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Why Every Kenyan Professional Needs a Retirement Plan

By May 20, 2024May 23rd, 2024Insurance

Retirement planning is an essential aspect of financial security that every Kenyan professional should prioritize. Despite its significance, many individuals overlook the importance of planning for their retirement years. In this article, we delve into why having a retirement plan is crucial for Kenyan professionals and how they can secure their future.

Story Overview on the Importance of a Retirement Plan

Imagine this: Friday afternoon, your last day at work before retirement. The weight on your shoulders you’ve carried for years has vanished, replaced by a thrilling sense of freedom. 

You finally have time to pursue your passions, travel the world, or relax and enjoy life. But a nagging worry creeps in – can you truly afford this dream retirement without your usual salary?

Retirement planning isn’t about just saving money; it’s about building a secure future where you can live comfortably and pursue your passions in your golden age. In this post, we will look at retirement plan options and what you need to know about them. 

Understanding Retirement Planning

What is a Retirement Plan?

A retirement plan is a structured approach to saving and investing money to ensure financial stability during retirement. It involves setting aside funds during one’s working years to support oneself after retirement.

Why is it Necessary?

Normally, retirement creates an illusion of how we no longer go to work because we’ve grown grey hair and have grandkids. Contrary to this belief, retirement could be anything that deters you from receiving your regular income. 

Think about a workplace injury, critical injury, or contract termination. You’re not wrong to add “desire for independent comfort” to that list, where you just want to travel the world and sleep in with your loved one on Mondays.

Retirement planning is the process of setting financial goals for your post-work life and taking steps to achieve them. It involves estimating your future expenses, understanding your retirement income sources, and using your current finances to save and invest for a future income that will sustain you when you are decommissioned from work. 

Challenges Faced by Kenyan Professionals

Despite the importance of retirement planning, Kenyan professionals face several challenges that hinder their ability to prepare adequately for retirement.

Lack of Awareness

One of the primary challenges is the lack of awareness about the importance of retirement planning. Many underestimate the need to save for retirement and fail to take proactive steps to secure their financial future.

Inadequate Savings Culture

Moreover, Kenya has a prevailing culture of inadequate savings, with a significant portion of the population living paycheck to paycheck. This lack of savings discipline further exacerbates the retirement planning crisis among Kenyan professionals.

Why Plan for Retirement Now?

Before we get started, you need to hold on to these three concepts. They make up everything we’re going to talk about:

  • You’re retiring from work, not life
  • You’re building future wealth with compound interest, time is your secret weapon.
  • You have more than what you need right now, why waste it?

Starting your retirement as early as today sets you on a fast path to a disciplined culture of saving. Even if you are the worst at handling finances, repetitive saving will leave a positive mark on you.

Think of retirement planning as an investment in your future happiness and comfort. It’s a sacrifice and commitment you make today to maintain your lifestyle for decades when you are too old to sit in an office. Here’s how it benefits you:

Benefits of Having a Retirement Plan

Despite the challenges, there are numerous benefits to having a retirement plan in place.

You secure Financial Freedom for Retirement

A well-executed retirement plan provides financial security during retirement, ensuring that individuals can maintain their desired lifestyle without relying solely on social security benefits or family support.

You Get Peace of Mind with Retirement Financial Planning

Moreover, having a retirement plan offers peace of mind, knowing that one’s future is secure and that they have taken proactive steps to safeguard their financial well-being.

You are Future-Proofing Your Finances

A solid retirement plan acts as a financial buffer, ensuring your finances can handle whatever life throws your way.

Types of Retirement Plans Available in Kenya

In Kenya, there are several retirement planning options available to professionals.

National Social Security Fund (NSSF)

The National Social Security Fund (NSSF) is a mandatory retirement savings scheme for formal sector employees in Kenya. Contributions to the NSSF are deducted from employees’ salaries and provide a source of retirement income.

Private Pension Schemes

Additionally, individuals can opt for private pension schemes offered by various financial institutions and insurance companies. These schemes provide flexibility and customization options tailored to individuals’ financial goals and risk tolerance.

Other Options

Sacco Schemes: Saving with a reputable Sacco allows you to access loans for various needs while also contributing to your retirement savings. Some of the reputable Saccos in Kenya include but are not limited to, Stima Sacco, Sheria Sacco, and Kenya Bankers.

Unit Trusts: These investment options pool your money with others, allowing you to invest in a diversified portfolio that can offer higher returns than traditional savings accounts. You can book a FREE consultation with our General Manager, Stella Chepkwony to learn more about investing in Trust funds.

How to Choose the Right Retirement Plan

Selecting the right retirement plan requires careful consideration of several factors.

Assessing Financial Goals

Firstly, individuals should assess their financial goals and retirement needs to determine the most suitable plan.

Considering Risk Tolerance

Moreover, understanding one’s risk tolerance is crucial when choosing a retirement plan, as it influences the investment strategy and asset allocation.

Steps to Start a Retirement Plan

Getting started with retirement planning involves several key steps.

Setting Goals

Begin by setting clear and achievable retirement goals, including desired retirement age, lifestyle expectations, and anticipated expenses.

Budgeting and Saving

Next, create a budget that allocates funds towards retirement savings and commit to regular contributions to build a substantial retirement nest egg.

Seeking Professional Advice

Seeking guidance from a qualified financial advisor can help navigate the complexities of retirement planning and optimize investment strategies for long-term growth.

Overcoming Common Misconceptions

There are several misconceptions surrounding retirement planning that hinder individuals from taking action.

Retirement Planning is Only for the Elderly

Contrary to popular belief, retirement planning is not solely reserved for the elderly. Starting early allows individuals to benefit from compounding returns and build a more substantial retirement fund.

It’s Too Early to Start Planning

Similarly, many young professionals believe it’s too early to start planning for retirement. However, the earlier one begins saving and investing, the greater the potential for long-term wealth accumulation.

Take Charge of Your Future: The Next Steps

Start planning for your dream retirement today by filling out a form on our website. We’ll dedicate our resources to ensuring your future is in safe hands.

Remember, the sooner you start, the more time your money has to grow through compound interest. Take control of your financial future – a secure and happy retirement awaits!