Why planning for your retirement today, saves you a world of worry in future

There is that classic by Oliver Mtukudzi. Wasakara is the title. One of its lines goes: “Makura ka musazoramba.” It is translated to “You must not refuse old age.”

It will come. The executive job you’re holding will one day have a younger holder. If you’re into business, a day will come when you don’t feel like running around, chairing meetings, inspecting accounts and all.

Retirement is the name. A survey of C-Suite professionals in Kenya, contained in the Standard CharteredWealth Expectancy Report 2021, says 45 percent of them plan to retire before the age of 65.

But it’s easy to say, “I’ll retire”. The harder part is preparing for the brutality that can come during that period. Past 65, many financial institutions will not give you a loan. That’s not all, many insurers are also choosy on the types of cover they can sell you. Money talks at this age, and you better know how to make your money do the talking for you at this crucial age when you probably don’t have the energy to chase around.

It is meant to be a stress-free period in the life of a person who has been an industry captain. It is meant to be a much-needed long holiday for a successful person. But, unless you start to deliberately plan for it earlier when you are still at the top, you won’t be spared the agony of retreating to the village to live a life you’re not accustomed to.

Actually, in some societies, people have gone from affluent to homeless due to retirement. It’s that bad.

Government statistics say the average Kenyan lives at least 14 years after the 60th birthday. This is what the Economic Survey 2022, a document by the Kenya National Bureau of Statistics, says: “Nationally, females have a higher expectation of life at 17.2 years after attaining age 60 years than males at 14.2 years.”

And the reality is that people are living longer nowadays due to improved healthcare, less risky ways of survival and more health consciousness.

With that, it’s possible to live for three decades or more after retirement. And that’s quite a long time to live. It requires a solid plan.

I say “solid” because I have been having conversations about retirement with affluent Kenyans due to my duties here at Standard Chartered Bank. And that conversation always leads us to investment income.

I tell them to compare these two people: one who has a tree that produces fruits every season and another who has to plant every season to get returns. Who do you think will be calmer?

That’s what an investment income looks like. You plant it today and it starts as a small tree. You water it, and it grows and grows. At some point, it will start yielding dividends. And you eat the fruits, not the tree. Even if God grants you up to 100 years, you’ll only be eating the fruits, and you’ll leave the tree there, which your generations can continue getting fruits from.

When somebody tells me they’re not investing, that it’s too risky, I tell them: “Actually, you are taking a higher risk by not investing for your retirement. When you retire, you’ll have to plant a crop every season whilst you may not have the energy to do that.”

I have also discussed the issue of savings and deposits. Many say they are setting aside a certain amount monthly or once in a while to be spent in their sunset years. Well, this is better than someone who’s not been saving, but there is something many people don’t look at— inflation. You see that figure the Kenya National Bureau of Statistics publishes every month saying inflation is 7.9 percent or 8.3 percent? You need to look at that figure keenly.

If your money isn’t growing more than the core inflation, it means it will do less for you in the future when you need it. For instance, if you’re just putting your money in a savings account, earning two or three percent or while the core inflation is eight percent, your money is losing value every single day. You’re basically running on the spot or, worse even, backwards.

Others say they are betting on rental income to see them through their sunset years. It is not a bad initiative, but it has challenges. Tenants can start getting cheeky when they realise that the landlord is ageing and not bothering them to pay. Agents can equally take advantage of you.

Side-by-side with rental income is the tendency to buy property. It is also not a bad idea but at that age, one needs an investment that can yield money when needed. Imagine being sick in hospital, and you don’t have money while you have plots scattered all over Kenya.

There are times I have told people to sell off such properties and buy a government bond portfolio or invest in our wide selection of local and international mutual funds. It brings a good flow of cash, almost like rental income, and the advantage is that this source is completely passive. You don’t have to labour around trying to get returns from your real estate.

I also talk to people at length about insurance. People overlook this, but it is actually a great way of protecting wealth. I ask people to get life insurance, a personal accident cover and any other cover that can eliminate the possibility of drawing from your pension.

In the Wealth Expectancy 2021 report, it is revealed that 17 percent of high-net-worth Kenyans are currently not saving for retirement. It notes that the most common expected sources of income in retirement are investment income (62 percent), cash savings (38 percent) and rental income (38 percent).

Due to the many misconceptions about how to make retirement stress-free, what we do at Standard Chartered Priority Banking – the arm that serves high net-worth individuals – is give them expert advice on how to invest right for retirement.

Especially for the solutions that will give you passive income till your last day, as a bank, we are big on that. We help you place your investment in an area you can have control over.

It doesn’t end there. We also connect clients to local and global investment opportunities. We have had people planning to retire in Europe or America. Do you know it’s better to keep your cash in the currency of the country you wish to retire to? That way, you lessen the exchange rate risk.

Then there are those who invest in their children, hoping that they will support them in their sunset days. Well, that’s a good way to plan but is it always guaranteed? If you’re lucky to have them reciprocate, well and good. But you should plan as if they won’t give a hoot where you will be in retirement.

I finish with another line in Mtukudzui’s Wasakara song. It goes: “Kuchembera ndizvo ndizvo; nenguva yakawanda (Ageing is what it is; it’s usually that way).

Yes, it’s inevitable. You better plan for it as soon as now. As we always tell clients, the best friend of retirement planning is time. At Standard Chartered Priority Banking, we are here to help you get started. Reach out to us via email on [email protected].

Head of Priority Banking and Wealth Management for Kenya and East Africa,
Standard Chartered Bank.

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