Imagine you’re in your 20s and in a room with 10 of your age mates. You are all starting out in life and discussing your career and financial goals.
Fast forward a couple of decades down the line. You are in your 60s and you’re in a room with this same group of people. This time some of you will be discussing how you are enjoying life in happy retirement after building assets over the years.
However, within this same group, statistics show that up to 80% may be faced with the reality of having to work past retirement age to earn an active income, not for the love of the work, but because they can barely survive on their post-retirement earnings.
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Statistics on Kenya’s income replacement ratio – the percentage of a person’s pre-retirement income that they need to maintain their standard of living during retirement – are dire, at about 26%. This means that many people earning Ksh. 100,000 could be earning Ksh. 26,000 in retirement.
Although Kenyans have saved about Ksh. 2 trillion in retirement benefit schemes, only 3.5 million Kenyans are saving for retirement despite there being about 17 million Kenyans working. Pension coverage in Kenya is less than 30%.
Kennedy Odenyo, the Assistant General Manager, Business Development, at ICEA
LION Life Assurance Ltd, highlighted these statistics during the fourth edition of the Abojani Economic Empowerment Conference held on November 23, 2024, at the Radisson Blu Hotel in Upper Hill, Nairobi.
The annual conference brings together retail investors and personal finance enthusiasts, keen on leveling up their personal finance journeys in a meeting filled with learning and networking opportunities with industry titans.
This year’s theme was: building staying power as African households, businesses, and individuals.
As one of the speakers at the conference, Kennedy shared with attendees tips on growing and protecting wealth for a happy retirement.
He reminded delegates that whether you plan for retirement or not, it will happen, so to avoid struggling later on in life, it’s important to have a plan for retirement.
Here were the key takeaways from his presentation:
- Retirement is not just about reaching a certain age: While the retirement age in Kenya is set at 60, a financially prudent person takes charge of their future by planning, building and protecting their assets so that they can be in charge of when, where and how much they want to retire with.
- Start your saving, investing and wealth protection journey early. Time is of the essence: the earlier you start saving for retirement, the better because the longer you wait, the more you will be required to put aside in savings to accumulate a decent sum to retire on. One should consider putting money in a variety of baskets, including a pension scheme, collective investment scheme and education policies depending on your unique circumstances and needs.
- Don’t neglect the social and psychological element of life postretirement: It’s important to have a plan for how you want to spend your time post-retirement to avoid feeling unproductive and isolated. Surround yourself with family and have hobbies in addition to having sources of passive income.
- Plan for post-retirement healthcare: health care becomes more expensive as one ages. It can be a huge blow to have to pay medical bills without insurance in one’s prime years, but it is an even bigger blow to have to foot the bills in retirement.
- Plan for succession: It is important to put your house in order and consider any eventualities so that should anything happen to you, your loved ones are not left struggling or fighting over the assets you worked hard to acquire. Succession planning can involve writing a will and setting up a trust that includes your assets.
- Cash is king during retirement: While it is tempting to acquire property, it is an illiquid asset and it can be challenging to dispose of it quickly to access cash in retirement. Therefore consider acquiring other liquid assets as well.
- Diversify your portfolio: as the saying goes, do not put all your eggs in one basket. If you acquire land, which is illiquid, put your money aside in other liquid assets to balance out your wealth basket.
