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Retirement Planning

Plan for a comfortable retirement, especially important for expats in the UAE who don't have traditional pension systems to rely on.

Why Retirement Planning is Critical in UAE

Living in the UAE as an expat means you're largely responsible for your own retirement. There's no government pension, no social security, and end-of-service gratuity often isn't enough.

The UAE Reality

  • No State Pension: Unlike home countries, UAE doesn't provide retirement income for expats
  • Gratuity is Limited: End-of-service equals ~21 days per year of service - not enough for retirement
  • Home Country Benefits: Living abroad may mean missing out on home pension contributions
  • Tax-Free Advantage: The flip side: you can save much more here than elsewhere

The Math

If you need AED 15,000/month in retirement for 25 years, you'll need approximately AED 4.5 million saved (assuming 4% withdrawal rate). That's why starting early is essential.

Retirement planning
The Numbers

How Much Do You Need for Retirement?

Calculating your retirement target

The 25x Rule

A common guideline: You need 25 times your annual expenses saved for retirement. This is based on the "4% rule" - withdrawing 4% annually gives you about 30 years of retirement income.

Calculate Your Number

  1. Estimate your monthly retirement expenses
  2. Multiply by 12 for annual expenses
  3. Multiply by 25 for your retirement target

Example Calculations

  • AED 10,000/month: 10,000 × 12 × 25 = AED 3,000,000
  • AED 15,000/month: 15,000 × 12 × 25 = AED 4,500,000
  • AED 20,000/month: 20,000 × 12 × 25 = AED 6,000,000
  • AED 30,000/month: 30,000 × 12 × 25 = AED 9,000,000

Note: These are rough targets. Your actual needs depend on retirement location, healthcare costs, lifestyle, and other income sources.

Retirement Calculator

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Pro tip: Use the 25x rule as a starting point, then adjust based on your specific situation.

Strategies

Building Your Retirement Fund

Systematic approaches to reaching your retirement goal

Start Early

Time is your greatest asset. Starting at 25 vs 35 can mean the difference between needing to save AED 3,000/month vs AED 8,000/month for the same retirement goal.

Maximize Savings Rate

In the UAE, aim for 30-50% savings rate. No income tax means you can save far more than in most countries. Use this advantage fully.

Invest in Growth Assets

For retirement 20+ years away, invest heavily in stocks/equities (80-90%). Time smooths out volatility. Reduce stock allocation as you approach retirement.

Keep Costs Low

Use low-cost index funds (expense ratio under 0.20%). A 1% difference in fees can cost you 25-30% of your retirement fund over 30 years.

Automate Everything

Set up automatic monthly investments right after payday. Remove emotion and decision-making from the process. Consistency beats timing.

Review Annually

Check your progress once a year. Rebalance your portfolio if it's drifted from your target allocation. Adjust savings rate if needed.

Asset Allocation

Investment Allocation by Age

How your investment mix should change as you approach retirement

20s - 30s: Aggressive Growth

Allocation: 90% Stocks, 10% Bonds

You have 30+ years to recover from any market downturn. Maximize growth. Don't even look at your portfolio during crashes.

40s: Growth

Allocation: 80% Stocks, 20% Bonds

Still growth-focused but starting to add stability. Peak earning years - maximize savings rate now.

50s: Balanced

Allocation: 70% Stocks, 30% Bonds

Retirement is visible. Balance growth with preservation. This is when nest egg starts to feel real.

60s: Conservative

Allocation: 60% Stocks, 40% Bonds

Approaching retirement. Focus on wealth preservation while maintaining some growth to combat inflation.

Simple Rule: 100 Minus Your Age

A simple starting point: Subtract your age from 100 to get your stock percentage. Age 30 = 70% stocks. Age 50 = 50% stocks. Some suggest 110 or 120 minus age for more growth.

Where Will You Retire?

As an expat, you have options. Your retirement location significantly impacts how much you need.

Cost of Living Considerations

  • Home Country: May have healthcare benefits, social connections, but potentially higher costs
  • UAE: Possible if you obtain long-term residency. Good infrastructure but can be expensive
  • Low-Cost Countries: Southeast Asia, Portugal, Mexico offer lower costs and good lifestyle

Tax Implications

  • Some countries tax worldwide income including investment gains
  • Some have favorable tax treatment for retirees
  • Consider tax treaties and residency rules
  • Plan your exit from UAE carefully for tax optimization

Healthcare

  • Biggest expense in retirement after housing
  • Some countries offer excellent affordable healthcare
  • Consider health insurance costs in your calculations
Retirement destination
UAE Specific

End of Service Gratuity (EOSB)

Understanding your UAE workplace benefit

How EOSB Works

Under 5 years: 21 days basic salary per year of service

Over 5 years: 30 days basic salary per year (for years beyond 5)

Maximum: Capped at 2 years' salary

Based on: Basic salary only (not allowances)

Reality Check

Example: 10 years at AED 15,000 basic salary

Years 1-5: 21 days × 5 = 105 days
Years 6-10: 30 days × 5 = 150 days
Total: 255 days = ~8.5 months salary
EOSB: ~AED 127,500

Nice bonus, but nowhere near enough for retirement!

New Savings Scheme (2023)

The UAE introduced an optional savings scheme where employers can invest EOSB contributions in approved funds during employment, potentially increasing returns. Check if your employer participates. This is a positive development but still supplementary to your own savings.

Avoid These

Retirement Planning Mistakes

Common errors that derail retirement plans

Starting Too Late

Every year you delay doubles the monthly amount needed to reach the same goal. Someone starting at 25 needs to save half as much monthly as someone starting at 35.

Underestimating Needs

Most people underestimate retirement expenses. Healthcare costs increase with age. Hobbies cost money. Plan for more than you think you'll need.

Being Too Conservative

Keeping retirement savings in cash or low-yield accounts. With 20+ years to retirement, you need equity growth. Cash loses to inflation.

Relying on Gratuity

End of service is NOT a retirement plan. It's a small supplement. Build your own retirement fund independent of EOSB.

Not Accounting for Inflation

AED 1 million today will only buy AED 500,000 worth of goods in 25 years at 3% inflation. Your target needs to account for this.

Raiding Retirement Savings

Taking from retirement for other expenses sets you back years. Those funds need to stay invested and compound. Use emergency fund instead.

Get Started

Your Retirement Action Plan

Steps to take today

Calculate Your Number

Estimate retirement expenses. Multiply by 25. That's your target. Use our calculator to see how much you need to save monthly.

Open Investment Account

If you haven't already, open a brokerage account (Interactive Brokers recommended) or robo-advisor (Sarwa, StashAway).

Set Up Automatic Investing

Automate monthly transfers to your investment account right after payday. Start with whatever you can, even AED 1,000/month.

Choose Simple Portfolio

Start with a simple allocation: VT (Total World Stock) or VTI + VXUS. Add bonds as you get closer to retirement.

Increase Savings Rate

Each time you get a raise, increase your investment amount. Aim for 30%+ of income going toward retirement.

Review Annually

Once a year, check progress. Rebalance if needed. Increase contributions if possible. Stay the course.