3 irrational retirement planning misconceptions you must avoid!

According to The Second World Happiness Report, more than half of UAE employees are worried that they will not be able to retire with an adequate income.

This means they either have to postpone their retirement (Forever in some cases) or compromise on their lifestyle - leading to an unhappy retirement.

Retirement Savings In Dubai

A majority of expats in the UAE, fail to save or save enough for their retirement due to the following three irrational misconceptions;

I have other priorities!

When young people think about retirement as something which will happen in many years or decades, and so they comfortably push it down on the list of priorities.

While they are busy addressing other priorities like Vacations, Debt Pay Off, Children's Higher Education, and Property Investment, they lose many fruitful years or decades in some cases.

They find themselves with very little or no retirement savings, usually in their late forties or early fifties, and then they start to worry.

I am not saying that you must not focus on other goals; I am just saying that you should not ignore retirement savings.

A Holistic Financial Plan and an efficient financial advisor can help you see the larger picture and break it down into smaller goals making it easier to focus and work on them.

Also, a regular review of your financial plan helps you rearrange your plans in light of changing life and economic situations.

I’ll continue to work during my retirement.

What if you are unable to work due to critical illness or disability? Then how would you manage to earn?

People are now living longer lives than ever before, thanks to medical advancements. The long lives we are currently bestowed with may not be as healthy as we would expect, given our food habits, sedentary lifestyle, and stress.

The more years you spend in retirement, the higher would be the need for retirement savings. So it is necessary to plan and save for retirement as early as possible to be able to handle unexpected early retirement due to health or other reasons.

About 46% of U.S. workers retire before their target age, according to the 2016 Retirement Confidence Survey from the Employee Benefit Research Institute. Of those, 60 percent retire early because of health or disability issues; the rest are affected by Restructuring and downsizing.

The rapid development of AI and Robotic technologies have rendered many positions obsolete and are threatening to replace more and more jobs in the future.

I would need much less to retire.

This is one misconception I hear from people quite often as an excuse to delay or save far too little for their retirement. They usually fail to understand the impact inflation could have on their savings and income during retirement.

Inflation is the least understood but the most potential financial risk when it comes to saving for long-term goals like retirement.

A rule of thumb often quoted is that retirees will need about 70% to 80% of their pre-retirement income to maintain their standard of living.

A luxury, once enjoyed, becomes a necessity. If you have lived in a three-bedroom villa in Springs for more than 20 years, it would be challenging for you to move to a one-bedroom apartment in Ajman or Fujairah.

If you have driven a Mercedes or a Beamer all your life, then it would be very difficult for you to drive a Yaris or a Corolla during retirement, and it may not fit your social profile.

While you can deny yourself all luxuries, but can you compromise on proper medical care?

In light of the above, think and act now, start saving for your retirement, or keep uncomfortably working during retirement!

Always remember, "There is only one thing worse than being old and lonely, and that is being old, lonely, and “broke”.

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