Why is Wealth Creation so Important?

Youth is wasted on the young. Whether you agree with this or not, there’s no doubt that when we are young, not many people stop to think about what it will be like to get old. But unless you manage to stumble across the fountain of eternal youth, the reality is that one day you’ll be slower, wrinklier and wiser - but you’ll also reach a point where you won’t be able to work anymore and earn an income. So, have you planned what you’ll do about your finances when that happens?

According to a 2015 report from the Association of Kenya Insurers (AKI), the average retirement age in Kenya is 60 years old. The report also found that only 15% of Kenyans are covered by pensions – and that these are mostly within the formal sector. Compare this with statistics showing that around 10.5 million Kenyans are employed via the informal sector. Given these numbers, there’s a good chance that as a Kenyan, you’ll need to think about setting up a retirement scheme on your own steam.

Why is a retirement scheme a good idea?

In recent years, Kenya has seen a shift from an agrarian economy to an urban one. In other words, more and more people are relying on employment in cities rather than on earning an income from agriculture and farming.  This shift has led to a need for people to be able to access a nest egg upon retirement in order to maintain their current lifestyle – which in turn helps to improve their longevity of life.

Another main reason to set one up is that in Kenya, retirement schemes enjoy certain tax privileges, in that you’ll pay less tax than you would with a normal savings product when you take money out of the scheme. You also get easier access to mortgage facilities. And finally, if you’re currently employed, there’s a good chance that your employer will agree to supplement your contributions to a scheme like this.

When should I start saving for retirement?

As with all investing, the sooner you start saving for your retirement, the better. This is thanks to the power of compound interest, where your income is reinvested together with your principle over time, so the earlier you start putting away money for later, the more quickly your wealth will grow.

Do I still need to save for retirement even if I don't have any dependents?

It’s definitely a good idea to save for retirement even if you don’t have any children or won’t have other people relying on your income. That’s because you won’t just need to look after the people around you – you’ll also need to look after yourself in terms of food, clothing, transport, where you’ll live and other essential expenses.

What broad kinds of products are there for retirement savings?

When it comes to retirement savings, there are two main types of products you can choose from: pension retirement schemes, and life endowment with profits.

A third option is to invest funds in a money market product. Although these products are not exclusively aimed at retirement saving, they give the best results if funds are invested for a long period of time – which makes them ideal for achieving your retirement saving goals.

It’s never easy to think about saying goodbye to your youth, but facing this reality can go a long way to making the golden years of your life much happier ones. With secure finances in place, getting old means you can finally have time to do all those things you never had time for before, from travelling the globe to learning to cook, or simply spending quality time with your loved ones.  

With ICEA LION as your financial partner, we’ll help you come up with a retirement savings plan that will help you on your way to being financially secure when you’ve stopped working. Keen to get started? Contact your broker or agent or contact us directly to start setting up a retirement investment plan today.