Will you be a poor oldie?

As children, we looked up to the adults around us with awe. We would marvel at the freedom they had to go anywhere and do anything, and the money that always seemed to be in their pockets. We dreamed of having similar experiences when we grew up.

But now, as we approach the same age our impressionable uncles were when we were young, we're suddenly confronted with a harsh reality: Time has flown past us like a speeding train, and we're not nearly as prepared for the future as we thought we would be.

Now that you’ve started your career or are past your first job, retirement is not as far-off a dream as you imagined. One question lingers – will you afford to retire?

Retirement

In recent months, retirement has become a hot topic, with many people, including President William Ruto, expressing concerns about the ability of individuals to retire comfortably.

According to a report by the Kenya National Bureau of Statistics, about 13.9 million Kenyans have no form of a retirement savings scheme. And, a majority of this population are in the informal sector.

“The labour market is skewed towards informal employment at 83 per cent. This is a time bomb and indicates that most Kenyans will retire poor,” the KNBS report states.

Many young Kenyans are burdened with unemployment and a high cost of living, which leaves them in a worse financial position by retirement age than their parents and grandparents.

Some blame this unfortunate predicament on the “useless” degrees they pursued. 

Employment

One of the most popular pension schemes by the Retirements Benefits Authority (RBA) is the Occupational Category. This is where both employee and employer contribute to the retirement kitty. Under this category, those who are self-employed have individual pension schemes.

But even those who are employed are currently feeling the weight of a suffocating economy. A number of employers are reported to be lagging behind in remitting pension contributions, while others are not contributing at all.

Irene Mugendi runs a boutique shop in Nairobi city centre and has three employees, all aged below 30. Irene says that she’s unable to contribute to their retirement kitty.

“I am struggling to pay their salaries. How will I afford to meet statutory deductions like NSSF? For me, I can only offer a monthly salary,” she offers.

All her three staff members have no safety nets for their future. One of them, Scholastica Mwende, doesn’t contribute to NHIF, the health insurance scheme.

“There is nothing to save. I am currently earning Sh12,000, with two dependents. There is rent to pay, tuition fees, and other expenses. If my earnings don’t change for the better, I may not be able to contribute to my retirement. Maybe my children will come to my aid,” says the 28-year-old.

A 2019 survey by FinAccess shows a drop in the number of Kenyans saving for retirement, be it in pensions or otherwise. About one in four (23 per cent) Kenyans aged 16 and above save for old age, a decline by half from two in five (44 per cent) in 2016.

Social media

As they navigate their adult life, many young people are turning to social media for that crucial information on how to create and maintain wealth.

At the moment, the pursuit of wealth is more alluring than ever. Online financial advisors have never been more sought after.

The transition to retirement is meant to be a move to the promised land where retirees get to relax with no worries about money. But, as things stand, will millennials afford to retire?

Tabitha Anyango, 31
Makeup artist
“The mere thought of retirement brings about a flurry of emotions — fear, dread, and stress. I try not to think about it and focus on present needs,” she offers.

Tabitha is a makeup artist who markets her work on Instagram under Tabbytabz Makeover. She depends on clients’ bookings to earn a living. 

“Things are really hard right now, and I cannot afford to spend on luxuries. Whatever money I earn goes into meeting basic needs — shelter, food, and clothing. The high cost of living coupled with lack of salaried job opportunities has made things worse for me, so there’s little to save,” she says.

While she would like to save for her future and even have a retirement plan in place, she has no money for it. She believes that her only way out would be to get a salaried job where she is certain of a regular income.

“I have not sought help from any finance professionals because right now, I am focusing on paying my bills, and paying off debts,” she adds.

Michael Omondi, 28
Part-time lecturer
“I live by the mantra that life is infinite. No amount of money is ever enough. We keep working hard to earn an extra coin, but it never is enough. One would you expect that being a trainer would earn me enough to take care of myself, but that is not the case.

As a part-time lecturer, I don’t earn much. I also serve as an executive director of a community-based organisation and even though I draw additional income from that, the money is still not enough,” he says.

A lot is happening. Inflation and the economic recession have made things tough.

“I compare retirement to my own death because I think that’s the worst that can happen to me at any stage of my life. As such, I must be prepared.

“I have a plan. Besides the monthly NSSF remittances, I am considering taking up an insurance policy to safeguard my future. My concern is that I may not be able to meet the monthly contributions because there are many competing needs. The other option is to broaden my income streams. I am thinking about all these things,” he offers.

One of the challenges that Michael faces is access to adequate information about savings.

“I think if this information could be availed while we were still in secondary school, it would be more helpful. So far, I have reached out to various insurance companies requesting information on saving but I am yet to engage with any financial advisers,” he shares.

Elsie Gatama,22
Student and content creator
“I went to Jomo Kenyatta University of Agriculture and Technology (JKUAT) where I pursued a Bachelor of Business Information Technology (BBIT). I am set to graduate in June.

While in school, I didn’t think much about retirement but being out of school has given me another perspective on life. I have learnt that I must work for my money, which is very tiresome. Even though I am currently living in my mum’s house, I take care of my personal needs,” she says.

Elsie sells solar products and from her current earnings, she has nothing left to save for retirement. She clings to the hope that she will get a better-paying job after graduation.

“Once I get a job, I will put a plan in place on how to subdivide my money and save for my later years. I am learning about financial discipline,” she says.

Rita Domnick, 25
Teacher and fishmonger
Rita describes life now as tough.

“There are delayed payments from employers, cost of living is high, and my business is racing towards a cliff.”

By Florence Bett-Kinyatti
The reality of our generation is, most of us, millennials, are working in jobs or businesses that don’t offer any pension benefits.

For those like me who are not in employment, our income is taxed at a much lower rate (withholding tax at five per cent, not PAYE at 30 per cent), so the expectation is that you will use these tax savings to set up – and finance – your individual pension plan.

But who can afford to do that, really? Who ever goes that extra mile and starts investing in their retirement from the moment they earn their first shilling?

We think of retirement as some occurrence that will come in the distant future. We believe that it is not something to worry about.

And yet, at some point, you will age, stop working your job or business, and you will need money to subsist in your twilight years without depending on others.

Consider doing the following as you start planning for your retirement:

Plan early: The legal pensionable age in Kenya is 60 years. This is the age you can access all your pension benefits. However, you can retire at any age you feel ready.

Retiring doesn’t mean you stop working, no, it means that you chose the work you will do. You can continue working your regular job but scale down the hours and realign your energies to other pursuits. Or you can start a new career altogether.

When you retire before age 60, you will live off your investments.

I am planning to retire by age 48. I will continue to write, but only as an author. My plan is to live off my investments and author income, and when I hit 60, my pension benefits will kick in. that will supplement my investment and income as an author.

All investment products are retirement products:

Expand your thinking and approach to all investment products. Each time you make an investment, view it as an investment into your future.

You can build your own retirement portfolio from investment products in local financial and non-financial markets. That is, government bonds and bills, money market funds, Sacco, land and property, shares and other securities such as crypto-currency and derivatives, farming, a business…there is so much to choose from.

For each income you make, either reinvest it or stash it away in a low-risk investment like a money market fund account, awaiting your early retirement.

Florence Bett-Kinyatti is a certified accountant and former financial auditor. She is also the author of two best-selling books about money. Engage on the socials @_craftit

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