Retirement Savings in Dubai - Are you on the right track?

Journey To Your Retirement

The road leading to retirement can be challenging with speed bumps, potholes and many diversions, distracting you from the actual goal.

Be assured that, with adequate planning and disciplined investing, it is certainly possible to stay on the right track.

The Road to Retirement - Are you on the right track?

The 5 major factors, which challenge and distract individuals from saving for retirement are;

Factor No 1 - Children's Education

Don't get me wrong here, I am just asking you to put your oxygen mask first.

I know and agree; that as parents, we have an enormous, non-negotiable, moral and emotional responsibility of providing the best education for our children. Still, it is equally essential to be self-sufficient during retirement.

To start with, you have to understand that if you do not save enough for your retirement, then you will have to live a compromised lifestyle or be dependent on your children, relatives or friends to support you financially.

Expecting children to support you during retirement, will burden on their finances, while they are trying to start their own family. It may also strain your relationship with your children.

You cannot borrow for Retirement, Can you?

Bear in mind; that you can get a loan to buy a property, car, college education for your kids and others, but you can never get a loan for retirement.

Spend some time and research on the various options of schools available. 

Shortlist a few prospective schools with fees affordable within your budget. Do not overstretch or borrow to pay the school fees.

Yes, providing an excellent education for your children is necessary, but it should at the cost of your retirement!

You may visit https://whichschooladvisor.com/uae to view the list of schools in Dubai, their fees structure and the 2020 KHDA ranking of schools, to help you shortlist prospective schools with affordable fees

Many expat parents tend to ignore retirement savings, while they are focussing on Saving for their children's higher education. Schedule a Free Consultation to understand how you can afford to save both for your retirement and your children's education within your disposable income. 

The key lies in identifying your financial goals early so that you have sufficient time to focus on them.

Factor No 2 - Property Investment

We always want it bigger, better and luxurious, don't we?  Agreed, investing in a property is undoubtedly a good idea and a dream for most of us. Still, if it prevents you from investing for your retirement, then you should seriously reconsider your property investment decision.

While it is essential to have a property to live in during retirement, it is more important to have a regular income to pay bills during retirement. Figure out how you can do both with the limited budget you have.

Many people borrow both for the downpayment and avail a mortgage to buy a property, intending to pay back both loans from their regular income.

While this kind of arrangement makes it easier and quicker to buy a property, it puts a lot of strain on the individual's cash flow every month, forcing them to ignore other financial goals. Even a small financial setback will ruin their cash flow, while a job loss or a financial crisis may push them into bankruptcy.

Do enough research and analyse your cash flows efficiently before deciding to buy a property. Draw a budget and stick to it. Property/mortgage brokers will always tempt you to stretch your budget to buy a bigger and costlier property, don't succumb to temptations.

Factor No. 3 Inflation

"Inflation is when you pay fifteen dollars for the ten-dollar haircut you used to get for five dollars when you had hair." Sam Ewing

Inflation will undoubtedly make retirement saving difficult, making you make work harder to save more during your working life. Be advised that only savings will not help beat inflation. You will have to identify investment options which consistently beat inflation, thus making your money work harder, instead of you having to work hard for money.

My grandfather's choice of retirement savings was pretty simple; he invested in a Public Provident Fund and term deposits, fetching him returns more than inflation. My father had to use Endowment plans, Term Deposits and ULIPs in addition to his pension plan.
My choice of retirement savings are much complex, thanks to various aspects of inflation, taxation, etc.
A good financial adviser will be able to understand your risk appetite and recommend suitable investment options, helping you beat inflation and invest for your retirement.

Factor No 4 - Market Fluctuation:

Yes! Stock market investing is risky, but you can manage risk to a large extent by efficient investment planning and asset allocation.

Arrange a Free Consultation to understand the pros and cons of various investment options to help you choose an ideal retirement savings strategy with appropriate asset allocation.

Together we can establish your financial goals, determine your risk appetite, identify suitable investments and implement the strategy.

We will also review and rebalance your investment regularly to mitigate market risks efficiently.

The following video thoroughly explains the need to start your retirement plan early in your life, and the impact of delaying retirement savings.

The following calculator will help you understand how much you will have to save every month, to reach your retirement goal.

Factor No 5. The Unexpected

Despite our efforts, life throws at us good and bad surprises quite often. It could be an unexpected promotion; a lay off due to technology disruption or an economic crisis! Such an event could force you into retirement before you are ready or intended to retire.

Start saving and investing for retirement as early as you can and put away as much when you can. By doing so, you can be well prepared for any financial challenges life may throw at you.

An unfortunate health setback like Cancer, Heart attack, an accident or injury, does not only stop an individual's income. It also drains out their savings.
Maintaining a good and healthy lifestyle with proper food habits and exercise is essential to ensure well-being.

Having adequate life and critical illness cover can mitigate the loss of income, in the unfortunate event of diagnosis of a critical illness or disability before retirement.

Summary

1. Hire an Independent Financial Adviser to help you set up a Holistic Financial Plan
2. Establish an Investment strategy, based on your priorities and disposable income
3. Start Investing for Retirement early; do not postpone
4. Mitigate loss of income with adequate critical illness and disability insurance.
5. Review the performance of your Investments with your financial adviser regularly.

As indicated at the beginning of this post, appropriate planning and disciplined saving and investing will keep you on the right track towards financial independence and peace.

As an Independent Financial Advisor, I can help you set up and manage a robust retirement savings plan. Arrange a Free Consultation to discuss further...