If you are 25 years now... this is how you do the math

Assuming that you are 25 years of age now, and expect to retire at the age of 60, and your monthly expenses at that time will be Dh45,000. Now, most analysts agree that, after retirement, an individual needs around 70 per cent of his pre-retirement monthly expenses to maintain a similar lifestyle. That works out to Dh31,500 per month that you will need after age 60.

Assumptions:
A. Current age: 25
B. Desired retirement age: 60
C. Projected pre-retirement monthly expenses (in 2047): Dh45,000
D. Required post-retirement monthly income (70% of c.): Dh31,500
E. Interest: 6%

In this scenario, after you reach your retirement age (60), you’d need a fund value of Dh6.3 million which, at 6 per cent interest, will give you a return of Dh378,000 per annum, or Dh31,500 per month.

To start saving that amount from today (age 25), your annual contribution needs to be Dh 56,535.32, or about Dh4,712 per month.

Below is how it all pans out, but remember that this is just an illustration of the required amount depending on a particular age-bracket and interest rates on fixed-income products. Actual figures will vary for each individual depending on multiple variables like age, projected post-retirement expenses, investment avenues, etc. It’s best to take the advice of a dedicated financial advisor to calculate your particular investment needs.

Fund Values for the next 35 years

Year     Anual contribution     Total Fund Value (Dh, cumulative)

1          56,535.32                   56,535.32
2          113,070.64                 116,462.76
3          169,605.96                 179,985.84
4           226,141.28                 247,320.32
5           282,676.60                 318,694.85
6           339,211.92                  394,351.87
7           395,747.24                  474,548.30
8           452,282.56                  559,556.52
9           508,817.88                   649,665.23
10        565,353.20                    745,180.46
11        621,888.52                    846,426.61
12        678,423.84                    953,747.52
13        734,959.16                    1,067,507.70
14        791,494.48                    1,188,093.48
15        848,029.80                     1,315,914.41
16        904,565.12                     1,451,404.59
17        961,100.44                     1,595,024.19
18       1,017,635.76                   1,747,260.96
19       1,074,171.08                   1,908,631.93
20        1,130,706.40                   2,079,685.17
21        1,187,241.72                  2,261,001.60
22        1,243,777.04                  2,453,197.02
23        1,300,312.36                  2,656,924.16
24        1,356,847.68                  2,872,874.93
25        1,413,383.00                  3,101,782.74
26         1,469,918.32                3,344,425.03
27         1,526,453.64                3,601,625.85
28          1,582,988.96               3,874,258.72
29          1,639,524.28                4,163,249.56
30          1,696,059.60                4,469,579.86
31          1,752,594.92                4,794,289.97
32          1,809,130.24                5,138,482.69
33          1,865,665.56                5,503,326.97
34          1,922,200.88                5,890,061.90
35          1,978,736.20               6,300,000.94
Source: Emirates 24|7 calculations