ALBAWABA – The United Arab Emirates (UAE) is buzzing with business and expats, many of whom with plans for retirement in UAE. If you’re one of them or would like to be, here’s a seven-step guide to planning for retirement in the UAE.
Retirement in UAE may seem like a distant concern for young individuals, but with average life expectancies rising, it's crucial to start early.
Retirement planning is essential for a comfortable lifestyle in later years. This 7-step guide offers young people a roadmap to ensure financial security for retirement in UAE.
1. Establish a vision for retirement in UAE
In the Middle East, the family unit is often a fundamental support system for later in life. However, as societies change and more people seek financial independence, it's essential to plan for retirement in UAE.
Think about your desired lifestyle:
At what age do you wish to retire?
Do you plan to own a property mortgage-free?
Will your expenses change?
Do you have aspirations to travel or pursue hobbies?
Having clear goals allows you to estimate the income needed to maintain your desired lifestyle in retirement.
2. Harness the power of compound interest
Compound interest is a powerful tool for building wealth. According to the Global Banking and Finance Review, the younger you start saving, the more your wealth can grow due to the compounding effect. Savings accounts, fixed deposits, and other investment vehicles available in Middle Eastern countries such as the UAE, Saudi Arabia, and Qatar can be leveraged for this purpose.
Compound interest means that the interest yield you make on your savings, deposits, or other such instruments is reinvested, so that you end up making interest on the interest amounts you reinvest.
3. Explore retirement income sources
In the Middle East, several countries have government-provided pension schemes. For example, in the UAE, citizens are covered by the General Pension and Social Security Authority (GPSSA), which provides pensions and other benefits. Expatriates working in the Gulf Cooperation Council (GCC) countries should also investigate their entitlement to end-of-service benefits (gratuities) as these can form a significant portion of retirement savings.
4. Leverage private savings and investment options
With limited social security systems, private savings and investments play a significant role in retirement planning in the Middle East. Invest in diversified portfolios, which can include real estate, stocks, bonds, or mutual funds. Some Middle Eastern countries, including the UAE, are becoming hubs for financial investments and offer numerous opportunities for both nationals and expatriates.
5. Plan for healthcare expenses
According to the World Health Organization, chronic diseases such as diabetes and heart disease are prevalent in the Middle East. As healthcare can be expensive, it's important to consider insurance and savings for medical expenses during retirement in UAE.
6. Develop a savings habit
A survey by the National Bonds Corporation in the UAE revealed that 80 percent of respondents were not saving for retirement in UAE. To avoid financial strain in later years, it’s important to cultivate a savings habit. Keep track of your expenses and income, create a budget, and cut back on unnecessary expenditures. Saving even a small percentage of your income consistently can make a significant difference over time.
7. Adapt and Re-evaluate
As life progresses, personal circumstances and financial markets change. Regularly reassessing your retirement goals and adjusting your savings and investment strategies accordingly is essential. Financial advisors specializing in UAE markets can offer valuable insights.
In conclusion, regardless of where you are in the Middle East, taking steps to plan for retirement at a young age is crucial. This forward-thinking approach ensures you can enjoy your golden years with financial security and peace of mind. With determination and a sound strategy, a fulfilling retirement in UAE is within reach.
