How practical is it to invest and retire a millionaire?
Retirees who manage savings across multiple accounts face complex calls during payout
Dubai: Becoming a millionaire is a goal that many dream of, but the journey to reaching that milestone requires careful planning, discipline, and smart financial choices.
“While there’s no one-size-fits-all formula, the path to financial independence and retirement as a millionaire can be navigated through a combination of saving, investing, and strategic decision-making,” said Masher Suleiman, a fiscal planning associate based in Abu Dhabi.
Snags of traditional saving, investing
“The orthodox advice is to save 10-12% of your income for retirement. But if your goal is to be a millionaire by the time you retire, this rate may not suffice, especially if you plan to reach the goal early in life,” said Suleiman, who specialises in on how overseas investments are taxed. Here’s an example.
Let’s say Max, at the age of 35, earns Dh50,000 a year, saves 10% of his income, and invests his savings in the stock market or deposit it at the bank with a 7% average annual return. By age 55, with a yearly salary hike of 5% to account for change of jobs or salaries, he accumulated nearly Dh260,000.
This is very far from the million-dirham goal he aimed for. However, if Max hikes his savings rate to 25-35% of his income, with all other variables same, he could reach Dh1 million before turning 55. But is this a feasible plan?
While the key to becoming a millionaire lies not just in saving but in saving more and putting your money to work through investment, it may not be always practical as this often comes at the cost of lesser personal spending power over the years
Setting realistic savings goals is complex
“While the key to becoming a millionaire lies not just in saving but in saving more and putting your money to work through investment, it may not be always practical as this often comes at the cost of lesser personal spending power over the years,” added Suleiman.
Parthiv Patnaik, a Dubai-based financial planner, agrees. “While the goal of becoming a millionaire early in life is appealing, the reality is that it’s not an achievable target for everyone. Many face barriers such as high living costs, student debt, or low salaries that make saving aggressively difficult,” he explained.
“Surveys on saving habits reveal that most people spend their income on daily expenses, loans, and bills, leaving little room for substantial savings. Furthermore, excessive debt can quickly deplete the funds you do have, making it even harder to save and invest for the future.”
Role of diversified investments is crucial
In order to know what’s realistic for you, it’s key to gauge the role of investing on your investments, both experts explained. “Beyond saving, investing regularly and routinely diversifying them not only allows you to accumulate funds over time, but also compound your wealth faster,” added Suleiman.
“If you invest Dh10,000 and earn an average return of 10%, your investment grows by Dh1,000 in the first year. The next year, you’ll earn Dh1,100, and this growth continues. Over time, even modest investments can turn into substantial sums, with the potential to double in value within seven years.
“Investing, however, requires patience and consistency. By making regular contributions, even modest ones, and routinely switching them around to what makes more money, you accumulate wealth faster. But, like saving, investing involves risks and requires a careful approach to ensure long-term growth.”
For example, people who heavily invested in real estate saw their portfolios decline during market crashes. Therefore, diversifying your investments across different asset classes—such as stocks, bonds, and real estate—can help reduce risk and ensure steady growth.
Build wealth by diversifying your investments
“To build wealth and retire as a millionaire, it’s essential to adopt a strategy of both saving and investing,” said Patnaik. “Diversifying your investments helps manage risk while maximising potential returns.
“What this means is to routinely split your money between high-risk and low-risk investments like stocks and bonds respectively. It’s often stressed that having a variety of asset types allows you to balance risks, ensuring that if one investment performs poorly, others may provide stability and growth.”
Patnaik also added that aside from the idea of becoming a millionaire through saving and investing might being daunting, especially if you're starting with limited income or face high expenses, managing savings across multiple accounts presents another layer of complexity for those nearing retirement.
“This can potentially harm long-term financial security, leaving retirees with an unstable income. Higher-wage earners tend to annuitise larger accounts (i.e. turn retirement savings into periodic payments) but cash out smaller ones, which can also impact their retirement income and planning.”
Key takeaways?
1. While becoming a millionaire through saving and investing is a practical goal, it requires discipline, time, and strategic decision-making.
2. By saving aggressively, investing wisely, and diversifying your assets, you can steadily build wealth and enjoy financial security in retirement.
3. Remember, the road to a million dirhams is not an overnight journey but a series of deliberate steps over time. Start early, stay consistent, and adjust your strategy as needed, and your million-dirham dream can become a reality.