How to save for Retirement as a French Digital Nomad?

Some people think that digital nomads lead a bohemian life. This may be the case for some of us who work just enough to lead a comfortable life in Southeast Asia without worrying too much about tomorrow

This isn’t our case. While we are slowly approaching our forties, we are thinking a little about what we will earn in retirement to ensure our old age.

We carry out several actions in parallel to prepare all this knowing that we have the following constraints

• Since we only stay an average of one month per year in France, everything must be managed remotely
• As a “SDF” without residence in France, our debt capacity is nil, no bank will follow us
• We want to have peace of mind, it should take us as little time as possible
• We aren’t gamblers, our investments must have a low to medium level of risk

Disclaimer, I am neither a financial expert nor a wealth advisor, this article only presents what we undertake but I do not pretend to think that it is advice to be followed. If you follow them, it will be at your own risk. If you yourself are a specialist and you have advice to give me, I’ll take it 🙂

Pension contributions

Even if our lifestyle is atypical, our company is based in France and we are classic employees of it. Like everyone else, we therefore contribute for retirement

However, we aren’t naïve, pension schemes are reformed every 3 to 5 years on average and the trend is towards longer contribution periods and reduced pensions. Given the evolution of the French demographics there is little chance that this will change in the coming decades.

So we consider that we have to manage by ourselves, the pension that they will be willing to pay us in 40 years will be a bonus (which will allow us to go on a trip? 😄)

A real estate purchase

Just before leaving on a world tour, while we had a “golden” dossier to present to the banks (two permanent contracts with decent salaries and a substantial contribution), we took advantage of the last few months we had left with this situation to go into debt and buy an apartment in La Rochelle under the Malraux law

Three advantages to this

• We were able to go into debt just before leaving on a world tour, a few months before our file became inadmissible with the banks
• The Malraux law (which consists in financing works to rehabilitate a property) is very interesting from a tax exemption viewpoint. As a result, we didn’t pay taxes for 3 years.
• Regarding rehabilitation, our housing is “like new” and benefits from guarantees. A priori, we should not have heavy works to manage and finance before many years

The apartment was delivered to us a few months after our return from the first round-the-world trip and we put it directly for rent (anyway we have no choice, having benefited from tax advantages, we are obliged to rent it for at least 9 years)

To meet the objective of having the minimum of things to manage and that distance isn’t a problem, it was entrusted to a rental management agency and subscribed to an unpaid rent insurance

As a result, nothing is taken care of and the rent falls every month!

As an example, we recently received a complaint from the syndic (the daughter of our landlord organized a party in her absence, it degenerated and there was damage to the common areas…)

We turned the baby over to the agency handling the problem

In the end, managing this apartment only takes me 10 minutes a month (the time to check that I have received the rent)

Of course, all this has a cost, about 10% of the rent, but that’s not a problem. We have made sure that the amount of the rent covers the repayment of the loan, the cost of the agency and the insurance

The apartment is self-financing and will start making money in 20 years

For our retirement, we can decide to live there or to receive the rent as a retirement supplement

Anh told more about the purchase of this apartment in this article.

For those who are interested, our rental management agency is simply called Ma Gestion Locative and we are very happy about it for the moment.

Real estate investment via SCPIs

Even when you have an atypical profile and are unable to borrow from banks, it is possible to invest in real estate with much lower initial stakes (from a few hundred euros) via SCPIs

SCPIs are real estate investment companies

The principle: you buy units of an SCPI and the management company of the SCPI will manage your subscriptions and those of your “associates”

The management company will then purchase assets and manage them. These are generally professional properties (offices, stores, warehouses, hotels, shopping centers, …)

Depending on the SCPIs, you will receive rents every month or every quarter and you can expect, depending on the SCPIs, between 3 and 6% annual return

Depending on the evolution of the price of real estate, you can also expect your shares to increase in value and then sell them later with a capital gain

There are several advantages to investing in SCPIs

• You can invest with very modest amounts
• You have absolutely nothing to manage, that’s the role of the management company
• They are professionals who manage investments, they have less risk of making mistakes than you, non-specialist, who buy a good.
• Diversification: you do not depend on a single apartment that may not find a tenant, suffer a fire, … The SCPIs own several properties in different fields of activity and various geographical areas

One of the drawbacks is that we totally lose the “sentimental” side that we can have when we buy a “hard” good. In fact, we sometimes talk about “paper real estate” when we talk about SCPIs. For my part, I don’t see this as a disadvantage

Other disadvantages :

• There are relatively high fees (around 10%) which cover the costs of property searches, notary fees, …
• Contrary to the stock exchange, SCPIs are less “liquid”, i.e. you cannot resell them in 3 clicks. It can take a few weeks or even a few months of delay.

These disadvantages make SCPIs long-term investments (a minimum of 8 years is generally recommended).

There are many SCPIs. For my part, I really like the SCPI Corum which allows

• To set up a savings plan. For example, we decide to invest 100 € every month
• To reinvest all or part of the rents. We no longer collect the rents but we increase our number of shares and thus our assets.

Some SCPIs are specialized in specific fields, for example the SCPI Pierval Santé which invests in retirement homes, EHPADs etc. in France and Germany. It is also a reputable SCPI.

Shares on the stock market

Over the long term, the most profitable investment remains the purchase of shares on the stock market

The scholarship is considered risky for two reasons

• We all have in mind the big falls linked to world recessions or stock market crashes
• If you bet on the “wrong horse”, you can indeed lose everything. Those who invested all their savings in Eurotunnel or Euro Disney a few years ago are biting their fingers

But in the end, if we really bet on the long term (retirement perspective) and diversify intelligently, there is a good chance that the stock market will prove to be a (very) profitable lever

I was very inspired by the book (and blog) l’Epargnant 3.0

The author presents a common-sense investment method of “don’t make decisions”

He advises to invest regularly in ETFs

ETFs (or trackers) are funds that replicate indices

For example, there is an ETF that replicates the CAC 40 index. Thus, by buying one share of the CAC 40 ETF, it is as if you were buying one share of each company that makes up the CAC 40. Your ETF share will therefore track the same performance as the CAC 40 index

However, the author does not advise investing in a CAC 40 ETF that he considers poorly diversified (one invests only in France and on “only” 40 companies)

He advises to invest in a “World” ETF that invests in the largest companies around the world

For example, the ETF “Lyxor MSCI World” invests in 233 companies in some 40 countries

Thus, by buying a share of this ETF (which is worth €190 at the time of writing), you invest in “a little” of these 233 companies, including Google, Amazon, Apple, Danone, Total, … One cannot say that these are particularly risky investments..

You thus benefit from a great diversification, both sectorally and geographically

By investing in an ETF, you hope that the ETF will pay you dividends and that the price of the unit will rise in line with the price of the shares of the company that makes it up

To invest in the stock market, you must open an account with a broker.

I use Boursorama (click on the link to benefit from my sponsorship and receive 80 € when you open your account) for personal use and Saxo Banque for professional use. The brokers take a fee for each transaction but it is very far from the fees of a real estate transaction. We are talking about more or less 1% for each operation.

I have decided to invest a little bit every month on ETFs, not personally but with our company. It’s a little bit the same since our company belongs to us 100% but it allows us to invest a little bit more because the amounts have not been reduced yet by contributions and taxes, it will be for later ^^.

PEE / PERCO, Incentives and participation

If you’ve ever worked in a large company, you’ve probably heard these barbaric words: PEE, PERCO, Interests and Participation.

The PEE and PERCO are blocked employee savings plans

• 5 years for the EEP
• Until retirement for PERCO

The money available on these plans is invested in diversified funds. It is possible to choose different levels of risk: prudent, balanced, dynamic, ..

These plans can be fed in different ways

• Via a voluntary payment by the employee
• Via the sums paid to you by the company as a profit-sharing scheme
• Via the amounts paid to you by the company as profit-sharing (attainment of objectives)

What is particularly interesting is that :

• The amounts paid out on the PEE and PERCO aren’t subject to much tax
• The company can decide to “top up” the amounts that are paid, up to 300%.

Few small companies are implementing these measures because they have the connotation of “big business”. However, they can be set up as soon as the company has an employee.

We set it up for both of us and we will, little by little, build up a little nest egg for our retirement

When we retire, we may decide to either receive the full amount available. Or to receive it in the form of an annual pension

To set up this system, you can call upon your bank or a specialized actor. For my part, I called on Epsens, which provided good advice and had the lowest fees

All this takes a little time to set up, they are a bit complex mechanics and require a bit of paperwork

Now that it’s in place, it takes me about half a day a year when I have to fill out the paperwork and make the transfers to feed the PEE and PERCO

Luxury Items

If Anh believes in it, but I don’t believe in it too much, we’ll see what it will be like in 20 years time. Anh bought luxury products (Hermès, Dior) to resell to collectors in about ten / twenty years. According to her, the price of new items from luxury houses is increasing much faster than inflation. By reselling them 20 years later, even on second hand, she will recover at least the same amount as when she bought them + inflation and even make a small profit.

Conclusion

To prepare for retirement, the two key words are anticipation (if you worry about it 5 years before retiring, it’s a bit late) and diversification (don’t put all your eggs in the same basket so you don’t lose everything in case of an accident).

On our side we :

• Contributing to the pension system and hoping for a small pension
• Have bought an apartment whose rent finances the monthly loan repayments.
• We regularly invest in SCPIs that will allow us to benefit from rents.
• Regularly invest in shares on the stock market, we hope that it will bring us dividends and that our shares will increase in value.
• Take advantage of the advantageous taxation of the PEE and PERCO to set up an additional savings plan.

Apart from the purchase of the apartment, all these investments are accessible with very small starting bets. It is possible to start saving with only a few dozen euros per month. I advise you to get started as soon as possible.

With these different devices, we are slowly building our retirement. If you have any additional advice, I’ll take it 🙂