How much do you need to retire comfortably in the UAE?

The biggest question on everyone’s mind is whether they can truly afford to retire comfortably in the UAE, as living costs keep rising. The next thought is how much you need to sustain yourself during retirement.

However, most financial experts point out that there’s no one-size-fits-all number, it varies depending on lifestyle expectations.

A good rule of thumb is your desired annual income multiplied by 25. For example, if you want $40,000 (Dh146,900) a year in retirement, you will need a retirement pot of $1 million, recommends Josh Clancey, head of technical at Indigo Financial Analysis and Consultancy.

“Generally, my clients want Dh20,000 to Dh40,000 a month to retire on. This would include living in a property they own and includes insurance as well. The retirement income will generally come from rental income and/or having a retirement pot of money that they can draw from,” he says.

Breaking it down further, Jay Adrian Tolentino, a financial coach in the UAE, instructs people to multiply their monthly expenses by 12 to arrive at their annual cost, then factor in any income they will receive during retirement such as pensions, from business, or rental income. The remaining shortfall is what their investments will need to cover, he says.

“For example, if you expect to spend Dh180,000 a year and receive Dh36,000 annually from other income sources, you’ll need your portfolio to provide Dh144,000 per year,” Mr Tolentino explains. “Using a 4 per cent withdrawal rate, that means you’d target a retirement fund of around Dh3.6 million.”

This estimate is based on the “4 per cent rule” that a study by financial planner William Bengen laid out in the 1990s.

What is safe withdrawal rate?

Safe withdrawal rate (SWR) is the percentage of a retirement portfolio that a person can withdraw each year without running out of money. The global SWR is 4 per cent.

Most planners today use 3 per cent to 4 per cent as a safer range for annual withdrawals, given longer lifespans and inflation, Mr Tolentino says.

For example, if you have Dh5 million invested, a 3.5 per cen