5 steps to planning retirement effectively

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When Asma and Bilal’s children were getting ready for college, they decided it was time to put their retirement plans into action. They had already bought a smaller house away from the main city and thought they were ready to begin a slower life growing vegetables and going on holidays.

However, when they actually thought of moving into their retirement home, they realized they didn’t have enough money to implement their slower life. Recent research shows that only about 50% of people aged 44-60 are sure that they will retire on their own terms; in fact, 33% say they may need to continue to work after retirement to supplement their finances.

So how can you plan to retire well?

1. When do you start? ‘Now’ is a good time to start planning for your retirement. ‘Yesterday’ is even better. Experts say it’s never too early, nor is it ever to late, to plan to retire. If you have started early, you might need to save less for longer. Towards your middle years, when your income is peaking, it’s time to set targets and outline how you will reach them.

If you are shortlisting property to retire in, treat it as an investment so it provides returns until it needs to be used, and can be exited from profitably in case plans change.

2. How much do you need? Your retirement budget can be benchmarked at 80% of your current income, adjusted for inflation. Consider costs for housing, healthcare, food, clothing, and transportation. Don’t forget to include travel plans, entertainment, and other leisure.

Consider any debt in your plans. Avoid carrying debt into your retirement years, even if you continue to earn.

3. What will you set aside? Once you estimate how much you need, start working towards creating that amount. Make retirement a part of your monthly expenses. When you get a windfall – like End of Service Payments, bonuses, or monetary gifts from relatives – consider letting it go into your retirement account.

Try using automatic deductions from your salary to an account you have earmarked for retirement.

4. Can you pivot? No matter what your age, do a reality check on your retirement plans from time to time. For instance, you or your spouse may actually want to continue to work and your plan needs to make sure it’s possible to do so.

At different milestones – like getting married, having a baby, or caring for older parents – review your existing retirement roadmap.

5. Is estate planning a part of your plan? Essentially, this is a plan for what happens to your assets after death. Making a will is part of your retirement, but remember that it may need to be updated as your family grows, or situations change.

Ensure liquidity for an increasingly globalized world and don’t lock away your funds in destinations that might not be easily accessible to your heirs.

From AED 360 a month to AED 1 million: The earlier you start saving towards retirement, the smaller the amount you need to save each month.