Going back to work after an eventful weekend can be dreading. Or it could be during an overdone day at work that you long for a break for an indefinite period of time. A lot of people wish to retire early but it isn’t as easy as it may sound. Going about your life without having a secure job to manage expenses can be quite overwhelming. People generally are unable to decide on early retirement because of their lack of understanding of upcoming life challenges and the absence of a thoughtful strategy.
This article will shed light on different aspects of early retirement to help you decide whether it’s your cup of tea or not.
Challenges of Early Retirement
A general perception regarding early retirement is that it revolves mostly around saving money for upcoming jobless years. However, there are a lot of challenges and risks involved when one chooses to retire at 40.
Why retire from a job early in life?
People do not always consider early retirement because of hectic work schedules and inconsiderate management. You can change jobs for a better future and opt for a different career path. Generally, people only pay attention to what they are retiring from when in actuality they should be focusing on what they are retiring for.
To cut it short, irrational reasoning and looking towards only the negative side of things may result in an inability to tackle life challenges that follow. A lot of people retire early to pursue their interests and accomplish life goals that wouldn’t be possible with a 9 to 5 job.
Focus more on future goals and what you want to do with your life after quitting your job. Only then you would be able to move forward and excel in your career. Of course, a rude boss and non-cooperative management could be a cause of you retiring at 40 but instead of fixating on bad life experiences, look forward to your passion and future life goals.
What to do with the spare time?
Figure out first what retiring from a job means to you. Understand if it’s a reasonable choice and is feasible. Our ego, self-confidence, and self-perception greatly depend on our work, status, and job role. If you know what you are going to do with your life after you quit your job and have set future goals, it would be much easier to finally let go of the job that drains your energy. Depend less on what others think and focus more on your personal objectives.
When you opt for early retirement, you would be left with an abundance of time that sometimes can be quite overwhelming. You need to make a strategy to utilize your valuable time and accomplish bigger things in life.
Increased Life Expectancy
The average life expectancy has increased by approx. 3 years during the last century. Soon, a lot of people will turn 100 unlike previously when the average life expectancy was around 80 years. The population in UAE has a life expectancy of around 78 years. In light of these findings, if you retire at the age of 40 years, you must have enough savings and a workable plan for generating cash for approximately 40 upcoming years of your life. Even if you start to work at the age of 25 years, there is a lot to be accomplished till you turn 40.
A younger and more active lifestyle
With latest advancements in the medical and healthcare field and improved lifestyle patterns, people in present times enjoy an active and healthier lifestyle even as they move gradually age.
Increased life expectancy and an active lifestyle has somewhat altered the public perceptions of retirement too. Almost 55 percent of the retired and pre-retired population look forward to retirement as a fresh start with a positive attitude for future endeavors.
With increased life expectancy, younger people who plan to retire early fear for insufficient savings for their future. However, it is quite certain that retired people will somehow generate an income. With sufficient savings by their side, skilled people who retire early most probably will indulge in activities to earn money and invest their time in something productive. People who retire early will inevitably need a huge amount of savings and a steady cash flow to survive in their retirement years.
For example, a 23-year-old person earns a monthly salary of AED12, 000. He wants to retire at the age of 40. With an annual inflation rate of approx. 2.5%, the total expenses per month for this person will rise to around AED18, 000 when he turns 40.
Now let’s say, he has almost 40 years of retirement years ahead and with the same rate of inflation along with a 6% return on savings, around AED 834, 000 will be required at the age of 40. If this person retires at age 60, his expenses per month are expected to rise to AED 30, 000 at the time of retirement and he would require around AED 70, 000. Let’s suppose he has an annual 8% return on retirement savings. Retiring at the age of 40 would require a monthly saving of around AED 1,900 contrary to AED 258 a month if he chooses to retire at 60. In simpler words, retiring early requires approx. 6.5 times more investment per month for future savings. More Savings with an Increased Number of Work Years People who retire at 40 have less time to save money. If they save or invest AED1932 a month, it means they will be able to save AED 121,611 in ten years’ time. These savings will continue to grow in the coming years, with a 71% growth in the next 7 years.
People who retire at 60 will have AED90, 047 after 20 years of savings and it will grow to around AED350, 000. Now that you have a gain an insight into the challenges of early retirement, you can set goals and plans accordingly to save wisely for the long retirement years.
Early Retirement: Tips to Save Money
To survive your retirement years peacefully, you need to generate a consistent cash supply that will make sure you have a good amount of money every month to meet the essential expenses.
Smart Investment plans can help you earn profits for fulfilling future life goals. Diversify your assets and invest money in different areas for lower risks and increased profits.
Work Consistently
Work hard for established and renowned businesses without taking career breaks. Quitting jobs too often and wasting months before getting hired can drain your savings. Work consistently, stay determined, and save money.
Register for Retirement Benefits
Sign up for retirement benefits at your workplace including gratuity schemes, pensions, and other perks. UAE Government has introduced a retirement plan where foreigners working in the public sector will be entitled to retirement wealth. All ex-pats will be enrolled into the scheme automatically, and the employer company will contribute to the savings starting from the date of joining till the day of retirement.
Learn Skills and Indulge in Modern Methods to Earn Money
Learn skills and indulge in multiple activities to generate cash from different sources. Do not rely on your basic salary only. Modern methods of earning a steady income include affiliate marketing that you can register for without any investment. Find out more about affiliate marketing in UAE here.
Consider Earning a Passive Income
Consider passive income sources where you can make investments and reap benefits without having to put in increased efforts. Invest in foreign property, purchase a property for rental purposes, buy national bonds, indulge in crowdfunding, or do dividend stock trading to create reasonable cash flow to spend the retirement years with peace of mind. Learn more about earning passive income in UAE here.
Say No to Loans
Avoid taking loans. Pay your credit card bills on time and clear off the debt before retiring from your jobs. Paying for loan installments after retirement can exhaust all your savings and you will be left with little or no savings to pay for monthly expenses.
Grow Savings with Bank Accounts
Grow your savings with saving accounts. A lot of banks in the UAE offer customers to open a savings account and earn a decent amount of profit per month or annum. For the best savings bank accounts click here.
Final Word
No matter what you do for a living or what sources of earning money you resort to, always weigh the pros and cons of retiring early and whether it’s a good idea for you to quit your job early in life. Early retirement has its own perks and downsides. For some, it can be a good way to pursue another career or follow their passion but for some, it might not be a good choice.
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