How to Plan a Retirement in the UAE?

Retirement planning is planning for a save future when you need it the most. If planned well, it allows you to have a life that you always dreamed of along with dealing with your finances in the most judicious manner. It helps determine post-retirement income goals and the actions required to achieve those goals. 

The process of retirement planning includes:

• Sizing up expenses
• Identifying sources of income
• Implementing a savings program
• Managing assets and risk

The best part about planning retirement in the UAE is that you also get workplace-sponsored retirement plans that you can rely on. 

Why is Retirement Planning Important?

As long as you are earning, it is easy to pay for your expenses and daily needs. But what about the time after you will get retired? You need to have enough funds set aside to meet your financial requirements and maintain a good lifestyle.

Here are a few more reasons why you need to plan your retirement.

• To Pay for Daily Living Expenses

Our income gets discontinued as soon as we get retired, but it is not the case with our daily living requirements. They stay the same. Without enough savings, the absence of monthly income can become a nightmare. Retirement planning helps you avoid this nightmare from becoming a reality. Not everyone gets gratuity or pension post retirement, and even for those who get it, the amount is not sufficient to cover all the expenses. Good retirement planning ensures that none of your family members’ standard of living gets compromised post retirement.

• To Deal with Uncertainties

Life is uncertain and can come with a lot of unexpected adverse surprises. Some situations have the potential of creating a financial disorder in your life. These events include natural disasters, financial problems of family members, losing loved ones, etc. Planning a retirement while keeping such circumstances in mind and having sufficient contingency funds can always help you deal with the challenges in a better way.

• To Cover Medical Expenses

With increasing age, our health issues and medical emergencies also increase. Sometimes medical insurance policies cover all the medical expenses. But if not, we all know such expenses have the potential of creating huge holes in our pockets. Retirement planning helps us deal with substantial medical expenses, ensuring that we get quality treatment in the later years of life.

• To Fight Inflation

Retirement planning gives you the potential to fight inflation and saves your purchasing power from being rendered. There has been a continuous rise in the price of products and services from the past few years, and there is a possibility that it will keep rising until you reach the retirement age. You may have to pay more for travel, grocery, accommodation and other daily needs in the future. A sound retirement plan will help you establish an adequate retirement corpus, ensuring that you have enough funds to pay for your needs.

• To Meet Your Retirement Goals

You plan your retirement to achieve certain goals in your retirement years. Some people plan to travel while some take up hobbies they always wanted to pursue. However, if you fail to save for these retirement goals, they will not become a reality post your retirement. Therefore, you must have a strong retirement plan that helps you take the steps needed to fulfil your dreams and achieve your pre-determined goals. 

How Must You Approach Retirement Planning?

Most people fail in planning a successful retirement and the primary reason behind this is that they start late. They do not get enough time to plan their investments or save for post-retirement years. 

Most of the time, individuals are unable to make a requisite amount of contribution to their retirement fund and set aside only a part of it. As a result, they need to postpone their investment plans, which is not the right approach. 

The correct course of action would be starting with what you have, even if you are running short of funds. You can make up for the remaining amount at a later stage. If, on the other hand, you will wait for the right opportunity, it might be too late by the time you would have enough funds to start with. 

Another reason for a retirement plan not working is spending a lot in maintaining the current lifestyle, entertainment and shopping expenses, leaving a small part of income to invest in the retirement plan. 

While it is essential to take care of present needs, future needs can’t be ignored. One must learn to maintain a balance between the two.

Perhaps, the thought of growing old brings a certain degree of discomfort for individuals and discourages them from planning their retirement. However, such an outlook needs to be changed. People must accept the fact that retirement is an eventuality, and they need to be adequately prepared for it.

Keep reading to learn a few steps for being prepared and leading to a successful retirement. 

Steps to a Perfect Retirement Planning

Here are a few simple steps to help you create an excellent plan for post-retirement years. 

1. Determine Your Retirement Age

The usual retirement age in the UAE is 60 years. However, it may vary from person to person. Some people wish to go beyond 60 years, while some plan to retire at 55 years. It is all a matter of choice. You must know at what age you will seek retirement as your monthly income can stop or be considerably reduced effective that day. So, as soon as you retire, you will depend on your savings and investments to meet your financial needs. 

The time you have between today and your retirement day is the time left for you to come up with a sound retirement plan. For example, if you are 30 and are planning to retire at the age of 55, you have 25 years left to plan for the post-retirement years of your life. How you will live after your retirement depends upon the investments you make today. 

2. Start Early to Make It Work

Make sure you start your retirement planning as soon as possible. With several years in hand, you have enough time to cover the losses and choose high-risk investment options to make a considerable amount of profits.

If you are not confident enough with investing, you can also begin with opening a savings bank account and start saving monthly. No matter which bank account you choose to open or what type of investment option you go for, you must consider starting early. By doing this, saving becomes your lifelong habit and helps in creating enough funds by the time you retire. The time in your hand will help you gain expertise in different investment options. 

3. Discover Your Retirement Corpus

Retirement Corpus is an amount that you need to maintain your lifestyle and meet your financial expenses in your retirement years. To determine your retirement corpus, you must first evaluate your current expenses by listing down expenses for different categories like household, travel, medical, entertainment, monthly EMIs, child’s education and many others. This helps you estimate how much you would need to meet all your financial needs after retiring. 

You can also use online retirement calculators provided by financial institutions offering retirement investment plans. Do not forget to include the inflation factor when calculating the estimated amount.

4. Calculate Your Net Worth

Your net worth is the value of the assets that you own after subtracting your liabilities. Analysing the amount you have in your hands helps you better understand your current financial condition.

Your assets include:

• Real-estate assets including your home and other rental properties
• Cash in hand including your fixed deposits, funds in your bank accounts, treasury bills, cash deposits and other cash equivalents
• Investments like stocks, ETFs and mutual funds
• Personal properties such as boats, vehicles, jewellery, collectables and household furnishings

Your liabilities include debts like:

• personal loans
• credit card bills
• Car loans
• Mortgages
• Medical bills
• Home loans
• Student loans

You must evaluate your net worth and the future value of your assets once a year. This helps you have a clear understanding of what you have in hand and head in the right financial direction. With a clear picture of your finances in mind, you can stay on track in fulfilling your retirement goals.

5. Cut Down on Unnecessary Expenses

If you are unable to set aside the requisite amount for your retirement plan, cut down on unnecessary expenses. This helps you have control over your finances and contribute as and when required. Some of the avoidable expenses include your weekly dine-out, impulsive purchases, entertainment, foreign vacation and much more. Cutting down on these expenses can help you save more and reach closer to your target retirement corpus.

6. Create a Retirement Portfolio

Create a diversified investment portfolio based on your current age and the amount of risk you can afford to take. You can get in touch with our financial experts to come up with a suitable retirement plan. Our representatives take you through all the available investment options and help you shortlist the ones that cater to your financial needs. 

Most banks and other financial institutions in the UAE offer attractive retirement investment options for individuals. Let us go ahead and check out the popular investment options for sound retirement planning.

• Bonds: A financial instrument to lend money to an issuer and earn attractive interest rates with their future face value.
• Annuities: The insurance plans for the policyholders to help them create a source of annual, quarterly, monthly or lump-sum income during retirement.
• Stocks: Equities that represent the ownership in the organisation that issues them. 
• Mutual Funds: The pool for collecting funds from investors to invest in securities like shares, stocks, bonds and other financial instruments up for sale.
• Fixed Deposits: Deposits made by investors for a fixed/flexible term to earn a reasonable interest.
• Cash Investments: The investors can also lend cash in exchange for attractive interest rates.
• Bank Accounts: To help accountholders earn interest on the savings.
• Exchange-Traded Funds: Stock investment options to deal in commodities, indexes, etc.

Conclusion

Just creating a retirement plan is not all that you need to do. You need to monitor it on a regular basis to make sure that you are reaching closer to your retirement goals. Also, you need to keep track of the changing market scenarios and their effects on your retirement investment plan. 

At Policy Bazaar, we always recommend you buy a term insurance plan to secure your post-retirement years. These insurance plans need you to pay monthly or annual premiums based on your financial needs and, in exchange, provide monthly, quarterly or annual income in your retirement years. Get in touch with us anytime to know more about term insurance plans.