How to prepare for retirement

Your age is catching up. Younger, fresher colleagues are entering your workplace. You can no longer be unintentional with money because the day when you may not have that income is now a reality. PHOTO | FILE

What you need to know:

  • You don’t want to paying off debt in your sunset years because there may be no salary to do this with. Home mortgages, unsecured loans, credit card debt, consumer related debt, school fees loans and so on must be paid now.
  • Many people have made the mistake of taking children to very expensive schools earlier on, only to find that it came at the expense of university fees.
  • If you did not have a budget, there is never a better time to develop one than now. Many people enter the peak of their earning potential  just before their retirement. Left unchecked, these higher incomes may lead to a false sense of security.

Everyone gets to the age when they realise that time has gone by and that retirement is staring them in the face.

Your energy levels are not quite what they used to be five or 10 years ago. Your age is catching up. Younger, fresher colleagues are entering your workplace. You can no longer be unintentional with money because the day when you may not have that income is now a reality. You must start preparing for retirement. Here is how you do it. 

Debt repayment. You don’t want to paying off debt in your sunset years because there may be no salary to do this with. Home mortgages, unsecured loans, credit card debt, consumer related debt, school fees loans and so on must be paid now.

List down your debts; any loans that cannot pay themselves without your input need to be cleared pre-retirement. Make a plan to pay them off as quickly as possible. Leave the extraneous purchases for when you can afford it.

School fees fund. Will you be done with this when you retire? Unless you want your children to get scholarships, you need to have some money to accommodate this. Do the math, find out what this will cost and ask yourself what your plan of action will be. Many people have made the mistake of taking children to very expensive schools earlier on, only to find that it came at the expense of university fees. Facing the numbers now may help you make more objective choices about schools.

Spending plan. If you did not have a budget, there is never a better time to develop one than now. Many people enter the peak of their earning potential  just before their retirement. Left unchecked, these higher incomes may lead to a false sense of security. Remember, you are not wealthy because of today’s income irrespective of how well you live. How long can you survive on the same lifestyle without that income coming in next month?

That’s how wealthy you are. Keep your lifestyle in check despite the temptation. Create a spending plan for your monthly income and expenses. Take it a step further and decide what lifestyle you will adopt. Use this income to put away something towards that.

Retirement fund. Your pension will never fully fund your retirement. Do you know that if you spend Sh100, 000 today you will need approximately Sh400,000 to spend on the same things in 10 years? This is why your pension will not be enough. You will need to have income coming in from somewhere.

This is why the plots of land at that point will not help you. They may have appreciated in value, but if they are not generating some income, they will not put food on your table. Having a home is great, but homes don’t come inclusive of paid utility bills, medical bills, rates, school fees etc. Other investments will need to be doing this. Start looking at those investment avenues that will generate income.

Personal plan. Just because you have retired does not mean you will do nothing.

Some of your hobbies and side hustles may help in continuing to generate some income for you. Maybe you want to mentor others, farm, write a book, and so forth. Some people start new businesses in retirement. Think about it and start working on it now.