2. Invest in hard currency

When you invest using your offshore investment allowance, your money is exchanged to foreign currency (unless you already have money in a foreign bank account). Ensuring that you have a retirement investment offshore will diversify your portfolio further.

If you're worried about how to make the most of the exchange rate - as long as you're investing for the long term, there's no need. By contributing regularly to an offshore fund, your currency conversion rates will average out over time.

This means that you'll be able to ride out currency fluctuations and you won't have a scenario where you move a large chunk of money offshore at a set rate, with the risk of the rand strengthening from that position. This can be done through Discovery who uniquely offer the market's only monthly offshore investment. Innovations like Discovery's world-first exchange-rate enhancer can also help ensure you get a good rate, no matter when you invest.

When can I access my global investment?

Your offshore investment will stay in the investment until you withdraw it. When you do, the proceeds can be paid into a foreign bank account. The advantage of this is that you're not subject to any further exchange controls.

Discovery's lump-sum Global Endowment, for example, allows you to invest globally below the prevailing exchange rate, which means you get more out of your investment. Benefits include effortless tax administration, significant estate planning advantages, and access to your investment when you need it.

Offshore investment can be a powerful long-term savings tool, but there's a lot you need to know before you start. To help you understand it better, check this comprehensive and insightful offshore investment info hub. For tailored guidance, consult a qualified financial advisor who understands your retirement needs.

This article is not financial advice. Please consult with a financial adviser for financial advice.