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Why a retirement plan is a must have

Medrine NyamburaDecember 16, 2015
4 min read
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I do not have a retirement plan and i don’t see the need to. Why would someone in their early twenties think about retirement? That word is synonymous with old people.  People who squint their eyes as they read the papers or move a bit slower than the rest of the world. We make do with three hours of sleep after a night out and still manage to turn up for class. So no pressure. The most important thing right now is building our careers right? Maintaining the friendships, we have made in campus for life. Discovering the next best joint for Friday. The ultimate plan is to survive an internship get a job and finally start making money. Then you can shop when you want to, go out for lunch with your friends and no longer have to worry about the bill.

You want a car by the age of twenty five. It only seems only logical as all your friends plan to do the same. Well that will come after your road trip to watch rugby in Nakuru aka Nax Vegas. After that Mombasa seems like such a good plan. Your friend actually suggested Zanzibar, a return ticket is roughly five hundred dollars. No big deal.

All that seems normal. I mean what could go wrong? I mean you are young, with a well paying job and generally living the good life. But one thing could. Your active years will come to an end, retirement will beckon and suddenly money will never seem to be enough. What with school fees, rent and general upkeep to think about. You reminisce over the good old times when all you had to worry about an M-PESA message confirming delivery of the money you needed for Saturday afternoon.

Time for a reality check. One day we will wake up old and tired and a walk to the shops will be torturous. It will even be worse if we will be scraping for crumbs that we can barely afford. When every beginning of a school term will lead to sleepless nights. All this sounds impossible, it could never happen to you. Well statistics from the Association of Kenya Insurers indicate that only 15% of the Kenyan workforce are covered by a pension plan and out of this, statutory schemes are 89% and we all know that the statutory schemes have low yields.

Retirement means that income supply is cut short while expenses continue to build. The only way that you and I can survive retirement is if we start saving now. We do this by putting away a little money away so that we can secure a golden retirement. NSSF is not enough. Think of how much you contribute monthly versus how much you need to survive, let alone be comfortable. Would it not be rewarding to know that you can rest easy with a roof over your head, food to eat and your children’s future covered. In order for one to be independent after retirement, one should have at least 40% of current income as regular income. The average salary per individual per month currently stands at Kes 147,950 so after retirement one should be earning at least Kes 59,180. You need to ask yourself what you are doing towards this.

An interesting fact is that 6.5% of Kenya’s population is above the age of 55. Within the next 5 to 10 years, that number will have tripled A scenario where a majority of these will not have a prudent pension plan will mean that the country will face dependency issues.

For some of us, fifty is thirty or so years away and it seems like a long time. Ten years from now you will have your dream job. Ten years after that you will be taking your daughter to pre-school. Ten years later you will be fifty. In as much as we choose to ball and YOLO for now, think of how you want to live your last years. Even if we only live once is it not better to live and leave in style? Afford your Friday day’s out with your golden girls. See you children off to that nice school and pay for their college without stressing about it. For that to happen you need to take charge of your future.

Check out Association of Kenya Insurers as first step towards saving for the future. Let us not, regretfully, have this conversation years down the line, wishing we had done things different.

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