Planning for retirement may feel distant but starting early is crucial for a smooth journey.
When preparing for retirement, it is important to understand your individual needs and goals.
While many people believe they are aware of their spending and saving habits, only a small portion seek professional guidance regarding money management.
By consulting with a financial expert, you can develop an investment portfolio that matches your risk tolerance, investment goals and timeline and, with that, help you to achieve your individual financial goals.
Another important element that tends to get missed easily is inflation, which gradually raises the cost of living.
Your retirement savings should account for this increase to ensure your purchasing power remains intact.
Below are five key strategies to plan your retirement.
1. Understand your retirement goals
Visualise your ideal retirement – including your desired location and activities. This will help you start your financial journey. The more vivid this visualisation is, the better prepared you can be.
Creating a solid savings and investment plan is key to achieving financial success.
To start, establish clear retirement goals based on your current and desired lifestyle, as well as additional expenses such as your children's higher education.
Calculate how much you will need to save – aim for 15 per cent to 20 per cent of your income for retirement.
However, making a start is crucial, even if it is only 5 per cent of your income. For example, if you earn Dh5,000 a month, saving Dh750 can help you stay on track.
2. Prioritise retirement savings
It is never too late to take the first step towards securing your future. While it is important to consider when you start, it is also necessary to focus on how you start!
You do not need to start with a lot of money – even Dh100 a month can make a difference. Starting early gives your money more time to grow and, therefore, more opportunities.
Residents planning to retire in the UAE should also take advantage of employer-sponsored options to ensure a comfortable post-retirement life.
Strategically allocating your income can have a significant impact on your long-term savings and financial well-being.
Developing a sound savings and investment strategy is one of the cornerstones of financial success.
3. Diversify your investment strategy
Diversify your investments instead of keeping all your money in one place. Just like planting different seeds, spread your investments across stocks, bonds or real estate. If one investment does not perform well, the others may.
The challenge is that only a few people are aware of the resources available at their fingertips. It is important to conduct research, educate yourself and seek assistance from the right people.
This includes preparing yourself with some facts such as how different investments can have a different lead time for liquidity.
Once you know what you are looking for, the process will become much easier.
Following the age-based investment rule is a great approach to balancing risk and returns, with a minimum investment amount typically ranging from anywhere between Dh1,000 to Dh25,000, depending on your income and goals.
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4. Focus on funding your child's education
If you have children, it is essential to consider education as a critical aspect.
Estimate the costs, open an education account and start saving early. Those early savings can make a significant difference and ensure that you are financially ready when your children reach college.
Investing in a dedicated education fund becomes a strategic move, allowing your financial resources to grow over time and ensuring that your child's educational aspirations are well supported when the need arises.
While prioritising your children's academic future, it is important to focus on securing your own financial stability simultaneously.
5. Plan regular check-ins
Life is full of unexpected changes, and your retirement plan should adapt accordingly.
Regular conversations with a financial expert can help you stay on track, ensuring that your retirement savings align with your goals and adapt to market fluctuations.
Schedule regular reviews of your retirement plan with a qualified financial adviser to evaluate your progress towards your goals and make any necessary adjustments.
Monitoring the performance of your investment portfolio and rebalancing it from time to time is important to maintain diversification and manage risk.
By following these steps consciously, you can create a secure and worry-free road to your retirement.
Taru Singhal is head of retail distribution at Zurich International Life