Soon-to-be-expats or current expats through foreign assignment, when it comes to personal finances, should be aware of current and long-term impacts of the international relocation.
A. Generally speaking, what are financial factors I should look into?
Immediate expenditures such as the cost of relocation, housing, taxes, transportation, and education should be reviewed carefully. Before making the decision to move abroad, you must consider if the offered financial package would satisfy your financial obligations, maintain your living standard, and continue to meet your financial objective. One important step to take is carefully examining duplicate expenses that would incur at your home location as well as the foreign assignment country (health insurance, rent, and etc.)
As for the long-term financial goals, see if the foreign assignment would affect your retirement benefits at all.
B. How would my expatriate compensation package compare to my current package?
The compensation package offered to an ordinary American employee is generally different than the one offered to an international assignee. The three most common approaches for international assignees are:
- Home-based: Based on the living standard of home country peers
- Host-based: Based on the living standard of host country peers
- Headquarters: Based on the living standard of the organization’s headquarters
Multinational organizations choose a different approach, but generally, an international assignee will receive the home-based compensation. However, with the fluctuating exchange rates, different tax systems, and costs-of-living, it is important to note that the compensation will be inevitably different.
C. Would my foreign assignment affect my equity in the company?
Unless told by the employer, your equity should not be affected; however, equity compensation is taxed differently in other countries when it involves vesting or sale. It is encouraged that you consult with your tax advisor to see how your equity would be affected in your destination country.
D. What about by my health insurance?
To be covered abroad, you may need to apply for extra coverage. Most likely you will continue to contribute to the company’s health insurance and still be covered abroad. For specific health conditions that need extra attention, you are encouraged to speak to the relocation manager to find out the available medical services and even recommended doctors. In some countries, you may even be covered under their state-run health system.
E. How about my retirement plan?
This one heavily depends on the organizations’ retirement plan structure. You may or you may not be able to stay in your current retirement plan during your foreign assignment abroad. In case you can’t stay in the program, you discuss with a financial expert to find out other ways you can continue to contribute to your retirement.