Retirements are at risk: Five essential steps for planning ahead

Nov 25 2020 | 6 min

When do you start preparing for your eventual retirement? In the UK, the government-sponsored Money and Pensions Service estimates that an incredible 37% of over-fifties delay retirement planning until the final two years of their working life [1]. And in the United Arab Emirates (UAE), global human resources consultancy, Mercer, recently discovered that only 15% [2] of employees have access to a corporate pension plan. The study found that 44% [3] of UAE employees have no retirement plan other than to continue working forever. This lack of financial planning can bring disastrous consequences. As life expectancy continues to rise, and state funds are depleted – particularly compounded by the impact of the COVID-19 pandemic, everything from living costs to healthcare could become unattainable.

How can you avoid this problem?

Planning for retirement is crucial. You shouldn’t simply aim to survive in your golden years, you should plan to thrive and enjoy every moment. When the big day comes, many people dream of the wonderful things they would be able to achieve. Many want to leave a legacy of wealth for their family to inherit. To help you achieve the retirement lifestyle you deserve, our experts have put together a five-point strategy:

1. Calculate how much your retirement will cost

Before you begin your journey, know the destination. Calculate how much money you and your partner will need to enjoy each year of your retirement. A general rule of thumb is that you will need about 80% of your current income.

Then work out how many years of this income you’ll need. The average life expectancy in Saudi Arabia is 77 years for women and 74 years for men. [4]

Cost per year x Number of years = Total retirement cost

Take some time to consider your retirement needs. You can discover more about yourself. Would you like to retire in the city or the countryside? In a small home or a grand mansion? Will you need help around the home? And would you like to go on regular vacations or stay nearby? These are important things to consider as you look to the future. Don’t forget to include medical bills and emergency money in your calculations.

Consider the impact of inflation on your savings. Experts predict that the inflation rate in Saudi Arabia will be over 5% in 2021 and 2022. [5]

Once you know how much your retirement will cost, you can see if the money you’re setting aside today will be sufficient.

2. Invest early to benefit from compounding returns

The beauty of retirement planning is in the compounding returns, which normally bring the best results after several decades of investing.

If you invest $5,000 annually from the age of 35 until retirement at the age of 65, you would have contributed $175,000 over 30 years. If the markets grew at a rate of around 8% annually, your retirement pot would be worth $612,000. You would have gained $437,000, which is a great return on for your money.

However, had you started at the age of 25, you would have only needed to invest for 10 years to have a pension pot worth $787,000 by your 65th birthday. You would have contributed $50,000 and gained $737,000.

An extra decade can make a huge difference to your wealth. Starting early is one of the best ways for investors to grow their retirement pot.

3. Match your risk levels with your time horizon

No risk means no return. If you want to grow your wealth, you must take some risk. The amount of risk depends on you and your time horizon.You should reduce your risk level as you approach retirement. Here is a general guide recommended by experts:

age stocks bonds table

Stay in control of your risk levels and check them periodically to make sure they are balanced.

4. Diversify your investments against market shocks

The events of the past year have demonstrated how the stock markets can plummet overnight. To help protect your wealth, it’s important to diversify your assets across different market sectors and geographies. Concentrating in one geographical region may result in overexposure to a given currency, sector, local monetary and fiscal policy, and the geopolitical risks of that region. For example, an investment portfolio comprised exclusively of Saudi public companies listed on Tadawul is affected by changes in oil prices, the Saudi riyal and the Saudi economy.

Investing responsibly in companies that address environmental or social risks could also help build resistance to market turbulence. A responsible approach to investments and risks allows funds to remain resilient during periods of volatility.

Another way to diversify your wealth is to invest in private markets. Private investments tend to do better than public investments. According to 2019 research conducted by the British Private Equity and Venture Capital Association, UK private equity has consistently outperformed the public markets over recent years. Over five years, alongside venture capitalist funds, it has returned 20.1% [6] (compared to 7.5% for the FTSE All-share).

We are specialists in private investments, please contact us for expert assistance.

5. Partner with the right experts

Your retirement income is too important to leave to chance. For peace of mind, consult a trusted investment advisor to help you with your strategy for asset allocation, diversification, and risk management over the long term. Your advisors should also be informed about current developments and future projections in order to rebalance your portfolio over time and help you reach your goals.

If you’d like to talk with one of our leading investment experts, we’re just an email or call away.

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[1] Source: Money and Pensions Service, September 2020,

3 million over 50s will leave planning retirement finances to the final two years before stopping work

[2] Source: Mercer, February 2020, “Rethinking financial security in UAE”

[3] Source: Mercer, February 2020, “Rethinking financial security in UAE”

[4] Source: World Bank, “Life expectancy at birth, total (years) - Saudi Arabia”

[5] Source: Trade Economics, “Saudi Arabia Inflation Rate”

[6] Source: BVCA, October 2019, “Performance Measurement Survey”

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