Dreams of Comfortable UAE Retirement Challenged

Many Aspire to Retire Here - But Do They Have Enough Savings?

A recent survey found that 70% of UAE residents wish to retire in the country. This is particularly true for those earning at least 25,000 dirhams per month. However, optimism does not always align with realistic financial planning—many underestimate how much they need to save for a truly comfortable retirement.

Is 5 million dirhams enough?

According to a YouGov survey commissioned by Zurich International Life Limited, 75% of respondents are optimistic about their future and believe they'll have enough savings by retirement. Most (about 65%) rely on workplace savings or end-of-service benefits—this could easily overestimate actual long-term coverage.

More than 60% of those surveyed believe 5 million dirhams would suffice for a comfortable retirement in the UAE. Additionally, 42% think 2 million is enough. However, the reality is more nuanced: someone retiring at 60 with 2 million dirhams intending to use it over 25 years would have about 6,600 dirhams monthly. Considering current living costs—including healthcare, rent, travel, and inflation—this amount may not suffice.

The real risk: running out of money in the 20th retirement year

Many associate retirement with reaching a certain amount, yet it actually concerns maintaining a living standard for decades. The greatest financial risk isn't running out of money after five years but after twenty. Essential expenses such as rent, utilities, or healthcare can rise over the years, and without investments or passive income, covering these can be challenging.

The UAE does offer a five-year retirement visa for those over 55 who own property worth at least 1 million dirhams, have similar savings, or a verified monthly income of at least 20,000 dirhams (15,000 dirhams for Dubai)—but this visa doesn't equate to financial security.

End-of-service gratuity isn't enough

Many consider the end-of-service gratuity as a retirement foundation, although it's merely a starting sum rather than a long-term solution. Experts suggest that with today's life expectancy, retirees might need to fund 20-30 years of living, far exceeding the coverage provided by an end-of-service gratuity.

Furthermore, gratuities do not generate income—they're a one-time payment, unlike the continual income stream needed during retirement. Relying solely on this is akin to embarking on a long journey with a single tank of fuel.

Workplace savings programs: untapped opportunities

The UAE government, particularly the Ministry of Human Resources and Emiratization (MoHRE), actively promotes workplace savings schemes. Under the alternative gratuity system, companies can voluntarily contribute to employees' retirement funds, managed by accredited investment funds.

This could help bridge savings gaps long-term—provided employees take advantage of this opportunity. Currently, many workers still lack access to such programs.

How to save wisely?

True financial security relies not just on savings but also on diversified income sources. Alongside long-term savings, consider alternative investment forms—such as real estate or commodities.

Some useful tools for retirement planning:

Educational savings funds: Many parents finance their children's education from their retirement savings—this can risk retirement security in the long run. Creating separate educational savings can be a solution.

Health insurance and long-term care insurance: Healthcare costs rise with age, so having proper insurance is crucial. This prevents medical expenses from consuming retirement savings.

Summary

Many plan for retirement in the UAE, yet few have a real strategy to sustain this plan long-term. Retirement planning isn't just about achieving a sum but maintaining a lifestyle for decades. Start conscious financial planning early, secure adequate insurance, leverage workplace savings programs, and diversify investments. This combination can lead to truly carefree retirement living in the UAE.

(The article is based on research by Zurich International Life Limited.)