Must-Know Tips for Ages 25-45
It is time to consider your retirement plan. Even if starting early can seem strange for a 25-year-old, it’s necessary to avoid the difficulties that come with rush hour. In old age, no one wants to be striving to survive. You must have a practical strategy that will grant you financial independence. Whether you are in your late 40s or mid-20s, you need to think carefully about retirement savings.
This guide will walk you through all the tips you require to plan for seclusion in Kenya, with an emphasis on the doable actions that are relevant in this day and age.
Why should you start retirement planning early?
Starting your retirement planning at an early age comes with incredible benefits. Starting early means that you give yourself more time to save. Furthermore, you allow your money to reap the advantages that come with compounding interests. Small contributions at an early age can accumulate to a substantial amount over time.
Additionally, you give yourself more control over your future. Risks of financial strain at an old age will be a thing of the past to you. Early seclusion planning is a sure way to maintain your lifestyle even when work stops!
How Much Do You Need for Retirement in Kenya?
Your lifestyle will determine the cost of your retirement. Aiming at 70-80% of your current annual income at your old age will assure you a good life in your retirement years.
The key determiners of retirement requirements are healthcare expenses, housing, and daily needs. Inflation is a two-edged sword that will not spare you seclusion income, so make sure you have all this factored in in your arrangements.
Let’s dive into the key steps that will help you plan better for your retirement
Key Steps to Retirement Planning in Kenya
First, set clear goals
Like any other business, numbers come far later after setting clear goals. What is it that you need during your retirement days? If you intend to travel across the world at your old age, then it means you will need a plan for the travel cost. For those young people with intentions to establish a home and spend the rest of their old age in the rural home, it means you need to factor in money for your home.
Clearly setting up all these goals will help you have a clear vision of the amount that you will need for your old age. Clear goals ensure that you have a clear picture of what every aspect will demand. Setting clear goals will help you determine the amount that you will need to save monthly to gather for your old age needs.
Second, join a pension scheme
One of the best ways to secure your retirement in Kenya is by joining a pension scheme. Several pension schemes are available for Kenyans. Joining the National Social Security Fund (NSSF) or any private pension scheme can help you start your retirement savings plan.
Every Kenyan who is working in either the private or public sector must join the NSSF. This, though, does not limit you from supplementing it with a private plan. The goal is to boost your retirement savings.
A small income or a stringent budget should not be a reason to ignore retirement planning. Why? Because most pension plans accept small savings as low as KSh 500!
Next is to take advantage of employer contributions
Most companies offer employer-sponsored pension plans. It is therefore important to check if you are working for such a company to benefit from their contributions. Most retirement policies are set up in a manner to free up some money for your retirement, so you should be in a position to take full advantage.
Take, for instance, you are working for a company that matches 5% of your salary for retirement; contributing to such a scheme will ensure that you save 10% each month. This can make a great difference to your retirement savings over time.
Afterward, you can diversify your investments
If you solely rely on your pension plan for your retirement, you may be in for old age surprises! You need to appreciate the power of diversification and use it to your advantage. First, it accords you with multiple income streams during your old days. Secondly, it gives you the pride and prestige to leave assets for your generation.
There are various investment vehicles you can opt to in Kenya to finance your old age needs:
- To begin with, invest in property so that you can earn rental income at your old age.
- Secondly, unit trusts and mutual funds will give you the power to invest in stocks, bonds, and other assets.
- Finally, you may opt for government long-term bonds, which are often low-risk investments with a steady income flow.
Diversifying your investments ensures that you spread your risk while also increasing your chances of financial security at your retirement age.
Finally, start saving in your emergency fund
The importance of an emergency fund cannot be understated. We live in a world full of surprises and events that force us to incur even what we don’t have. These unexpected expenses can derail your retirement savings, such as assets! Having at least 6 months of savings on your living expenses in your emergency fund can assure your old age lifestyle.
An emergency fund is a cushion against unprecedented expenses that may force you to dip into your retirement savings plans.
Common Retirement Planning Mistakes to Avoid
1. Avoid delaying your contributions
Don’t wait until your pay slip bulges! More even, people tend to think that retirement savings can only be feasible during high income seasons. The truth is, starting now is the best decision you will ever make. Time is your asset, and the more you delay, the less you save, and the harder your retirement life.
2. People ignore inflation
Failing to appreciate the time value of money could be the greatest injustice you can do to yourself! That item you are purchasing at KSh 50 today may be worth KSh 150 in 30 years!
To avoid this danger, ensure your retirement savings are growing faster than the underlying inflation rates. You may need to consider investments such as stocks and real estate that will keep pace with the rising cost of living.
3. Failing to review your retirement plan regularly
Financial situations and goals change over time. It is to this effect that it becomes prudent to regularly review your retirement plan. Your review here should ensure that what you are saving is sufficient to gather for your retirement goals.
Final Thoughts: Take Control of Your Retirement Today
The right time to save for your retirement is now! Don’t wait, or else you will live to regret and beg during your retirement age! Age should not be a reason to procrastinate. Start now to save more.
Also Read: Green Bonds in Kenya
Remember, it is not about how much you are earning at the moment! The key to happy retirement days is the ability to plan and save. Your future begins now!
