An Expat Retirement Drawdown Example in Practice

August 2026

Retirement drawdown becomes materially more complicated when your assets, future spending and tax position sit in different countries. This expat retirement drawdown example shows why a withdrawal rate that appears comfortable on a UK-based spreadsheet can become less certain once exchange rates, residency rules and changing expenditure are taken into account.

The figures below are illustrative, not personal advice or a forecast of investment returns. The purpose is to show the decisions an internationally mobile retiree needs to make before setting a regular income from invested capital.

An expat retirement drawdown example with two currencies

Consider James and Helen, both aged 62. They have spent much of their careers in the Gulf and intend to retire to Portugal, while retaining UK citizenship and a mix of UK and offshore assets. Their financial position at retirement is as follows:

• £1,200,000 in an internationally diversified investment portfolio
• £300,000 in cash and short-term bonds
• A combined UK State Pension expected from age 67
• A small defined benefit pension paying £12,000 a year from age 65
• A mortgage-free home in Portugal

Their current lifestyle costs €72,000 a year after tax, including travel to the UK, private healthcare and regular support for family. At an exchange rate of £1 to €1.17, that equates to approximately £61,500. They also plan £15,000 a year for discretionary travel and home improvements during their active retirement years.

Their initial required income from capital is therefore around £76,500 a year. Against investable assets of £1.5 million, this is a 5.1% withdrawal in the first year. Looked at in isolation, that may seem manageable. But it is not yet the number that should drive the plan.

The £300,000 cash and short-term bond reserve is intended to cover roughly four years of planned withdrawals. The remaining £1.2 million is invested for longer-term growth across global equities, high-quality bonds and other appropriate diversifiers. The reserve gives them scope to avoid selling growth assets after a significant market fall, provided their spending remains flexible.

Why the headline withdrawal rate can mislead

A 5.1% starting drawdown rate tells us very little without understanding the source and currency of future income. At 65, James and Helen begin receiving £12,000 from their defined benefit pension. At 67, their combined State Pension adds a further income stream, subject to their individual entitlement and the rules that apply where they live.

If these pensions provide, for example, £32,000 a year in total from age 67, the amount needed from investments falls from £76,500 to £44,500, before allowing for inflation. That changes the long-term pressure on the portfolio considerably.

However, their day-to-day costs are in euros while much of their pension and investment wealth is measured in sterling. If sterling weakens against the euro, their sterling income must buy more expensive euro expenditure. A move from £1 to €1.17 to £1 to €1.05 would make a €72,000 annual core budget equivalent to roughly £68,600 rather than £61,500. This does not mean they should convert everything to euros. It does mean the currency of planned spending must be reflected in the investment and cash strategy.

For a retiree who expects to live in one country permanently, holding a sensible reserve in the local spending currency can reduce short-term uncertainty. For a couple who may later return to the UK or divide their time between countries, a multi-currency approach may be more appropriate. The right answer depends on where liabilities are likely to arise, not simply on the currency in which assets were accumulated.

A practical drawdown sequence

James and Helen decide not to take a fixed, inflation-linked withdrawal regardless of conditions. Instead, they use a planned sequence that separates essential expenditure from discretionary spending.

Their essential annual costs are €55,000, covering housing, food, utilities, insurance, healthcare and core travel. The remaining €17,000 is more flexible. In a strong investment year, they can take the full travel and improvement budget. If markets fall sharply or the euro rises substantially against sterling, they can reduce discretionary expenditure before permanently increasing withdrawals from the portfolio.

For the first three years, they draw their planned £76,500 primarily from the cash and short-duration bond reserve. Their globally diversified portfolio remains invested, though it is reviewed and rebalanced as required. In years when markets perform well, a portion of gains can replenish the reserve. In weak markets, the reserve provides time for the growth allocation to recover rather than forcing sales at depressed values.

This approach does not eliminate investment risk. A prolonged period of poor returns and high inflation can still weaken a plan. It does, however, recognise sequence risk: poor market returns in the early retirement years can cause more damage when withdrawals are being made at the same time.

What happens after a market fall?

Assume the growth portfolio falls by 18% in the first year, while inflation remains elevated. A rigid approach might require James and Helen to sell investments to maintain the full income target, crystallising losses. Their plan instead uses the reserve for the following year and temporarily reduces discretionary spending by £7,500.

Their revised withdrawal from capital might fall to £69,000. That reduction is meaningful, but it does not alter their core standard of living. Once markets recover, withdrawals can be reassessed. The aim is not to react emotionally to every market movement, but to use agreed decision rules before pressure arises.

A useful review framework may include whether the portfolio has fallen by a specified amount, whether withdrawals have exceeded a chosen percentage of assets, and whether exchange-rate movements have increased local-currency spending beyond an agreed limit. The figures should be tailored to the household rather than copied from a generic rule of thumb.

Tax can change the net income requirement

For expatriates, the gross drawdown amount may bear little resemblance to the money available to spend. Tax treatment can differ according to the type of pension, investment wrapper, country of residence, domicile position, local reporting requirements and the relevant double taxation agreement.

A UK pension payment, for instance, may be taxable in the country of residence, the UK, or subject to relief procedures depending on the circumstances. Investment income and gains may receive different treatment from pension income. An offshore bond, direct investment account, ISA, company share scheme or former employer pension cannot be assumed to produce the same tax result simply because each contributes to retirement wealth.

In this example, assume tax and administration costs add £8,000 to the couple's annual funding need. Their gross withdrawal requirement is then £84,500 rather than £76,500. That difference raises the opening drawdown rate to 5.6% on £1.5 million. Proper tax planning may reduce avoidable leakage, but it needs to be coordinated with investment planning rather than addressed after withdrawals begin.

Residency is especially important around the retirement transition. Moving country shortly before taking a pension commencement lump sum, selling an investment portfolio or restructuring offshore holdings can have consequences that are difficult to reverse. Advice should be obtained before transactions are made, not after the tax year has closed.

Building a plan that can adapt

A sound retirement drawdown plan for an expat should be reviewed at least annually, and sooner after a move of country, major currency shift, bereavement, sale of a business or change in family circumstances. The review should test actual spending against the plan, the currency split of assets and liabilities, portfolio performance, tax residency and the sustainability of future withdrawals.

It should also address longevity. A healthy couple retiring in their early sixties may need their capital to support several decades of spending. That is why holding excessive cash indefinitely can create a different risk: purchasing power may erode if long-term growth is insufficient. The balance between accessible reserves and invested assets must reflect both short-term security and the need for capital to work over time.

For some expatriates, a phased approach is preferable. They may use part-time consulting income in the first years of retirement, defer larger discretionary spending until pension income begins, or retain a property as a potential later-life asset. Others value certainty more highly and may choose to secure a greater proportion of essential income through guaranteed sources. Neither approach is universally better.

The value of this expat retirement drawdown example is not the precise withdrawal figure. It is the recognition that retirement income is a cross-border planning exercise involving investments, currencies, taxation, pensions and lifestyle choices. A carefully structured plan gives you clearer choices when markets, exchange rates or residency rules change - and more confidence that your wealth can continue to support the life you intend to lead.