Retirement Planning in UAE: Tips & Strategies

Published on November 29, 2021

Retirement Planning in UAE: Tips & Strategies

4 Strategies to Enjoy Retirement in the UAE

Today’s competitive, expensive and fast-paced world has led many people to dedicate themselves to their professional commitments. While this is a good space to be in – have you taken a step back to plan your retirement in the UAE?

➔ If your answer is a yes, have you implemented any retirement strategies to achieve your goals?

➔ If you answered no, imagine a horizontal scale. We will call it ‘The Scale of Retirement Benefits’.

On the scale’s left side, foreign employers offer pensions and other retirement benefits to their employees. However, on the right, we have the UAE employers who refrain from such generosity.

This means UAE expats are not eligible for retirement benefits from their workspace, making it crucial to start retirement planning at the earliest.

While this might sound ‘unfair’ at first – in reality, it’s not. 2020 hurt the global economy significantly. Many countries, including the developed giants, took financial setbacks that increased pressure on their governments. So, while these countries are assisting their employees with monetary reliefs at present – there may come a time when their pockets might lose affordability to support everybody.

Moreover, UAE has a retirement visa in force – a 5-year renewable residency permit for UAE expats (including their spouse and dependents). However, this visa calls for strict eligibility criteria in the age (55 years and older) and finance aspects. To qualify under the finance criterion, starting early and building up substantial cash and investments is necessary. And, think about it – isn’t it better to live life on your terms?

So here’s presenting four retirement strategies for leading a comfortable life in the UAE:

1. Evaluate Yourself

Before proceeding with retirement planning in the UAE, it’s necessary to take a step back and understand your situation. Often, people apply retirement strategies without understanding their goals. Eventually, they find themselves all over.

Avoid such problems; begin your process by answering these questions:

a. At what age do you wish to retire?
b. Do you want to retire in the UAE or return to your home country?
b. Will you have any dependents during retirement? If yes, how many and to what degree?
c. What are your monthly expenses?
d. Do you have impending wishes, for example, travelling to your dream country?

Understanding and accepting your answers assists with achieving clarity in your thoughts and goals – which, in turn, dictate your retirement strategies in UAE.

2. Earn. Save. Repeat

One of the easiest ways to plan for your retirement starts as early as your first stable job. Keeping aside your everyday expenses, start saving regularly.

Since UAE charges no income tax, park a portion of the ‘extra’ funds in a long-term savings plan.

Think about this:

Suppose you started a job at age 25 (2018), and by the time you celebrate your 28th birthday (2021), you get promoted to the second-to-highest income bracket in your organization.

You wish to retire at 60. So, you start saving monthly from 2021 onwards.

Now, imagine the interest you will earn on 384 months of saving! This compounding effect will increase the value of your savings/retirement fund – allowing you to live your life to the fullest in your golden years!

Apply the 4% Rule

The 4% rule helps you mark a goal for “the amount required to save for your retirement.”

This rule is straightforward: Your fund’s value should be such that it allows you to withdraw 4% of it in the first year of your retirement. For example, your lifestyle calls for spending $120,000/year. Then, your savings should constitute at least $3 million.

However, a November 2021 report marks an interesting suggestion. It suggests that when people prepare their retirement portfolios, their returns will be lower in the long run. For example, today, some people believe a million dollars is enough to sustain retirement. However, in the future, this amount might not be enough to satisfy the retired life. It further adds that people retiring in the next few decades should consider withdrawing only 3.3% of their savings/year (when planning to live for approximately 30 years of retirement).

Thus, I emphasize the need to take the extra step today to level up your future quality of life. What worked for your forefathers might not churn the same impact of results for you. And therefore, it’s ideal to temper your expectations about market returns and then build your portfolio for the long run.

Disclaimer: I suggest using this rule as a starting reference only – the rule’s dynamics change with the inflation rates.

3. Diversify Investments

I always tell my clients that you’re losing the chance to earn big money if you’re not participating in the
investing world.

Given that the UAE is the:

● Hub for accessing global markets for investments
● Has a fixed dollar-dirham exchange rate
● Operates on a generous taxation system

It’s time to use these advantages for pulling up your retirement action plan. First, consult a financial advisor and share your goals with them. Then, move on to investing your money in different asset classes. The diversification spreads out your portfolio’s risk quota and allows you to make the most out of the market movements.

4. Get Critical Illness Policy Add-On

Today, everyone is susceptible to higher stress and lifestyle diseases.

My client, Peter, signed up for a life insurance policy worth $4 million in Dubai as a protective measure. He also added the critical illness cover to his policy. Unfortunately, six months after signing up, he was diagnosed with an illness that required bed rest for eight months.
(Side note: He had an active retirement fund too.)

Since Peter had the critical illness cover, he received a one-time cash benefit in hand that met his hospital bills and other recovery expenses, refraining him to dip into his retirement fund. This financial assistance helped him recover worry-free. However, if he had only taken up the life insurance policy, he would’ve had to deal with big holes in his pocket.

Begin Your Retirement Planning Process in UAE

Planning retirement is like preparing a college fund for your children. The earlier you start, the better it is for you to manage your expenses and reach your goal.

Always remember:

Retirement is a journey that does not begin after you quit work. Instead, it is a process that requires adequate planning, strategy, and effort to live a comfortable lifestyle.

If you’re looking for guidance regarding the best retirement strategies in UAE – book a discovery call with me to explore your options.

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