Facing retirement with insufficient savings is a growing concern for many Kenyans approaching their 60s. Alfred Mathu, lead financial consultant at Hisa Africa, underscores the importance of early saving.
“Regardless of the amount you save, starting early puts you in a better place than waiting until your mid-30s or 40s. The longer you wait, the more you’ll need to save, making it a greater burden.”
For those just starting their careers, the advice is clear: start saving now, regardless of how distant retirement may seem.
Clement Malik, a Nairobi-based financial advisor, echoes this sentiment: “Learn from those who are retiring today. Otherwise, you might regret not saving enough, early enough.”
Retirement planning can be terrifying at any stage, especially when other financial obligations, such as student loans or a mortgage, demand attention.
While there’s no one-size-fits-all formula, most financial experts recommend setting aside between 10 percent to 15 percent of your pre-tax income annually for retirement.
High earners may aim for the upper end of this range, while those with lower earnings might save less, relying on Social Security to cover a larger portion of their retirement needs.
What do experts recommend having saved enough for retirement by age 60?
Even among experts, the recommended savings amount for a 60-year-old varies. Malik notes that saving goals are highly variable and depend on several factors.
“When it comes to saving for retirement, there is no magic number to hit by a certain age,” he says. He adds,“The amount of savings needed to live comfortably in retirement is different for everyone. It comes down to your ability to save and when you begin saving for retirement.
“The sooner you start saving, the more time your investments have to grow and compound.”
Approaching 60 with insufficient retirement savings can be overwhelming, but several strategies can help manage this challenging situation.
Consulting a financial professional is crucial. Malik emphasises the importance of personalised advice: “Financial planners can offer strategies tailored to your unique situation.”
A financial advisor can help you develop a plan to boost your savings and manage your retirement funds effectively.
Cut your debt
Reducing or eliminating debt is another important step. Malik advises, “Ideally, most debts, like mortgages, should be paid off or significantly reduced by 60.” Paying off or substantially decreasing your debts before retirement can help stretch your retirement income further and alleviate financial stress.
Cut cost of living
Considering relocation might also be beneficial if you currently live in a high-cost area.
Malik suggests, “Living in a city or town with a lower cost of living can stretch your retirement dollars.” Moving to a less expensive location could significantly extend the lifespan of your retirement savings.
Work longer
To add on, working longer can provide financial relief. By delaying retirement and continuing to work, you not only increase your income but also allow your Social Security benefits to grow. Malik notes, “If you delay taking your Social Security payouts until age 70, you’ll receive an eight percent annual increase in the amount of those benefits from your full retirement age until age 70.”
Keep saving
Despite these strategies, it’s essential to keep saving, even if your current savings are insufficient. Malik advises, “Some money saved is always going to be better than no money saved.” Continuing to contribute to your retirement funds, even in small amounts, can make a meaningful difference over time.
Relook your budget
Finally, reassess your budget to find additional savings.
Alfred Mathu, also a financial advisor, recommends, “Separating your personal budget between discretionary and non-discretionary spending helps create a baseline in terms of what you need versus what you want.”
Identifying areas to cut back and increase your savings rate can improve your financial situation and work towards a more secure retirement.
No one disputes that some portion of the population—maybe 20 percent—will arrive at retirement vastly unprepared.
“Those are households with lower wages and lower levels of education who have struggled with basic savings skills or have suffered significant economic hardships,” says Malik.
However, a more nuanced view of preparedness has replaced the stark assessments of the past. “You have to look under the covers—it’s person by person,” he adds.
Calibrate your saving
You’ve likely heard the advice to save 10 percent to 15 percent of your annual income (including any employer match) in your retirement account from the beginning of your career until the end.
This strategy allows you to benefit from compound interest and encourages a habit of saving that keeps pace with pay raises. At the end of a 40-year career, this approach should provide sufficient funds for a 25- or 30-year retirement.
However, this plan doesn’t account for life’s unexpected detours. Mathu notes that children, buying a house, paying off student debt, and job loss can all affect your saving strategy.
“People with children will likely have different saving and spending patterns compared to those without,” he says. When faced with competing financial goals, like saving for a child’s education or buying a home, Mathu advocates for adjusting retirement savings rather than stopping them altogether.
“Easing up on retirement savings for a few years shouldn’t slow you down too much if you’ve fueled your accounts early on.”
Crunch your numbers
To better understand your future financial needs, Mathu suggests analysing your current expenses about five years before retirement.
“In the first two years, don’t try to clip coupons or cut back too much. Live your life to get a realistic picture of your spending,” he says.
Consider both obvious expenses like housing, utilities, food, and entertainment, as well as less apparent costs such as property taxes, homeowners insurance, and potential large outlays for things like a new car or a major trip.
“People often underestimate one-time expenses. There tend to be more of these than expected,” Mathu adds.
