Has saving become stressful? Beware of the cost of over-saving
Saving too aggressively? Learn to strike the right balance for financial peace.
Dubai: Saving for retirement is often hailed as a financial must-do. For many in the UAE trying to manage expenses, save for a home, and still plan for retirement, the idea of saving "too much" might sound unrealistic. But financial planners say it’s not just about how much you save—it’s also about how you save and what you're giving up in the process.
Take the rise of the FIRE (Financial Independence, Retire Early) movement, for example. Inspired by stories of people retiring in their 30s by saving 50% or more of their income, some residents are aggressively cutting spending to meet similar goals. But that approach doesn’t work for everyone.
"We’re seeing more young professionals in the UAE trying to fast-track their savings by being overly frugal," says Dubai-based wealth advisor Lara Tan. "While the discipline is admirable, it can lead to burnout or even delay other life goals like starting a family or investing in property."
Why saving too much can hurt
The idea that you can save too much might seem counterintuitive. But excessive saving can cause financial strain during your prime earning years. If you’re constantly stressed about hitting a savings target and forgoing important needs or experiences, the long-term effects can be negative.
One of the biggest missteps? Over-relying on general retirement calculators. Many financial tools assume you'll need around 80% of your current income in retirement. But that's not a one-size-fits-all rule.
"Some people might need just 55%, especially if their home is paid off and children are independent," notes Abu Dhabi-based financial planner Rami El Khalil. "Overestimating means you could end up saving more than needed, limiting what you enjoy today."
Location and lifestyle matter
Where you plan to live in retirement also makes a huge difference. A retiree staying in their mortgage-free UAE home will need far less than someone planning to relocate or rent elsewhere. Housing, after all, can account for 30-35% of annual expenses. A paid-off property can cut future savings needs dramatically.
How to find the right balance
The good news is that you don’t have to guess. Here are three smart steps to avoid over-saving:
Set your retirement timeline: If you're more than 10 years away, aim to save 10–15% of your income. Closer than that? It's time to refine your target.
Customise your numbers: Rather than relying on the 80% rule, map out your expected retirement expenses. Subtract costs you won’t have (like commuting or school fees) and add new ones (like travel or healthcare).
Account for income sources: Include pensions or end-of-service benefits, and factor in healthcare costs. The more these cover, the less you need to save.
Bottom line
Saving is critical, but overshooting your target can leave you unnecessarily cash-strapped today. Aim for smart, not extreme. A well-balanced savings strategy doesn’t just set you up for the future—it lets you live well in the present too.
Sign up for the Daily Briefing
Get the latest news and updates straight to your inbox
