Annuity: Insurance contract that guarantees you an income stream in the future

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Securing your future through retirement planning requires discipline, foresight and commitment to taking action. PHOTO | SHUTTERSTOCK

Retirement is a milestone that provides individuals with an opportunity to relax, pursue hobbies and spend more time with loved ones.

Despite its significance, retirement is probably the most underrated among all other major life events such as graduation, starting a family or buying a family home.

For most people, retirement always seems like an event in the distant future. Despite how comfortable your current lifestyle is, you must undertake proper planning and preparation to ensure a smooth transition to retirement.

According to the Kenya National Bureau of Statistics, about 13.9 million Kenyans have no form of retirement savings. Additionally, a 2022 survey conducted by the Central Bank of Kenya indicated that 90 percent of adults in the country do not have a pension plan.

The Survey further indicated that the percentage of Kenyans struggling financially has almost tripled in the past five years.

This leaves retirees depending on their children. Depending on children to pay “black tax” significantly hinders their financial growth while creating a generational poverty cycle.

A pleasant retirement does not happen automatically. Although the retirement period is often seen as a time of relaxation and enjoyment, this season can also bring its own set of challenges.

The ability to comfortably afford basic needs and a few other luxuries requires deliberate retirement planning.

One of the best ways to secure your future through retirement is to start saving for it early. Begin by envisioning your desired retirement lifestyle before diving into the nitty-gritty of retirement planning.

Define your retirement goals by considering factors such as the age you wish to retire, the standard of living you want to maintain as well as the goals you would like to achieve during your retirement years.

A reflection on these areas will enable you to estimate the financial resources needed to fulfil your aspirations.

Once your goals have been well defined, identify the best way to save and preserve the value of your money. Inflation has a significant impact on retirement savings.

One of the ways to keep up with inflation in retirement is through the purchase of annuities which escalate on an annual basis- this ensures that you get consistent income from saved pension, that is adjusted upwards every year.

An annuity is an insurance contract issued and distributed by insurance companies with the intention of paying out accumulated pension funds in a guaranteed income stream in the future.

Annuities are mainly used for retirement purposes to help individuals address the risk of outliving their savings.

By starting to save and invest early, you give your money more time to grow supporting your ability to achieve your retirement goals.

It's critical for you to seek advice from financial professionals who are well-placed to help you devise a tailored retirement plan and provide guidance on investment strategies, tax optimisation and estate planning.

Securing your future through retirement planning requires discipline, foresight and commitment to taking action.

It’s important to stay informed about market trends and economic changes that may affect your retirement savings. Remaining proactive and adaptable will ensure your retirement plan stays on track.

Ms Odera is General Manager – Retail Life & Pensions, Jubilee Life Insurance.

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