Retirement has nothing to do with you or your competence. It is an event which is the result of the policies of your employer and this is an inevitable stage in all our lives.
It is estimated that the population of 60-year-olds in the World will cross 1 billion by the end of this decade.
According to Olive Gitau starting to save early while active makes sense because money grows over time, it multiplies over time.
“If you start saving in your 40s towards your retirement, what will multiply will not be as much as what would be if you started early,” says Gitau.
You can start with as little as Ksh.2,000. This is what is called the compounding effect. It makes what you have at the time of retirement to sustain you when you are not strong enough to actively be working.
In contemporary times, the majority of youth have become innovative and run their own businesses and do not depend on salary at the end of the month.
While this is important for the country’s economic growth, Gitau advises, that putting aside a little cash that you earn from your business so that there is that compounding effect when you hit retirement age.
Cash flow
Cash flow at the time of retirement has been a problem for a good number of retirement.
Gitau says that whereas many are retiring yet have accumulated a lot of assets and assets, that asset does not provide continuous cash flow.
This has left many who are asset-rich but cash flow poor.
“by the time it gets to retirement, you have to find that balance, at the time of retirement, you need to have those assets that will give you a flow of cash.”
Offloading some of the assets may take time. Gitau advises one to identify a partner who would come in and put in a few cash and you offload yourself from being the sole owner.
Is NSSF enough?
The National Social Security Fund (NSSF) creates a good retirement foundation for those who are employed. But Gitau argues that NSSF is not enough and one needs to make an extra gesture for compounding effect.
“If your employer is putting 10 percent, then put an equivalent of half of what you are saving monthly.”
