6 Factors to consider prior to planning retirement in Dubai

With life expectancy improving, most of us expect to live a little longer. As a consequence, our retirement savings need to last that much longer. What with dismally low interest rates at a global level, creating a comfortable pension fund is a remote possibility, and our incomes are shrinking more than ever.

While the retirement age was set at 65 several decades ago based on the retirement system devised in Germany, times are changing. The average life expectancy was around 60 to 61 years then, though today the life expectancy has improved to around 76 to 78 years. Here are 6 factors to consider prior to retirement planning in Dubai.

Retiring at 65

Retirement Planning -Omega Insurance

While many would prefer to retire early, say when they are pushing 55 or so, and live a happy retired life. However, in reality, people would probably need to work another 10 years or so. One cannot think of retirement until the age of 65, even then the financial challenges are too daunting.

With no pension fund they can rely on, retirement planning in Dubai is one of the biggest challenges, and the only saving grace is probably the tax-free savings that will certainly come in handy.

If you push your retirement age up to 65, you may be able to accumulate a retirement pot of US$800,000 or more according to some financial calculations by the deVerve Group, Dubai. However, in reality the savings are a meager US$125,000 or so. Hence, retiring at 65 would be an OK option.

Adopt thrifty measures

When you get a fairly large pot on retirement, the natural tendency is to go on a spending spree. However, a bit of prudence and thrift will put you on the right perspective. Remember that with advancing age, you need to put away some money to take care of unforeseen medical expenses.

Although insurance is still a good option, it may not cover all, and premiums can be rather high and cut a hole in your budget. Although living, housing and transportation expenses may go down marginally, healthcare costs can spiral and put you in a spot. Overspending is not an option that you can indulge in. Check all the sources of income you have left may be you invested prudently in mutual funds in your prime and can fall back on it now. The trick lies in starting to save at an early age, say when you cross 35.

Save while you can

The onus for saving for a nest egg lies squarely on your shoulders, and the sooner you start putting away small amounts, the better for you. However, how much you will be able to put away each year will depend on many factors. One factor is your retirement age and duration of retirement.

It also depends on how many years you have left before you can hang up your boots. The earlier you start contributing towards your pension, the more time your investments have to grow into a comfortable nest egg.

The difference between starting to save at 30 and at 40 is that when you are 40, you are likely to have to save double the amount you would have otherwise saved had you started when you were 30.

How much can you save?

Assuming that you start saving at 30, you will need to save around $700 to 800 per month over the next 35 years to create a fund of US$850,000 by the time you retire (at 65) This figure though, increases to more than $2000, if you were to start saving when you are 45.

Most people do not think or worry about retirement in their 30s and imagine that there is forever to think about retirement. During that period, one is bound to have other commitments like mortgage payments on your house, repaying small debts, expenses on educating your children etc.

However, the longer you put away creating a retirement fund, the worse the financial mess you’ll get into.

How about retiring at 75?

What with life expectancy extended and people enjoying good health in their late 60s and early 70s, extending the retirement age up to 75 sounds like it makes good sense. However, you need to be allowed to retain your current job; else you need to look for another one.

Moreover, you should like your job, rather than take it up solely for the sake of supplementing your income. The good news is if you extend your retirement age up to 75, you just may be able to achieve a retirement pension pot of $850,000 or more, which should fetch handsome returns if invested wisely.

Most people realize too late in life that they do not have a nest egg, and are forced to put away retirement until the age of 75, and if good health permits, why not?

Get started right away, if you haven’t already

If you haven’t started saving already for your pension fund, it is high time you started. Most people are rudely awakened to reality when they start calculating the amount of money required to continue living comfortably after retirement.

If you are lucky, the interest rates may just have gone up, and you can get decent returns on your investment. For expats who have settled in Dubai from various parts of the world, pension can be a complex and vexing issue.

It makes sense to consult a financial expert who can guide you on what and how you should go about with your investments. The higher the risk, the better the returns, and if you are prepared to take the risk, you may want to invest in stocks and shares. Else, settle for a bank deposit or a good mutual fund, which can fetch you regular, decent returns after retirement.

Moreover, you need to decide whether you want to retire offshore and explore the options in retirement planning in Dubai, or get back to your homeland and start all over again. The decision is entirely yours, though the financial part of it can be handled by an expert investment adviser.

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