Saving for retirement is not a walk in the park. It takes commitment, discipline, and being intentional with your money choices. It’s important to have saved enough in your retirement kitty by the time you lay down your tools. Social security (NSSF) benefits alone will not cover your retirement expenses. Social security is designed to supplement your retirement income hence the need to find an alternative pension savings plan.
Experts say you need at least 75% of your income to maintain your lifestyle in retirement. Whether you are just starting your career or you are near the end, you can potentially grow your retirement kitty. Starting to save early has always been the tip so that you can benefit from compound interest. However, even if you start late, you can take certain steps to ensure you increase your kitty savings and hit your goal in your desired time frame.
Take advantage of employer-offered defined contribution retirement plans. In these plans, the money comes out of your paycheck before income taxes are assessed hence it will lower your income taxes. For example, if your income is KES 65,000 and you contribute KES 10,000 to the plan only KES 55,000 gets subjected to tax.
In most organizations, the employer offers to match your contributions to the plan. This means that you should also be conscious of the terms of employment as you look for a job or transfer from one job to the other. For instance, assuming your income is KES 65,000 and your employer offers to match up your contributions of 10% of your salary, they will be contributing KES 6,500 into your retirement kitty every month which is money you have not worked for.
Independent Post-Retirement Medical Schemes to be licensed – RBA
You can set up an individual retirement account with a licensed pension provider of your choice. Contributions made to this plan may be tax deductable but still essential to guarantee your financial freedom in the future. This is especially a good option for people who are self-employed or work at companies with no retirement benefits schemes. “Pay yourself first.” Ensure that payments to the retirement plans are automated so that it does not become a choice between paying it and getting a home appliance. Making the payment check-off payments will ensure you don’t have to worry about it and that you adapt to the deductions.
You will need to practice financial discipline. Examine your general spending budget and make little adjustments to ensure you save more. Little things like deciding to carry your lunch to work instead of buying could make a difference in the long term. Every time you get extra money, a raise, or tax refunds, allocate at least half of it to your retirement kitty. Getting good medical insurance for your family will also save you on emergency medical costs.
You are not at a loss if you’ve just started saving in your 30s or 40s, look for opportunities to enable you to get good earnings. As your income increases, you can save even more. You could also create side gigs to offer alternative income to your salary. If you decide to invest be diverse in your investments. There is always risk involved in every investment hence if one is in crisis you will have the other to fall back to. Take calculated risks.
Currently, it’s a norm for people to move from one job to the other. It’s unusual for one to stay in one job for 15 years. If you were contributing to an employer-offered retirement savings plan, roll it over to your new employer’s scheme since cashing out can tempt you to allocate the money to something else or expose you to taxation.
It’s very paramount that you manage your accrued debt before you hit your golden years. It will also help to try and avoid getting huge debts or loans without a proper provision plan for paying them back.
There are only two things that could derail your retirement kitty. When you start to save late or you don’t save enough for your retirement. This is why you need to maximize ways to boost it. Saving enough money for retirement is very possible. You just need to stretch every penny as far as you can!
Gloria Musau is Senior Officer- Business Development, Sales & Training at Enwealth Financial Services.
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