Sunday, March 26, 2023

How to Manage Early Retirement

By Albanus Muthoka

Retirement as many people perceive, should not be scary. In fact, if planned well, one could retire and enjoy the fruits of their labor early. Given that you spend much more of your life retired than working, you should consider the kind of life you want to lead during your retirement years. Whether you want to maintain your current lifestyle or have an upgrade, is entirely dependent on the steps you take toward your retirement goals. Here are some tips to help you manage early retirement.

Invest. Just setting money aside has proven to be the least effective especially if you are planning long-term.  The inflation rate currently stands at 8.75% according to The Central Bank of Kenya Inflation Rate Report as of November 2022. With this information, it is safe to say that you cannot wholly rely on your bank account savings for retirement. One needs to diversify their portfolio to more interest-generating investments such as Infrastructure bonds, money market funds, share capital, etc. This ensures that your money does the work for you even in your years of retirement.

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Estimate your retirement expenses. These include debt repayments that need to be cleared. Take stock of your daily expenses: water, electricity, and fuel expenses. Leisure, which includes hobbies e.g., travel and entertainment should also be well accounted for. Planning for all the above ensures you have a track record of where your money is going thus you are able to plan and adjust accordingly.

Set your spending guidelines. The most important part in setting your financial goals is to know how you are spending your money. While small expenses are often overlooked, they have a significant impact on whether or not you will be able to achieve your goals. Eating out, impulse buying, instant road trips, and hair and nail appointments just to name a few, are some of the little ways you could be going beyond your budget without your knowledge as most times the amount of money used feels little. Budgeting and setting aside sinking funds for such small instant expenses would go a long way in making sure you don’t eat into your savings and investments as those are meant for the long-term arising expenses.

Insurance. Policies help to save you in your moment of financial need. This includes taking up education policies for your children up to when they complete their education, medical policies to ensure that in case there is a health emergency, you don’t have to go back to your pockets to clear the hospital bills, a mortgage to ensure you have a secure place more so in an area of your choice to call home.

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Work with a financial advisor. Walking the journey toward financial freedom and security can feel like finding your way in a maze. There is a lot of trial and error involved. Allowing yourself to learn and make mistakes is a crucial part of the journey. The bright side is that you can choose to seek financial help from an expert who will guide you through the right choices. From insurance policies to mortgage plans that help you diversify your investment portfolio; a financial advisor will help you understand what works best for you and create a goal plan for what you are aiming to achieve.

Retirement as you have seen is not just reserved for those advanced in age, you can choose to retire early and enjoy your life as long as you have a good game plan. It takes a lot of discipline but achieving a peaceful, stress-free retirement is possible.

Albanus is the Pension Admin & Consulting Manager at Enwealth Financial Services.

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