Careers: Castles in Spain

I'm the kind of person that loves to read the economic section of the newspaper and dream about how to invest the millions I don't have. So about every other day, as I dream and read, I see an article on the importance of planning for retirement. After I've read these articles from top to bottom, I invariably realize that they're written with someone else in mind--someone with lots of money left over each year after looking after basic expenses, and someone who isn't country-hopping.

In other words, they aren't written for expatriate English teachers. After all, teaching English in Spain is something you're supposed to outgrow in a year or two, at which time you come home, affix a bronze plaque to the stick you used to hike across the Pyrenees and hang it on the wall, and get a "real" job selling widgets.

Social Security payments are bound to one country, and most private pension plans such as the American 401k and IRA (independent retirement account) aren't very helpful for nonresidents either. A 401k is an employer-based pension plan, and few American TEFL teachers overseas are employed by American companies. As soon as your tax home becomes someplace other than the U.S., the IRA is no longer a good investment because you don't pay any tax in the U.S. and can take no deductions for the money invested. If no tax deductions are available, there are investments with higher yields than IRAs. A pension scheme for TEFLers would need to be international and movable; the retirement options that most people depend on are neither.

Here in Spain, Social Security provides a pension if the worker has paid into the system for at least 15 years and retires in Spain. There is a bilateral agreement with the United States whereby a taxpayer who has moved around and doesn't have enough credits in the country where he retires receives credits from the other country to make it up to a minimum pension (but only to a minimum). The Spanish government is promoting private pension plans, but these aren't appropriate for an expatriate who, however well-installed in Spain, may one day find himself back in his country of birth. Just as with an American IRA, a private pension plan in Spain is only worthwhile if one is a resident in the country because much of its profitability is based on the fact that contributions can be deducted from income tax.

I'm certainly not an investment professional, but aside from whatever the Social Security administrations want to give us, the only route I see for TEFLers is to open an old-fashioned savings account or put money into investment funds, stocks, or real estate. On the $9000 a year salaries that private language school teachers in Spain earn in a good year, that is next to impossible, and on the $20-30,000 a year salaries that state-sector teachers or people with a good language school of their own earn, it's hard.