You can retire today – here’s how to do it

How much money do you need to have in the bank, earning you interest, so you can retire right now?

Gary Clement for The National
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How much money do you need to have in the bank, earning you interest, so you can retire right now?
Imagine – just imagine – never having to get up and go to work just because you have to, because you've got bills to pay and can't afford not to.
Now imagine getting up for work and loving it – what you do, who you work with, and hanging out with your colleagues. The money you earn is an added bonus.
My ideal is to have both the stash of cash to take care of my life's outgoings, and have the luxury of working part-time or as and when on things I love – earning me bonus money over and above what I need.
Sounds fantastical? Not really. It can be done. I was calculating what I would need to have in the bank to do just this the other day, and yes, it's a whoppingly scary figure. I suggest you do the same. This is how I did it:
Work out your annual spending – by which I mean take every single thing into account – then multiply it by 25. That's how much you need to retire – today.
Let's go through it together.
Please meet Family X – an expatriate couple with two young children who are conscientious about money and like to live sensibly.
This is Family X's cost of living in dirhams (It's by no means a comprehensive list, and doesn't reflect an average cost of living but it gives you an idea of what I'm talking about):
Dh100,000 for housing
Dh5,000 a month = 60,000 a year on food and eating out
Dh1,500 for clothes and gifts a month = Dh18,000 a year
Dh70,000 for school for two
Dh5,000 for insurance
Dh20,000 for holidays
Total: Dh273,000 annual spending
Multiply this sum by 25 and you get Dh6.825 million.
Now pick yourself off the floor, and let's go through why Dh6.825m is the magic number for Family X to stop working, today, for ever.
Caveat This is an oversimplification, and doesn't take into account things like savings for your children's tertiary education or building your dream home. And those of us who are expats are guests here in the UAE, so plans for retirement will include living in another country.
It doesn't even factor in that bigger, better gift you feel compelled to buy to show someone you really love them, or because the person you're gifting it to is so much wealthier than you and you're embarrassed not to buy them something you think they would like or want.
But it gives you an idea of what today's money means for your future, with the maths to show you the way.
The idea is this: I'd like to introduce you to the Safe Withdrawal Rate (SWR).
This is how it's defined: It's the maximum rate at which you can spend your retirement savings, whereby you don't run out of money in your lifetime.
Again, a caveat. This is a simplification. I realise the SWR doesn't take into account the unpredictable, and the roller coaster of what life, and economics, will throw at you.
But it's a start, and a great way to get you focused on what you need to do to get to a point where you can choose to work, not have to.
Back to the SWR – there's something called the 4 per cent rule that many experts believe can see you through retirement. It's become an industry standard for a safe withdrawal rate. It's the interest on your capital you can spend without worrying too much about being able to go on living this way. Some of your savings would be in stocks and shares, perhaps rental properties, and other assets. Some would do better than others.
Four per cent of Dh6.825m is Dh273,000 – Family X's annual spending.
There's a massive series of calculations called the Trinity Study that goes over various scenarios of maximum sustainable withdrawal rates over decades – look it up.
The situation I'm talking about is slightly different. First of all, I'm putting to you the idea of retiring early – now, in fact.
You are still wondering if can you afford to. Your calculations should not be based on the "average" number of years of retirement that typical planning sites or experts talk about – it will be much longer.
Your retirement is all about the luxury of choice: what time to get up, time to spend with loved ones, and the ability to pick and choose whatever hours you end up working on your part-time passion.
Plus, I'm not talking conventional retirement where you stop working completely. No. You have skills and passions that will earn you more than pocket money. This is money on top of what your savings will give you, and so you will actually have more than 4 per cent of what you've saved to live on.
Just think about it: at a time when governments are working out how to get their citizens to work until they are much older, and fretting over provisions for pensions and pensioners, you could be living your dream – retired early, and still earning as you go along.
Now do this exercise for yourself – it will change your life.
Nima Abu Wardeh is the founder of the personal finance website You can contact her at