This archive report was first published on 25 September 2019.
Why Millennials Should Prioritize Retirement Planning ¶
Published on September 25, 2019, by Joy Kareko.
Millennials often live by the 'YOLO' (you only live once) motto, prioritizing short-term financial goals over long-term retirement savings. However, this approach can lead to financial instability and stress in the future.
Failure to save for retirement can have severe consequences, including relying on others for financial support, struggling to afford basic needs, and compromising one's quality of life.
Fortunately, there are simple strategies to prepare for retirement, starting with making a deliberate decision to save for retirement.
Once this decision is made, saving becomes a manageable task, similar to setting aside money for a specific goal, such as buying a car. Consider opening a personal pension account and setting up a standing order with your bank.
Additional voluntary contributions can also help boost retirement savings. By projecting your savings, you can estimate how much you'll have in retirement. For instance, saving KSh 36,000 per year at a 10% interest rate can accumulate to approximately KSh 574,000 in 10 years.
To achieve a substantial retirement nest egg, consider escalating your savings periodically. Aim to save about KSh 3,000,000 to replace 75% of your monthly income in retirement.
Planning your life and setting measurable goals can also help you save for retirement. Break down your overall goal into smaller, manageable targets, and evaluate your progress regularly.
It's essential to remember that your pension savings plan is not an emergency fund. Instead, consider setting aside a separate emergency fund to cushion you during tough economic times.
When receiving a lump sum from your retirement funds, use part of it to purchase an annuity or income drawdown fund to ensure periodic payments every month. This will act as a safety net in case your business fails.
