Book Excerpt
RETIREMENT PLANNING: A HOLISTIC GUIDE TO A SATISFYING SEASON
Copyright©2021 Rose Wakiria
Tel: +254 722 355 464
Email: rose.wakiria@gmail.com
No part of this publication may be reproduced, distributed or transmitted in any form or by any means, including photocopying, recording or other electronic or mechanical methods without prior written permission of the author except in brief quotations embodied in reviews and certain other non-commercial uses permitted by copyright law.
ISBN 978-9914-707-618
ACKNOWLEDGEMENTS
I would like to thank my family, friends and clients. Our interactions were the catalyst for this book. Special thanks to my daughter Sue for encouraging me to keep writing, Ben for diligently reading my newsletters and encouraging me to compile them into abook, and Josephine for copy editing this book.
CONTENTS
Acronyms and Abbreviations
Introduction
1: Transitions
2: Retirement as a transition
3: Life planning
4: What to prepare for
5: Retirement income sources
6: Retirement benefits
7: Accessing benefits at retirement
8: Selecting a provider
9: Choosing a Financial/Retirement Planner
10: Investing for retirement
11: Investing in retirement
12:Psychological preparation
13: Socialpreparation
14: Preparing your children
15: Bringing it all together
Final thoughts
Glossary
About the author
ACRONYMS AND ABBREVIATIONS
BOT Board of Trustees
CBK Central Bank of Kenya
CMA Capital Markets Authority
HELB Higher Education Loans Board
IRA Insurance Regulatory Authority
IRR Income Replacement Ratio
NHIF National Health Insurance Fund
NSE Nairobi Securities Exchange
NSSF National Social Security Fund
OPCT Old Persons Cash Transfer
PSPS Public Service Pension Scheme
PSSS Public Service Superannuation Scheme
PRMF Post-Retirement Medical Fund
RBA Retirement Benefits Authority
SACCO Savings and Credit CooperativeSociety
I am writing this book during the COVID-19 pandemic. It is a time like no other as we face perhaps the greatest disruption in our lifetime. In March 2020, in an effort to stop the spread of the novel coronavirus, the Kenya government announced various containment measures including travel restrictions; lockdowns and curfews; and banning of public gatherings. Public places such as schools, churches and mosques; bars and restaurants, were closed; and non-essential workers were required to work virtually from their homes.
Some people have likened this time to retirement. We are separated from colleagues and have a lot of time to ourselves. Unfortunately, many workers have lost their jobs and sources of livelihood; and while some businesses have struggled to remain open, several have been forced to close.
Financial concerns, lack of social interactions, inability to engage in meaningful work, and the uncertainty of how long the pandemic will last has been overwhelming. These worries about an unpredictable future resonate with many going into retirement, especially those forced into an early retirement. Even those who still have jobs wonder whether they will have a comfortable retirement. If you knew in advance how 2020 would play out, would you have made any specific preparation for it?
Yet, unlike the current pandemic, which will end and life will return to normal, retirement is certain and can span several decades. With proper preparation, this time can be a rewarding one, free from workplace pressures, allowing you to spend quality time with your family and loved ones while engaging in the activities you enjoy.
Life comes in phases along with many transitions. There are three broad phases or seasons in life: growth and development; economically productive; and retirement phase. The growth and development phase covers the first 20 to 25 years, when you grow physically, socially, intellectually and gain skills that prepare you for the labour market. In this season, you are mostly financially depend on your parents or guardians.
As you transition into the economically productive phase you look for enjoyable, financially rewarding work; and want to remain engaged until you retire. This season can last three to four decades. You are financially independent, taking care of your financial obligations and making investments to build wealth.The retirement phase marks a new life away from work when you have time and an opportunity to redefine yourself. This phase may last a few years or several decades, and is marked by advancing age, diminishing energy levels, and potentially declining health.
Growing up, the narrative was that a child would go to school, get an education, then a good job, work for several decades, and retire comfortably to a peaceful rural life. This storyline no longer holds for a majority of people in Kenya today. First, a good education no longer guarantees a job, let alone a good one. Second, job security is an illusion, even for those working in government, as restructuring and job losses are common occurrences.
A significant number of employees, particularly in the private sector, are likely to work for several employers before retiring or venturing into entrepreneurship. They are also more likely to experience career interruptions. While many may voluntarily leave their jobs; some will be forced to retire before the mandatory retirement age of 55 or 60 years.
The millennials, however, have a unique approach to work and retirement. Many do not wish to be employed, opting instead to venture into business and only work on what interests them. Some millennials have embraced the “Financially Independent Retire Early” (FIRE) movement, whose goal is to attain financial independence early in their career so they can do whatever they want in their later life.
Whether you subscribe to the traditional concept of work and retirement, or to the FIRE ideology, you will retire either because you have achieved financial independence, lost a job or business, or attained the mandatory retirement age. One thing is for sure, if God blesses you with a long life, you will make this very important transition. Since retirement is certain, whether it comes early or on time, will you be ready?
There are many reasons why you should prepare for retirement. First, if you live long enough, retirement is a certainty. Second, retirement can last a long time, when you have limited or no ability to earn an income. Third, no one can accurately predict when they will retire. And finally, since retirement comes with a myriad of other transitions, it can be a turbulent time. Therefore, it is prudent to prepare for it so that you navigate the transition smoothly and enjoy the season.
As a financial and retirement planner, I work with people preparing for, or transitioning into retirement. The relationship with my clients continues intoretirement, and I am thus privy to common issues they encounter during this period. This book addresses those concerns and will provide you with information to help you have a smooth transition to retirement.
The book discusses various ways of coping with the changes you may encounter as you transition to this new stage of life. It addresses the financial and non-financial decisions you need to make during your career, before you retire, and in retirement. It also addresses the frequently asked questions and concerns including how and when to access retirement benefits; various available retirement income options; selecting providers; considering medical insurance; and investing for, and in retirement.
My goal is to help you prepare well for retirement in a holistic manner encompassing all aspects of life: financial, social, and psychological. While financial preparation will allow you to live a financially independent life, other non-financial aspects are just as important. The quality of relationships with family, friends, and the community will enhance or diminish your quality of life, while how you spend your time will affect your mental wellbeing as you seek a meaningful life.
This book is a useful resource for all those who want to have a secure and fulfilling retirement, in particular retirees; those approaching retirement; and even young people in the early stages of their professional life. It will help family and friends of retirees understand the transition their loved ones are going through, as well as human resources personnel and trustees of retirement benefits schemes who guide employees through retirement benefits enrolment and withdrawal processes. Others who may benefit are financial advisors who help clients to manage their finances.
I draw from my two decades of professional experience in the retirement benefits industry. I have worked closely with individuals as they save and prepare for retirement. I have assisted hundreds of employers set up retirement benefits schemes for their employees and trained many employees on saving through retirement benefits. In the past five years, I have worked closely with retirees and have come to appreciate their unique needs, as well as the opportunities and challenges in retirement. I embrace the biblical worldview on planning, managing finances, living in a community, and living a meaningful life.Mayyou enjoy reading this book as you prepare for retirement and finish well.