There are basically two types of plans, defined benefit and defined contribution plans.
Defined benefit plans are pension plans and are traditionally sponsored by large corporations that have been around since the days pensions were in fashion. Upon retirement, you will receive a “defined benefit” based upon years of service, salary at the time of retirement, etc. This doesn’t apply to people in TW because defined benefit plans are more of an old school approach and are typically provided by older companies.
Most new companies have defined contribution plans, that is, retirement plans that are based on their own cash contributions. You make your own contributions and you also control where the money is invested. In the US, employer plans have many names such as 401(k), 403(b), and then there are accounts like IRAs and Roth IRAs that have nothing to do with your employers, but these retirement plans are basically the same as your standard run-of-the-mill stock brokerage trading account. The only difference is the fact that these retirement plans are tax deferred (no taxes until you withdraw), whereas your typical brokerage account is not tax deferred. But for most people living in TW teaching English, you probably don’t even pay taxes to your home country (minimum income for a US citizen is something like US$70K before you’re required to pay US taxes) and TW taxes are so low that there isn’t much of a deferred tax benefit to retirement plans. But retirement plans have early withdrawal penalties, so they are less flexible.
So to cut through all the hocus pocus, if you want to plan for retirement and you’re living in TW, you’re probably better off just opening a stock brokerage account and buying some mutual funds. If you’re incredibly incredibly risk averse and don’t mind losing money in the long run to get that sense of security, then an insurance company plan might work for you. But generally speaking, anything you buy from an insurance company will probably be a losing proposition from an investment perspective, and you’re probably much better off (especially if you are not near retirement age) to invest in mutual funds. You’ll actually make money instead of losing money. Bonds are usually only for people close to retirement age, mutual funds are best for young people.
Personally, I like to have a nice diversified mix for my retirement funds. In the past, I have been known to put 25% in an international fund, 25% in a small cap US fund, 25% in an aggressive growth US fund, and 25% in a standard US fund.
In terms of recommended US brokerages to open an account, Scottrade has no minimum balance and does not charge for most mutual fund purchases (unless the fund itself charges a fee). I also recommend opening up a brokerage account with a large mutual fund company manager like Fidelity or Vanguard because their brokerages typically do not charge brokerage fees for any funds that they manage. And they manage so many funds that there’s plenty to choose from. Some brokerages have minimum balances, so watch out, but I know Fidelity for example will waive its minimum balance requirement if you receive all statements electronically.
