EXPAT GUIDE TO SAVING

Expat Guide
How to Save for Retirement

It’s a scary statistic but 67% of UAE residents are failing to plan for their retirement, according to a research report carried out by Zurich International Life in December 2013. Other than the mandatory end-of-service gratuity benefit, this huge percentage of the population has no formal savings plans in place. Despite living in a country where disposable incomes are relatively high and income tax is nil, combined with there being no government backed retirement benefits for expats, short-term spending is evidently being given priority over long-term planning.

If you find yourself included in this statistic, fear not. It’s never too late to start saving. Of course, the best time to start is in your 20’s. By starting early, you can build up a bigger retirement fund, as you add more contributions over your lifetime and they have longer to grow. Even if you can only afford a small amount, it helps to form a healthy savings habit.

Here’s our advice:

IN YOUR 20s

• Focus on clearing your debts
• Then save whatever you can afford

In your twenties, retirement will seem a long way in the future so it’s reasonable to expect other financial objectives to take priority. Repay any student debt amassed whilst studying and pay off any credit card debts. If any extra dirhams remain, squirrel them away for the future! Open an offshore account or an online savings account with the best rate you can find.

IN YOUR 30s

• Reassess your debts and outgoings
• Commit to regular Pension, Investment and Life Insurance Plans
• Think long-term with your investments

This can be a busy decade from a financial perspective, whether it involves buying a property, getting married, starting a family or a combination of two or three! First of all, review what debt you have and find ways to address it. Once you’ve done this, ask yourself a set of questions: Do you have a family to support? Do you have sufficient ‘rainy day’ savings? Have you bought or are you looking to get on the property ladder? This should help you establish an overview of your key financial outgoings. There’s a fine balance to be struck between saving for the future and paying off debt, particularly expensive unsecured debt such as credit cards and personal loans. Get into the habit of saving a fixed amount monthly, by standing order, as soon as your salary is paid and consider this the time to take a long-term view on your savings & investments. You can afford to take on more risk in the form of shares as there’s a high chance this will pay off in 30 years’ time. The old adage, ‘shares outperform savings accounts in the long run’, still rings true.

IN YOUR 40s

• If you haven’t started saving, do something about it!
• Your earnings should be peaking so be putting aside as much as possible

Ideally, by the time you reach your 40s, you’ll already have built up a decent pot of savings, but if you haven’t already started, it’s not too late. Make the most of pay rises and bonuses to boost your savings, rather than simply increasing your expenditure each time. Identify your target retirement age and broadly consider what you want your lifestyle to look like in retirement so you can make sure your financial plans are on track to deliver.

IN YOUR 50s

• Maximise your contributions to your savings and investments
• Reduce exposure to risk

Do you have a retirement date in mind? It might not be definitive, but it should serve as a guide. Then calculate the minimum income you want. Next, take a detailed look at all your savings and investments and where they’re invested. Take money out of risky equities and put it into safer cash investments. At this stage, you can’t afford to lose out if the stock market takes a strong downward dip.

IN YOUR 60s

• Check that all your debts, including mortgage, are in order

At this stage, you’re most likely ready to retire or at least, have the option of whether you wish to continue working. It might be a good idea to see an Independent Financial Advisor (IFA) for advice on making your portfolio last as long as you do.

If you remember one thing:

Saving is not optional!

‍Taking that first leap from ‘not saving’ to ‘saving’ may seem daunting but the quicker you can establish some sort of routine, the better. Your retirement should be about spending time with friends and family and pursuing your passions… not about penny pinching and wishing you had been more disciplined during your working years. Take advantage of being in a relatively comfortable financial position as an expat in the UAE and you will reap the dividends down the line!