Retirement income

Where to invest for retirement

“ The trouble with retirement is that you never get a day off   

Abe Lemons

As retirement becomes a reality and not a far-off plan, we have discussed this several times and agreed that retirement planning starts from your first paycheck. It is crucial to map out where you want your sources of income to come from, that you start, plan and test and adjust as necessary. In retirement cash is king, and the biggest concern is how liquid are you to meet your everyday needs.

From the onset, let’s walk in the clarity that the choice of investment vehicle will be dependent on how much time you have to get to your planned retirement. One of the key reasons to build sustainable wealth is so that you can retire comfortably.

So, let’s look at the possible places where you should consider investing for retirement

  1.  Regulated Pension Scheme

The Retirement Benefits Authority is the regulatory body that oversees, matters pension in the country. The good thing about investing in a regulated pension scheme is that you have the comfort of knowing that your investment will not be placed haphazardly and that it is being handled by professionals who have been vetted.

Most pension schemes allow for individual investors with some requiring amounts as low as Kshs. 20 per day.

Because of the mix of the prescribed investment areas the returns tend to be conservative. I usually prefer investing in a pension scheme as a minimum. At retirement, your investment is converted to an annuity from which you will receive a monthly stipend.

The best way to approach this investment is to start early so that you take advantage of compound interest which then makes your investment grow faster with time.

  1. Agri-business

Opportunities abound in the agricultural space, especially where farmers practice smart farming.

It could be in rearing animals for the commercial sale of meat, milk, and eggs. Farming horticultural crops especially for export has great potential. As well as fish farming and apiculture.

The trick with agribusiness is to start early to test the market, and the best practices including contingencies because of climate change.

Starting early gives you the advantage of getting through the learning curves while you still have another source of income means any failed season will not cripple you.

It also makes the transition much smoother since you will have secured constant cashflows.

Most people default to agriculture in retirement because of access to land but they don’t have experience in any kind of farming. This is dangerous because there is the likelihood that they could lose most of their retirement nest egg while trying to chase this dream.

So, my recommendation on this is only to venture here in retirement if you are already done with the experimentation stage and are sure of what you are doing.

  1. Real estate

I know the fad of buying land all over the place with no clear strategy of what you will use the land for. In fact, most of us are happy to buy land in remote areas for speculation. When you think about it isn’t a good strategy.

The key to the purchase of a good piece of land is located. A good location means you can develop the land for commercial purposes such as housing rentals or commercial offices.

It also means that you can do land banking, which means because the land is in a good place, it naturally appreciates and you can easily dispose of it.

Real estate is good also for busy professionals or those in business who can scout around for property to buy during their working life so that at retirement they have income from rental properties.

All in all, the only good kind of real estate at retirement is the one that puts money in your pocket.

  1. Government Sponsored Provident Fund (NSSF)

The National Social Security Fund has been around for a while, and the fund seeks to secure its workforce at retirement. Currently, the contribution is Kshs.200 per month, with a match of the same by employers, making the total contribution Kshs. 400.  Which is not very much considering at retirement you want to replace your income by as least 75%.

Because it is a provident fund then at retirement you can access all your contributions.

For me, I recommend you make your contributions to NSSF for compliance with the law., but keep in mind it will be a drop in the ocean, at the time of retirement even if you have been contributing faithfully for over 30 years.

retirement ready

      5.  Treasury Bonds.

One of the best places to put your money as you head to retirement is in Government Treasury bonds. By lending to the government, you are paid a return every 6 months. And it is one of the least risky areas to invest in. To achieve a good monthly income, space out your bond purchases over 6 months of the year. This means you will have an income all year round.

The other advantage of this investment is your capital remains intact and will be refunded back at the end of the tenor of the bond, which you can choose to roll over to a new bond.

This is a good investment avenue for retirement and starting early to build the capital for the kind of interest income you need monthly is key.

        6.   SACCOs

Over the years the role of SACCOs have morphed from being seen by members as a credit lending institution to an investment partner. This is because, SACCOs have been increasing their dividend and interest rates, making it easy for members to make plans around the annual payments.

I know some of my friends who have opted to leave their shares and deposits in the SACCOs well into retirement because they are assured of a good return on interest and dividend income, annually.

The trick here is to invest in a good SACCO otherwise it is very easy to get your hard earned money going up in smoke.

       7. Invest in stocks

Some people are fearful about investing in the securities exchange, and sometimes I say this is rightfully so because you need to know what you are buying and why you are buying into it. So, I will advise that you seek out your investment professional for advice. That said the Securities Exchange has opportunities especially if you invest in stocks that are known for a constistent dividend payout.

Remember at retirement your biggest concern is cash, and so if the stocks appreciate in value that is a bonus, but the primary role of the stocks you pick will be for the annual dividend payout, which is characteristic of blue-chip stocks, that have reached the maturity stage.

      8. Business

In retirement, most people try their hand at various business opportunities. I encourage this, provided you were purposeful in starting the business before retiring. If you have been in business all along, it will be important for you to have started scaling long before your retirement date so that the business can thrive long past your exit.

As a businessperson seek to delegate and have processes and systems that are easily adaptable to employees. This will ensure sustainability in your absence.

    9.  Income/Money Market fund

This I find an alternative to investing in treasury bonds because it generally works the same way in giving you a monthly payment.  However, this fund is run by investment funds and schemes which means you need to be picky. Some investment funds will allow the full withdrawal of the capital invested, so if you struggle with financial discipline this fund may not be for you. If you choose it, do review the return rate making sure that it will suit your lifestyle.

Navigating retirement planning is often seen as a bothersome task especially since we often believe we have more time than we  actually do. Intentional planning saves you lots of headaches and heartaches.  So how are you getting ready for your retirement, today? Let’s chat in the comment section below.

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