Are you saving for RETIREMENT?

Retirement is fondly referred to as the golden age, and rightly so. After years of hard work, one needs to sit back, relax and enjoy the tranquility that comes with old age. It is therefore prudent to think about retirement in your active life. You may expect pension from your employer, but this is never enough. You will need additional savings so as to avert monetary challenges upon retirement. It pays to plan for retirement as early as possible even if it seems a long way off. We tell you why…

Over the past few years, we have witnessed individuals who were high flying in their heydays living in abject poverty. One even shed tears during a TV show hosted by a renowned media personality. Our hearts went out to him and we blamed the government and everyone else for his poor state.

Just recently, the public was treated to the sorry state of one of the comedians who lit up our living rooms as we grew up. Indeed, he was a household name and the “Churchill” of his time. This raised furore on social media with all and sundry coming to his aid whilst castigating the government for turning a blind eye to heroes who once flew the Kenyan flag high, locally and internationally.

Well, if it interests you, there are so many elderly men and women, once active and able to fend for themselves, wallowing in destitution. It is noteworthy that some of them were doing quite well before…well…life happened. That is the sad state of affairs in Kenya.

Why you ought to save for retirement

This begs the questions: Are Kenyans really keen on saving for retirement? The answer to this question lies on the state of the retired citizens, many of whom are relying on their children to get by, and rightly so, they argue. Didn’t they spend all their money educating their children and in the process were left with nothing to cushion them in old age? Majority of today’s working young men and women are forced to not only grapple with the high cost of living, but also the burden of caring for their aged parents and younger siblings. This ultimately prevents them from making investments and they end up frustrated and disillusioned. This contributes to the vicious cycle of poverty experienced in many Kenyan homes.

But it need not be this way. The concept of children helping their parents in old age is entrenched in the African culture but something has got to change given the current economic constraints. One way of averting this scenario is through encouraging people to save for retirement, even if it seems several light years away.
There has been concerted effort from the government through National Social Security Fund (NSSF) and Retirement Benefit Authority (RBA), and the private sector to encourage Kenyans to save as much as possible before old age comes knocking. The government’s proposal to increase NSSF deductions attracted considerable opposition from workers’ unions who felt the increment was unjustified. The government stuck to its guns and now both employers and employees remit amounts commensurate to their salary to NSSF. Many retirees will tell you that the pension money is not enough to take care of all your needs during retirement and it is thus imperative that you start putting some more on the side.

How much will you need?

Many retired Kenyans get their money from several sources such as pension, NSSF, investments and their own personal savings. Some also prefer to take up part time jobs to get by.

It is foolhardy to believe that everyone’s needs during retirement are the same. Each individual has his or her own retirement needs. When planning for retirement, take into consideration these two aspects: what sort of lifestyle you will want and where you will live. Ask yourself questions like: what will be my cost of living in retirement? Will I be living in my own home or renting? Will I retire in town or upcountry?

Answering these questions will help you know how much you will need for retirement. Remember, some of your costs will go up (for instance, healthcare) while others such as education, clothing, and work related travel would definitely go down. You also need to factor in your retirement goals like travelling to new places or joining social clubs. You will need more savings if you rent a home to cover the cost.

Aim to be debt free by the time you retire, as this will significantly reduce your cost of living. Pay off any debt as quickly as you can before you go for retirement. As you budget for retirement, consider issues like insurance, maintaining your house and/or car and build in some funds for the unexpected or any emerging issue. The average life expectancy for Kenyans has been on the upward trend since independence and this means that we are living longer, which is good news. This also means that you need to save more money to sustain yourself in retirement – the earlier you start saving, the better.

PUBLISHED MAY 2015