Creating a retirement savings plan is something everyone should consider.
The advantages are two-fold. Having a plan caps your downside, ensuring that you have a safety net in case you run into financial difficulties. And it gives you opportunities to generate wealth over the long term, securing your retirement.
Putting some money aside each month can make your dreams a reality, enabling you to retire in the knowledge you can afford to live out your days in comfort and financial security. Here’s how you can make your retirement savings plan happen.
First thing’s first, it’s a good idea to ensure you have a safety net. This can help if you run into financial difficulties. We recommend saving enough cash to cover at least 3 months of expenses for you and your loved ones. This will give you enough time to resolve any underlying issues with your finances.
Having an emergency fund is a key part of any retirement savings plan.
Interest payments on credit cards and bank overdrafts hurt your ability to build wealth over the long term. So as soon as you can afford to, pay down any short-term debts. Not only will this reduce your monthly outgoings, it will also mean you’re in a much stronger position should you encounter financial difficulties.
Saving is a skill – it takes time and dedication to master it. By setting money aside in a current account that you use for expenses, you reduce your chances of success, since the money you have saved is lumped together with cash used to fund your everyday activities.
So, as part of your savings plan, make sure you separate your savings pot from your current account. With this in mind, it’s a good idea to open a new account – either a savings account, an ISA, or an account with an investment platform like Sarwa, which offers better rates than a bank account.
There’s a range of different products out there, so take the time to figure out what’s right for you.
Once you’ve established a safety net, it’s time to think long-term. Retirement might seem a distant prospect, but you need to begin saving decades in advance in order to ensure you have enough money to support your lifestyle without a salary. We’ve written about this here.
In fact, a new survey reveals the majority of UAE expats do not have realistic retirement plans for securing a comfortable lifestyle when they finish working. While 75% of respondents expect to be retired by the time they are 65, less than half are saving regularly for their retirement.
So, how to avoid falling into this trap? The 50:30:20 rule is a helpful heuristic, helping you decide what to spend on everyday essentials, nice-to-haves and your retirement fund.
For most people, 20% is an ambitious target, but it’s one that’s well worth pursuing, as it will set you up for long-term financial success, whilst also providing short-term protection against things that are outside of your control.
If you’re ready to start saving, why not get in touch with an expert who can help to advise you on a retirement savings plan that’s right for you and your family?
Here at Sarwa, we’re making investing simple and affordable for people in the Middle East by using cutting-edge technology. But we also have experts on hand to provide advice on your savings plan over the phone. So get in touch, and start building for the future.
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