Retirement Planning in Kenya

Retirement planning is necessary because we don’t have an infinite amount of energy and so we have to plan our finances for when our bodies “slow down” so to speak, and we cannot be as active as when we were younger.
Investopedia describes retirement planning as financial strategies of saving, , investment, and ultimately the distribution of money meant to sustain one during retirement.

Some of the reasons why we need to plan for retirement include:

1. You will not be able to work all your life;

As suggested earlier, as much as many of us believe that we will always be able to work, it is just not possible to work with the same amount of energy at say 70 years as when we were 25 years. It is important then, to put aside some of your earnings to cater to what

2. Enjoy sunset years without financial worries.

When you retire or leave active work, the one thing you will have is an abundance of time. You will have a lot of time and it would be good that you do not have financial worries. Obviously, there is no shortage of things to do if you had all the money you wanted in the world.
However, the goal at retirement is to not only be in survival mode but to thrive. For some, this is the time to travel and explore new places, enjoy fine dining, pursue abandoned hobbies and even volunteer by giving both time and money.
All these can only be achieved if you plan ahead and in good time.

3. Ensure investments can meet the growth in expenses

Retirement comes with a different set of needs for every individual. For example, it is expected that there will an increase in medical expenses owing to the gradual failing of one’s health. So medical expenses should be catered for, accordingly whether through Medical insurance or self-insurance. 

In contrast, some costs are expected to reduce. Costs, such as commuting costs from one place to another will reduce significantly. The plan is to ensure that every expense is properly catered for, as well as inflation being factored into all investments.

4. To give you dignity in sunset years and be self-reliant upkeep

One of the biggest elephants in the room in retirement is the lack of proper planning. Where we are in the position to afford to join a pension scheme and contribute consistently yet we choose not to, then it is highly likely that we will have some regrets at retirement.

We may choose to say that we will rely on our children for survival, throughout our retirement years but this will rob us of our dignity. You can imagine if you have been independent though your adult life and now having to explain to someone why they need to give you money for food, or even giving an account every time, you spend money. 

When it comes to retirement planning, hope cannot be our only strategy. We’ve got to be intentional and plan meticulously.
It then follows that we need to have a strategy on how to plan for retirement.

How do we  plan for Retirement?

There are various issues to be considered and addressed in planning for retirement some of them include;

a) Consider your current living expenses

The best indicator for the amount of money and investments you will need in retirement is your current living expenses. The reason being that this amount is known and you can easily project forward to give a good estimate for what your future expenditure will be. To get a good feel of this, write down each expense. The chances of leaving out an item are greatly reduced when you have a written-down list. Remember to also include your seasonal expenses such as insurance and annual subscriptions.

b) Evaluate your Assets

This is a listing of the assets you have that can generate an income for you. List down all your financial assets. Incidentally, the asset need not be tangible. It could be your skills and talents that you can leverage to earn an income. Realistically project how these assets will contribute to your retirement income.

c) Review Debt and other liabilities

Debt usually poses a challenge in achieving financial independence. It reduces the amount available for saving and investing. Even in dealing with “good” debt, we must be intentional in tackling it, otherwise, it will make for a rough retirement.
The process should begin with listing down, every debt you owe. This will help you know the total debt as well as give you a picture of how to start repaying it.

d) Time

Time is your greatest ally in planning for retirement. The younger you start saving and investing for retirement, the lower the amount you will have to save in the long run.
Retirement is a long game and it needs years of consistent saving and investing to achieve the desired result.
This is not to say that if you did not start to invest early, that all is lost. Far from it! Age is still an advantage because you have bigger and hopefully better networks. You can, easily leverage your experience to get better paydays for both your main hustle and your side hustle.
So, whether you are young or old consider what you can easily bring to the table.

e) Finally, but not least, project and simulate what you will need to live on. 

Get actuarial charts that show the projected lifespan. Calculate the present value of amounts that you will need in the future. This step is very crucial in retirement planning. I would advocate that you engage the services of a professional e.g., an Actuary, Accountant, or Investment specialist to help you with this process.

Where should you invest your retirement funds?

In Kenya, the Retirement Benefits Act prescribes investment funds through which funds can be channeled to invest retirement. 

It is important to invest in schemes that are under the oversight of the Retirement Benefits Authority because the savings are safeguarded by various checks and balances put in place by the Authority. There are also some tax benefits.