How Does Covid-19 Can Impact Your Retirement Plan?

Retirement planning in UAE is an important part of managing finances and preparing for the future expenses. To be self-sufficient and maintain the current lifestyle, after you turn 60, you need an action plan to begin saving.

 

However, as the coronavirus pandemic has ravaged the economy, retirement savings plans are taking a hit. The world has been in a panic since the outbreak of coronavirus, which has caused unprecedented market volatility. Although some people have been quick to compare this to the credit crisis of 2008 that lasted for five years. 

 

While the world is preparing to affront a coronavirus-fuelled economic downturn, all major financial markets are volatile, and unemployment is on the increase. But it is still important to have a plan in place to protect your financial future, especially if the economic damage of the virus takes longer to resolve.

 

Here’s what you can do to make sure you are still on the right track to hitting your long-term financial objectives.

 

Hold On To Your Money For Now

 

While it is of utmost importance right now to review and revise your financial planning strategies, it is equally important to hold on to your money for now.

 

Do not make big purchases and do not send money home. Instead, keep money intact to sustain yourself during these difficult times. As per the market experts, the UAE economy will not go back to what it used to be, rather it will be scaled down. The cost of living in the UAE will go down and therefore, people may not get salaries as they were receiving previously.

 

Companies are being forced to scale down the scope of their business owing to the impact of coronavirus pandemic. Many private sector companies have lost their earning power and income. So, even if the economy re-energises, it will be difficult for most companies to continue at their earlier pace of activity.

 

End-Of-Service Pay

 

Many employees who have been dismissed by their employers during the pandemic are having troubles getting their end-of-service settlements. With companies facing a cash crunch, some are falling short of funds to meet this financial obligation that employees are entitled to.

 

There is a system to protect people’s wages. Within this system, there is a requirement for companies to set aside some funds as a reserve. The reserve will accumulate as the employee logs in more time at the company and this is given to the employee in the form of end-of-service benefits, when they leave service. Therefore, employers must set aside money for staff’s end-of-service benefits. The employee can save this money for their family and future.

 

When an employee finishes his service in a company, he can choose either to access this money as cash upfront or get it as a regular source of income every month after retirement. You must check for such schemes and understand your right to end-of-service pay.

 

Adjusting to New Circumstances

 

While a significant proportion of UAE residents have taken a hit to their income, people are being advised to adjust to the new circumstances and be frugal.

 

Most of the people who are working from home in the new circumstances are not spending as much money as they did earlier. Going to malls and restaurants have become limited. People are forced to stay home, which has made them self-sufficient. This has also triggered a change in lifestyle for most Emirati as well as affluent expat families.

 

Rent accounts for the biggest chunk of the income. With entertainment expenses reduced significantly, people should manage to live within limited means in these emergency situations.

 

Opportunity for Novice Investors

 

The COVID-19 outbreak has made people smarter in their investment decisions. Current situation presents a good opportunity for amateur investors. For instance, if you are an expat renting property, this is a good time to consider buying the asset. You can put in your savings as a down payment and use a long-term mortgage to fund it. This will work out cheaper in the long run than paying rent.

 

You should not buy anything expensive, instead you should buy an affordable property and mortgage it for 15 years. In case, your financial situation goes awry, you can always rent it out to pay the mortgage.

 

You must read extensively or consult with a financial advisor if you are investing in asset classes like bitcoins or shares. You have to be very careful about which companies’ shares you invest in.

 

Beware of Online Scams

 

You must be wary of online investment scams and get-rich-quick schemes. Many online ads claim that they can help make money sitting at home. You should avoid such schemes. But if you have become a victim of such a scam, you must immediately report it to the authorities and prevent others from being cheated.

 

If You’re Already Retired

 

If you are already retired, it is imperative that you allow the income planning and generation process to run its course. If you did a good job for your retirement planning in UAE and you have a strategy for your retirement income, you must keep the strategy.

 

Your retirement plan should ideally have been designed so that any major event in the market should have a minimal impact long-term. But if you don’t have any retirement savings in Dubai, now is the time to talk to your financial advisor.

 

If You Plan To Retire In Next 10 Years

 

By now, you should already have assets positioned for future income. But if not, this is a lousy time to sell any type of securities, especially stocks and it is also not the time to drop a big wad of cash into any investment. Refrain from doing so and instead, check on the planning you’ve already done.

 

A dramatic market plunge due to Covid-19 can delay your retirement depending on how long the decline lasts. So, if you are 55 planning to retire at 65, it may mean pushing to 67. It’s unlikely to mean 75.

 

If you’ve been working with a financial advisor, you should have retirement plans in UAE that are designed to withstand this type of market volatility. If you have not, it is time to learn from the current events, start taking your retirement planning seriously and invest in retirement planning insurance. Find an advisor today, so that you can be prepared for the next financial crisis.