Longer life expectancies mean that retirement can truly be a time for new adventures. But do you have the wherewithal to fulfill those lifelong dreams of world cruises and global travel – or even just to meet your healthcare expenses comfortably? Sadly, Many UAE expats have no financial retirement plans to fund their silver years. Retirement planning while working in the UAE is essential if you want to enjoy life in comfort after you’ve stopped working. Given the way investments grow over time, starting early in life is the best way to feather your retirement nest, but it’s never too late to begin. From buying a home to establishing a source of regular income, answering some basic questions can help you get started with a retirement investment plan, while some decisive action will put that dream within reach. The following retirement planning tips will help you get started.
How much do you need to save for retirement?
How long is a piece of string? If you don’t know the answer, chances are you won’t know how much money you need in retirement. The first question to ask during a retirement planning process is what sort of lifestyle you envision for yourself.
Ask yourself the following questions when retirement planning in the UAE:
- Do you want to retire in the UAE or elsewhere?
- Do you already have a home to retire to?
- What sort of retirement visa decisions do you need to make?
- What age do you want to retire at?
- What are your monthly expenses likely to be?
- What luxuries would you want to enjoy?
Basic calculations can help establish your day-to-day expenses as a retiree. Then factor in inflation. Figure out what your monthly expenses would be if you retired today and calculate what that works out to at a typical inflation rate of 2.5% to 4% per year.
Alternatively, consult an online retirement planning calculator.
How to start saving for your retirement?
The most important part of creating a retirement fund is to begin setting aside a portion of your income each month for investment. Low bank interest rates at present, combined with inflation mean that your savings won’t buy the same goods and services in the future as they do today. There are numerous investment options available to those making retirement plans in the UAE. From equities to systematic investment plans (SIPs) in mutual funds and property investments, each asset class carries its own rewards and risks.
Expats in the UAE don’t qualify for pensions yet – although this law could change. However, many companies have corporate retirement accounts and will match employee contributions. If this applies to you, make the most of this opportunity.
Things to keep in mind when retirement planning in the UAE
Fluidity and flexibility are essential to any future planning – because life gets in the way. Not only is it important to diversify your investments, but you will also need to tweak your plans as you go along. Don’t hesitate to seek expert help – you can’t be a master of everything.
Keep the following strategies in mind when making retirement plans in the UAE:
1. Start saving for your retirement as soon as possible
Classic advice holds that the best time to start saving for your retirement was 10 years ago. The second-best time is today. That means that getting started on your savings and investment journey as early as possible to maximize returns over time and to take advantage of the effect of compound interest.
Your priorities will depend on the age when you begin investing for your retirement. When you’re younger, for example, you have more time to pay off a mortgage, so you can potentially afford a larger home.
No matter what your age, however, it’s never too late to start saving.
2. Treat retirement savings as an expense
A lot of people save for their retirement after paying their bills. As a result, there may not be anything left to set aside, and the decision gets postponed to a future payday. Too many postponements could lead to no retirement plan at all.
On the other hand, when you set aside retirement funds first, you’re setting up a pathway to the future you want. With a mental shift towards paying yourself first, you will reach your retirement goals faster. And future you will be thankful.
3. Spread your retirement assets
Financial advisors say you shouldn’t put all your eggs in one basket for a reason. Spreading your retirement portfolio across a few different investments helps reduce your risk. Investing always involves risk, but diversification ensures that if one investment goes under, the others continue to work in your favor.
The best retirement plans for UAE residents should include a mix of the different asset classes, such as:
- Savings accounts
- Fixed deposits
- Onshore and offshore investment schemes
- Equities – such as via SIPs
- Debt investments
4. Create a life budget
Budgeting is an essential part of life. It allows you to live within your means and offers peace of mind. A budget typically matches your income against your outgoings, but many expats forget to factor in savings for their retirement alongside everyday expenses. Setting aside this money regularly helps you achieve your goals.
There are several budgeting apps available for smartphone users, but you could do the job equally well with an Excel or Google spreadsheet. Thinking about the long term – we’re talking 30 or 40 years – will help you make strategic decisions about your life choices, which will in turn will make retirement planning easier.
5. Adapt and adjust your retirement plans
Retirement planning is a continuous journey that requires adjustment along the way. Just as your situation and desires change as you grow older, so too should your retirement planning strategies evolve alongside.
When you’re in your twenties and thirties, you can afford to have a riskier investment profile – because you will have more opportunities to recoup any potential loss of income. As you get closer to retiring, you’ll naturally want to focus on capital preservation and may want to consider safer asset classes with a lower risk of losing your money.
6. Get help from experts when retirement planning
If you’re the kind of person who shies away from financial decisions because you don’t think you know enough, consider seeking expert advice. An expert can offer advice on broad economic trends, different asset classes and which investments match your goals. When making investment decisions, remember to ask any advisors what commissions they may receive as well as what fees you will need to pay on any investments you make.
Start by reaching out to your bank. Citibank has several products worth considering:
- Lifelong Protection is a flexible life insurance plan that bridges the financial gaps arising from unfortunate events. You can customize the premium paying term of 7 years and above, with insurance plan benefits extending up to age 95. The plan offers the option to invest in a range of funds and helps build policy cash value from 3rd year onwards. Optional benefits include coverage for critical illness, permanent total disability, accidental death, hospitalization, long term care and family income.
- Invest Plus and Wealth Accumulation Plan are other products worth considering to help build up a retirement corpus. You can customize your portfolio currency based on your risk appetite and market conditions. The plans offer access to your capital by allowing regular withdrawals or partial surrenders, with the flexibility to add optional benefits and premium increments.
7. You are not retiring alone
When making retirement plans, consider the people who depend on you, such as your spouse or other family members. Obviously, you need to think about planning for these dependents and for their needs – both in your lifetime and afterwards.
Consider an insurance plan that ensures they can pay their everyday expenses in the event you suffer a serious injury, a critical illness, or pass away unexpectedly. Plans on the market today offer both investment and insurance options. Many advisors suggest separating the two for maximum financial gain, but others believe a joint plan serves your needs equally well. Do your homework before making a decision.
If you are an expat in the UAE, you will need to consult a lawyer and create a notarized, registered will so that your assets and other investments are distributed in accordance with your wishes in the event of your death.
The pointers above will help you get started on your retirement planning journey – whatever your age. While younger people benefit from long-term portfolio growth, everyone can benefit from retirement planning, whatever their age. Even a small start is better than no start at all.
How can Citi help you plan for your retirement?
Retirement planning can be complex and confusing – but it’s all right to ask for advice. Citibank helps UAE residents from all walks of life to set life goals with its wealth management service. Citigold offers personalized advice on creating and protecting your wealth in line with your approach to risk. A team of advisors, including a wealth management professional, an insurance specialist and a treasury expert, work with each Citigold client to tap into wealth building opportunities in order to help establish a retirement corpus.
Advice covers asset classes such as:
- foreign exchange, and,
- real estate.
Regular and in-depth portfolio reviews offer a way to keep track of your progress and adjust your investments along the way.
Reach out to Citigold for a holistic approach to wealth management and benefit from a cash reward of up to AED5,750.
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