Think your children will take care of you after your retirement. Think again. Chances are, considering the trend, they might need more care than you. So, start thinking of your retirement now. Believe it or not, it is your responsibility.
The problem is that everyone thinks that they will be forever young or forever employed. This is a lie you tell yourself so you don’t have to do anything about your retirement now. Stop living a lie. God willing, you will go into retirement. And retirement can be tough. Very tough. Plan.
Here are a few words of wisdom on planning for retirement so it doesn’t have to be drudgery.
- Estimate Your Retirement Needs
Experts estimate that you will need about 70 percent of your preretirement income — for lower earners, the figure is 90 percent or more — to maintain your current standard of living when you stop working. Research also shows that people who try to estimate their needs in advance ultimately save more for retirement. Start thinking about it now. Whether you just started employment or you are way into your middle age, it’s never too early or too late to start planning for retirement.
Preparation for old age should begin not later than one’s teens. A life which is empty of purpose until 65 will not suddenly become filled on retirement.
Dwight L. Moody
- Contribute To Your Workplace Plan
If your employer offers a retirement savings plan, sign up and contribute as much as you can. Most company’s that have retirement plans do kick in a match, and deductions can be automatically taken from your paycheck. Over time, compound interest and tax deferrals can make a big difference in the amount you accumulate. Furthermore, the employer contribution is a pay rise. If you are not in the scheme, the money is really “lost”. Make sure your plan isn’t a lemon by comparing the returns from the various pension scheme administration providers. The progressive ones will have self service portals where they provide information on their year on year returns. If you feel that your employers providers fall short, ask the management to do something about it.
- Learn To Invest
How you save can be as important as how much you save. Inflation and the type of investments you make play important roles in how much you’ll have saved at retirement. Know how your savings or pension plan is invested. Learn about your plan’s investment options and ask questions. Put your savings in different types of investments. By diversifying this way, you are more likely to reduce risk and improve return. Your investment mix may change over time depending on a number of factors such as your age, goals, and financial circumstances. Financial security and knowledge go hand in hand.
- Don’t Touch!
If you withdraw your retirement savings now, you’ll lose tax benefits or have to pay withdrawal penalties. If you change jobs, leave your savings invested in that employer’s retirement plan. Or roll them over to an IPP or your new employer’s plan.
- Understand Fees
The cost of your investments makes a big difference. The less the administration fees, the greater the fund at retirement. Ensure that you understand how your administrator is working on reducing costs and increasing return on investment. Even small changes in percentage in costs can result in a substantial difference over say 35 years.
- Open An Individual Pension Plan Account
There are many Pension Administrators providing Individual Pension Plans or IPPs. You can put as much money as you can afford into such a retirement account with the same tax benefits as the occupational ones. You can also start with much less, with some like the Mbao Pension Plan accepting as little as Kenya shillings 20.00. Contributions can be made through any means including mobile money.
- Find Out About Your Social Security Benefits
Social Security also pays benefits that can contribute to your final retirement kitty. You should receive a statement each year that gives you an estimate of how much your benefit will be and when you can receive it.