What Is Your Go-Back Fund As Of Today?
Build Wealth, Plan B, Saving For The Future

What Is Your Go-Back Fund As Of Today?

Like me, most people came to Dubai for a good lifestyle, and to make money. Dubai is a city of dreams, I love staying here and my lifestyle in Dubai.

I am sure most expats who stay here, would say the same. But the truth still remains, whether we were born here, or if we came here for a better lifestyle, we all have to leave one day.

Leaving the UAE by choice is a different story, but what if you had to leave for any other reason?

How much money would you go back with? 
What assets have you built as of today? 
I hope you won't be going back with nothing.

What is your go-back fund? Have you thought about it? I hope these questions compelled you to think about this important subject.

Have you started building wealth yet? If yes, are you happy with your progress? If no, what are you waiting for?

Please forward this article to some one who could start building wealth.

Feel free to leave your questions, comments or suggestions below.

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The Guaranteed Savings Plan I Took For My Daughter
Case Studies, Financial Planning In Dubai, Saving For College, Savings Plans

The Guaranteed Savings Plan I Took For My Daughter

On the 28th of April 2016, I started a savings plan to save money for my daughter’s higher education fees.

As an independent financial advisor myself, I was faced with the decision of choosing between all the different providers of savings plans that are available in the market.

I used the following factors to evaluate and choose the best savings plan for me.

Principle Protection

  1. The S&P500 Index savings plan from Investors Trust is one of the two principle protected plans available in the U.A.E., that are ‘principle protected’.
  2. ‘Principle protected’ simply means that my capital is assured. The S&P500 Index savings plan assures that at the end of the term, the capital plus 40% (140%) is assured as the worst case scenario.

Fine print – This is subject to me contributing all the premiums over the full term.

This means that I have to ensure that I don’t miss any premium at all. While this may seem inflexible, I can pay future premiums in advance to avoid losing the guarantee.

I prefer this plan over other plans in the market, that provide no principle protection whatsoever. Moreover, with other savings plans, I could get back less than what I invested.

Market Participation

This product provides me with 100% market participation. This means that I get the actual performance of the market without any limits on the growth.

Underlying Investment

  1. Other savings plans in the market such as Vista from Zurich International Life, or Premier Advance from Friends Provident International, or Vision from Generali International, etc…, offer mutual funds as the underlying investments.
  2. While there is nothing fundamentally wrong with mutual funds, the fact remains that mutual funds are subject to market risk and have to be chosen correctly. The key here is ‘mistakes happen’ when selecting mutual funds.
  3. Wrong choice, now or in the future, could lead to losses in the portfolio.
  4. The S&P500 Index savings plan offers the S&P500 index as the underlying investment choice.
  5. There is only one variable that could affect the performance of the portfolio, which is the S&P500.
  6. This plan works without intervention from the plan holder or the financial advisor.

The advisor cannot make mistakes, causing you to lose money.

The S&P500 is simply a numerical index that gives the average performance of the top 500 stocks in the US stock market. I like the simplicity of this investment.

I don’t have to pick and choose anything where ‘mistakes could happen’.

Moreover, Warren Buffett himself advocates the S&P500 as the best investment to everyone including himself.

Not only that Warren Buffett has famously wagered a million dollars on the performance of the S&P500 over the best hedge funds in the world – Protege Partners.

This was a 10-year bet which is into its 8th year and Warren Buffett is right so far. The S&P500 has beaten the hedge fund in overall performance in the past 8 years.

Performance of the S&P500 Index

Historical performance matters even though it may not be an indicator of future results. All I did was look at the 25-year performance of the S&P500, and my mind was made up.

The S&P500 has averaged 12.98% per year over the last 25-year period.

Charges

There is a saying in life that you get what you pay for. This product is slightly more expensive as compared to the other savings plans in the market. But there are three factors that made me choose this product over the others.

  1. Principle protection of 140% which the other products don’t have, and
  2. Index fund – S&P500 that has actually outperformed any of the funds in the market over 25 years.
  3. Warren Buffett (one of the richest man in the world recommends it)

Term – (number of years)

The S&P500 Index Savings plan is only available for a term of 15 years. While others might find this unsuitable for their savings and investment goals, I found this perfect for my goal of saving for my daughter’s education.

She is 3 years old and I have exactly 15 years before I have to shell out approximately USD 320,000 for her higher education fees.

Specifics of my investment

My investment details are as below:

  • Monthly Contribution – USD 1,000
  • Term – 15 years
  • Total contribution – USD 180,000
  • Minimum Guaranteed amount (after 15 years) – 140% i.e., USD 252,000 or actual market performance.

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Saving for retirement

Retirement Planning and the Rule of 72

Retirement planning and 30 somethings

It is reasonable to assume that most individuals in the UAE who are 30 somethings have never given a second thought to retirement planning. Most individuals who plan to retire at 65 think they have ample time to start saving for retirement since they are only in their 30’s. Others think that being expats in the UAE, they will move to another country and settle down there and then start saving.

But there is a high cost of waiting associated with reaching your financial goals, especially retirement planning.

The ‘Rule of 72’ and Retirement Planning

If you are in your 30’s it is high time you read about the ‘Rule of 72’. The ‘Rule of 72 states that if you divide 72 by the interest rate or the inflation rate, you can get the number of years in which your money or expenses will double.

Savings in the bank vs Investing

Take the UAE for example. The cost of living in the UAE increases by 4% every year and the interest you get on your money in the banks here is 2%.The problem is apparent, if you divide 72 by these numbers, you will find that your ‘Cost of living’ or ‘expenses’ will double every 18 years, and your money in the bank will double every 36 years.

The solution is obvious. The sooner you start your retirement planning by saving and investing money towards your own retirement expenses, the easier it will be as time goes on to achieve your retirement planning goal.

Note – Going by the calculation above, your money should be invested in a vehicle that gives you more returns than inflation in dollar terms in order to maintain its purchasing power.

Example calculation for a 30-year-old considering retirement planning

If you are 30-year-old, living in the UAE and have living expenses of USD 5,000 per month as of today, by the time you are 48 the cost of living will double to USD 10,000 per month going by the ‘Rule of 72’. By the time you are 66 and retired, the cost of living will be USD 20,000 per month. If you live to be 84, it will be USD 40,000 per month.

At the same time, your income will stop at 65 and your money will only double every 36 years. The graph below illustrates this example.

The next step – get started now

Contact a professional financial planner and get started as soon as possible. Time is money literally, when retirement planning is concerned.

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Best Savings Plans
Saving For The Future, Savings Plans

Best Savings Plans in UAE

Best Savings Plans in UAE

(Updated February 2019)

I am writing this article because as an independent financial advisor, I get asked frequently which are the Best Savings Plans in the UAE.

The criteria I have used below reflect my own views, both as a customer myself with my own savings plans from different companies, as well as my experience as an independent financial adviser.

Local vs International Providers

When investing one’s hard earned money, I generally recommend considering international providers only.

This is because they have the pedigree, experience and expertise to design products that perform well.

Local providers are not recommended.

Also, make sure that the international provider you are evaluating is licensed to offer investment products in the U.A.E. This ensures that you have legal recourse should things go wrong.

Licensed International Providers in the UAE

I have listed below providers of savings plans in the UAE who are licensed and whose products are regulated in the UAE.

  1. Assicurazioni Generali (closed to new business as of January 2019)
  2. Metlife International
  3. Zurich International Life
  4. Friends Provident International (Part of Aviva Group)
  5. Investors Trust S.P.C.

Types of Savings Plans in the UAE

There are mainly two types of savings plans in this market:

  1. Unit-linked savings plans based on mutual funds.
  2. Index linked savings plans that invest in stock indices.

Pros and Cons of Unit-linked Savings plans

  1. Shorter terms (as low as 5 years).
  2. Wide choice of mutual funds themes to choose from.
  3. Choice of funds is not always good as you have to select the right funds or rely on the knowledge of your adviser.
  4. Moreover the choice of funds has to be kept relevant with changing economic situations, i.e. the choice has to be reasonably correct to match changing markets.
  5. These plans are not capital protected.
  6. The returns on these plans are not guaranteed.
  7. These plans perform well only if held till maturity.

Pros and Cons of Index-linked Savings plans

  1. Terms tend to be longer than 10 years.
  2. Indices outperform fund managers over time.
  3. No control over where the money is invested as the money is invested directly in the indices.
  4. Recommended by Warren Buffett.
  5. No choice of funds to be made or changed.
  6. No timing the market.
  7. Capital protected
  8. Minimum yield assured (in most cases 140% is guaranteed in writing as a minimum)
  9. If the market performs better you get the full benefit.
  10. Catch - all the premiums have to be contributed without fail to avoid losing guarantee.
  11. Pre-funding allowed for upto 3 years.

Best Unit linked Savings Plans

In order of preference, based on flexibility and charges.

  1. Evolution (Investors Trust) - Investors Trust Evolution Review
  2. Wealth Builder (Metlife) - Metlife Wealth Builder Review
  3. Vista (Zurich International Life) - Zurich Vista Review
  4. Premier Advance (Friends Provident International) - Friends Provident Premiere Advance Review
  5. Vision (Assicurazioni Generali) - Generali Vision Review

Best Index-linked Savings Plan

  1. S&P 500 (Investors Trust) - Investors Trust S&P500 Index Review

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Click the button below and Ask your question.

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How to Plan For Retirement- Preparing for the Future
Saving for retirement

Pension Retirement Plans Dubai

How to Plan For Retirement- Preparing for the Future
How to Plan For Retirement-Enjoying the Fruits of your Retirement Plan

One of the realities of life is that, at some point, everyone has to stop working and retire. For some, this is a golden opportunity to enjoy their golden age and do things they couldn’t do while they were busy working and raising a family.

For others, however, having no pension retirement plan prepared can be a very scary prospect, with no more work and expenses continuing to increase. Even though work stops, the truth is that life doesn’t.

Factors to consider – Pension Retirement Plans

The most important factor in planning out your retirement income is to plan ahead- the sooner you start to plan, the better. When you are in the prime of your career where you are receiving a steady income, you should begin to put money aside to have a source of income when you retire.

This can be done by diversifying your sources of income – small investments that yields income will eventually add up when you retire to provide you with a comfortable living.  If you are frugal you may find that your retirement income is actually more than enough to live by.

Choosing Pension Retirement Plans

Pension retirement plans are very important in the retirement planing process and are viewed, wrongly by many, to be the sole means to achieve an appropriate sustainable income in retirement.

There are several ways to back-up your pension retirement plans and in doing so, it is feasible to have a more financial security.

  1. Begin Saving Now! The earlier a Pension retirement plans is looked into the better. It is much better to start one at twenty than it is at forty. The longer you save, the more you will receive when you retire.
  2. How much must I put in? The simple answer is as much as you can afford. However, it is worth bearing in mind additional forms of savings for retirement, such as investing in stocks and shares.

Managing our funds and having personal stability is definitely an essential matter for a number of us. When we spend so much time trying to earn money, its good to know that our income is working hard for us too.

Probably the most vital factor in our wealth management that requires necessary consideration is our Pension Retirement Plans. After a lifetime of non-stop work to earn income, we want to have the assurance that we can relax in our retirement with enough funds to take full advantage of it.

There are a number of pension schemes available to help us to do this. It is good idea to seek financial advice on  Pension Retirement Plans that are suited to our financial needs.

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How to plan for retirement
Financial Planning In Dubai, Saving for retirement

How to plan for retirement

How to plan for retirement

Lets face it, no matter who you are, what you do and how old you are right now, there is day when all of us will retire, or at least want to retire.

How to plan for retirement

For most people retirement means having financial independence and being able to make the choice of working or not working.

How to plan for retirement – Questions you need to ask yourself

  • Would you want to able to afford at least the same lifestyle you are living today?
  • Would be comfortable being dependent on your children or others for your monthly expenses at retirement or be financially independent?
  • Do you want to have the freedom to ‘Do what you want, when you want and how you want’ when your retire?

How to plan for retirement – When do you plan to retire?

When I meet people about financial planning one of the questions I ask is ‘When do you plan to retire?’. Most people have a blank look in their eyes, while others say between 45-50. Some say 60-65. The point is, there is no right or wrong answer about the right retirement age, it all depends on your own personal situation, wants and needs.

But, not planning for retirement is the most common mistake people make. Some procrastinate while others pretend that their game has no end. Others say that they have more important commitments like children’s education planning to look after before they can consider retirement planning. Like it or not, I tell them that they need to start thinking about retirement planning and the earlier the better.

How to plan for retirement – Where do you want to retire? and what do you see yourself doing?

When considering ‘How to plan for retirement‘, consider where you would want to retire. Answer the questions below to yourself in as much detail as possible. I cannot stress more on the importance of doing this.

Unless you have a detailed picture of your retirement years, you will keep wondering ‘How to plan for retirement‘.

  • Which country do you see yourself retiring in?
  • What do you see yourself doing during retirement?
  • Would like to travel around the world, visiting countries you haven’t seen?
  • Would you like to build your own dream house?
  • Would like to do any particular activity which is not possible right now?

How to plan for retirement – How many years after retirement should you plan for?

Based on your family health history and your own lifestyle choices, you can probably arrive at a number of how many years you would expect to live after retirement, and consequently the number of years you would need to plan for, to be financially independent after retirement.

If you expect to retire at 60, typically you would need to plan for 20-25 years after retirement.

How to plan for Retirement – Calculating the total amount you would need to have by retirement to live comfortably

This is a tough one, especially if you haven’t done the previous section correctly. Based on the questions answered earlier, you will now have a rough idea about how much you need on a monthly basis, to do all the activities mentioned above. If not, I can always help you arrive at this figure when we meet in person as I have a very comprehensive version of a retirement calculator in the form of an excel file.

But to begin with, start by thinking about your basic monthly expenses in today’s terms for maintaining the same lifestyle your are leading now. This should be fairly easy to calculate based on your current expenses. Multiply this number by twelve to get an annual figure. Then itemize the approximate annual expenses of all the other things you would like to do at retirement in today’s terms. Add all of the above and you will arrive at a number, which you can call ‘Total Annual Expense at Retirement in today’s terms’.

Then you have to factor in the effects of inflation and calculate the future value of the ‘Total Annual Expense at Retirement in today’s terms’ at the age of retirement. Then you need to calculate the total amount you would need in bank deposits to earn you the calculated future value in interest annually.

After all this is done, you need to back calculate the monthly amount you need to save in order to hit this number at retirement.

Feel free to leave your questions and comments below.

 

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