Planning for your retirement in Kenya is a critical issue you should consider when you receive your first paycheck. Many people wait until they retire to start planning post-retirement. At that time, they do not have reserves to run them through the rest of their life. Other people rely on their children for survival, which is not the best way to plan for retirement.
Creating a comfortable retirement plan that generates some income is the best investment to consider. The following are some of the ways you can plan for your retirement.
Know Your Retirements Needs
You need to identify your retirement needs to start planning for your retirement. To do so, write down your needs and how much you will be spending on each. Also consider unforeseen needs like medical and travel expenses. If you have a loan or any other debt, consider how much you will be spending to offset it. The essence is to come up with a post-retirement budget.
Start Saving and Stick to Your Budget
It is important that you start saving when you receive your first paycheck. Saving is a good financial habit that can help you grow your wealth. Budget before receiving your salary to avoid overspending. Once you receive your salary, put savings aside first and then direct the remainder to where it belongs. You can open a savings account and start earning interest on your savings. You can take advantage of the power of compounding by starting to save when you are young.
Read also: Business ideas for Kenyan retirees.
Invest Your Money
Saving alone may not be enough for your retirement. As such, you need to invest in projects that can generate regular revenue over time. For instance, you can invest in shares or the stock market. If you invest in company shares, you will be getting dividends when the company makes a profit. You can also invest in other projects like real estate or open a business.
Contribute to Your Pensions Scheme
Having a pension scheme is a great way to prepare for your retirement. When you retire, the pension scheme will be paying you monthly income. Savings in the pension scheme attract some interest over the years you contribute towards it. Besides, there are some insurance schemes that you can register to be receiving income when you retire. The pension scheme should not be your last resort since the income may not be enough to sustain you post-retirement.
Take Advantage of the Social Security Benefits
You can learn about the National Social Security Fund in your country. It is a great way to save for your retirement by making monthly contributions towards it. It works the same way as a pension scheme. Your employer will be deducting a certain percentage of your income and remitting it to the concerned social security body. When you retire, you will be receiving social security benefits. You can estimate how much you will receive after retirement using the retirement estimator.
Read more: How to plan for retirement with NSSF Kenya.
Pay Off Your Debts
Reducing your debts is a great way to ensure that you live a comfortable life when you retire. Debts accumulate interest over time and you may end up paying almost 50% of your borrowing as interest. As such, it is best practice to repay your loans and debts when you are still earning a monthly salary. It will reduce your financial burdens after retirement.
Open an Individual Retirement Account
You can open an Individual Retirement Account (IRA) where you will be contributing money towards your retirement. The advantage of the IRA is that it offers tax benefits. You will not be taxed as high as you would in the case of social security. You can set the amount you want to be contributing to the IRA so that the money is automatically deducted from your salary.
Consider a Passive Income
Having a passive income is an excellent way to plan for your retirement. A passive income is an income that you get without having to work continuously. One of the ways to set up passive income is to invest in real estate. Rentals will be providing you with a regular income. All you need to do is to ensure that your houses are occupied. Other sources of passive income include starting a blog, affiliate marketing, REITs and dividends from stocks.
Read more: Sources of passive income.
Retirement is the time one should relax and enjoy the fruits of their hard work over the years. To ensure that you live a comfortable life when you retire, you must plan for it. You can consider the above ideas that can help you generate post-retirement income. Starting to plan for retirement early is the best practice. It will help you take advantage of compounding power and grow your wealth over your working years.