Income calculator: How much money do we need to retire?

Having a Dh1 million fund for retirement may seem a difficult task, but that may be the minimum amount of money you might need once you stop working, say experts.

Richard Musty, Managing Director, Lloyds TSB in the Middle East says “the sooner the better” should be the approach for starting a retirement fund as each delayed year adds to the pressure on the individual.

Click here for the top 5 ways to prepare for retirement

“For every five years that you wait to start your retirement savings plan, you have to double your monthly contribution to reach a set lump sum,” Musty told 'Emirates24|7'.

“If an individual is 35 years of age, and plans on retiring at age 65 with a view to have a pension fund at retirement of Dh1 million, then that individual will need to save Dh33,000 per annum. If the same is 45 years old with the same view of a pension fund at retirement (of Dh1 million), then that individual will need to save Dh132,000 per annum,” he said.

However, this figure is not applicable on all and the amount can vary. “Retirement planning advice will differ from person to person and will depend on a number of factors, including personal circumstances, age, employment and life priorities,” Musty said.

“Whilst there is not a ‘one size fits all’ answer to this question, its recommended to start saving around 10 per cent of your monthly income and then increase this as and when you can afford to do so. There are a number of factors that will need to be considered when assessing your pension fund you would like at retirement. These factors can impact the lump sum and your monthly contributions, such as: inflation, interest rates (which may vary), currency depreciation and income fluctuations,” Musty added.

Check out our Retirement Calculators for ages 25, 35 and 45 below

Even though most of us believe in saving for old-age, taking action seems difficult as we are busy meeting today’s expenses. For such people, Musty advises setting up monthly savings. “We recommend having a set monthly contribution to your pension plan as a committed outgoing. You can always increase your contributions with any surplus of income or make lump sum contributions from bonuses etc.

“Being disciplined in setting a minimum amount aside is vital. Take a look at your current financial situation and work out how much you need to set aside to sustain your lifestyle post retirement. Be honest in your assessment and think about how many pay cheques you expect to receive between now and the end of your career. This is often a difficult but eye-opening reality check – for example, at age 45, you only have 240 paydays remaining.

“As with all investments, diversification is crucial. In order to protect and grow your retirement savings, think about investing these funds into different assets that reflect your objectives and appetite for risk. It’s in this area of planning where many people find advice and guidance from a professional is required, so as to understand the different areas you can invest into and how they fit best with their own personal needs,” he explained.

The ideal time to start saving is when you get your first cheque and any delay at the onset will add to the pressure to save later in life. “It is never too early to start saving for your retirement – the sooner you start, the better. When you receive your first pay cheque, ideally you should be thinking about saving for retirement because the sooner you start the more you will receive when you retire,” he advised.

“Expats in particular need to pay attention to planning for retirement and need to be proactive about the subject, given the absence of public pensions and often limited support of company based savings or retirement schemes. It’s also important to consider where you will end up when deciding what currency to save in and for every 5 years that you wait to start your retirement savings plan you have to double your monthly contribution to reach a set lump sum,” said Musty.

In reality, Musty says there is only a small percentage of expats who actually save for retirement. “Whilst it is difficult to comment on precise numbers, in our experience and based on recent industry surveys, roughly 80 percent (survey conducted by Insight Discovery October 2011) of expats in the UAE are not saving enough for their retirement.

“We encourage our customers to make saving and planning for the future a key priority and retirement planning is an important part of this. Make it a priority and chat to your financial advisor for guidance on a retirement plan that’s best suited to your needs and requirements,” concluded the Lloyds expert.

Retirement Calculator

Assuming you are 35 years of age now, expecting to retire at 60 with Dh36,000 monthly expense then... Click here to do the math...

Assuming you are 25 years of age now, expecting to retire at 60 with Dh45,000 monthly expense then... Click here to do the math...

Assuming you are 45 years of age now, expecting to retire at 60 with Dh30,000 monthly expense then... Click here to do the math...

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