By John Kariuki
Bastan Ngururi, a retired civil servant, does not regret working hard in his time to see his children through school and college. And like most working class Kenyans, he began on the fast lane.
He was burdened with his siblings’ education bill from the moment he earned his first salary.
And when his siblings were through with school, his own children would stake their claim to his finances.
This, coupled with other parental responsibilities ensured that Ngururi would not have money for his own plans until all his children were grown up and gone.
With only a few years to retirement, Ngururi seriously began considering his old age money plans. It dawned on him that he did not have substantial savings, which he could live off.
His life had been a whirlwind of borrowing and repaying loans and the sudden financial freedom awed him. He began worrying that it was too late in the day to invest and secure his sunset years. At his wits end, Ngururi sought financial help.
“The expert and I estimated that I would need at least Sh2 million to live on in my retirement,” says Ngururi. “The financial expert then posed the stark question of where this money would come from,” says Ngururi.
Bleak future
This retiree factored in what would be available from other sources besides his savings. But whichever way he looked at it, his financial future was bleak.
“At the prodding of the financial expert, I did what many people considered the unthinkable,” says Ngururi. “I sold part of my inheritance — a tract of land in the rural area — and bought a commercial plot in my home town,” he says. With the proceeds from this sale and part of his Sacco savings and lump some pension, Ngururi constructed a commercial building on this plot. It was a lifetime gamble that had to pay off.
“My fortunes took a turn for the better as my home town was elevated to county headquarters and the rooms were rented out long before the building was complete,” he says. From the rent goodwill alone, paid six months upfront, Ngururi was able to recoup half of his investment and the rest is now history.
Ngururi advises people not to despair if they feel that time for investing is running out.
“The worst thing that anybody can do is to give up on account of believing too much in formulaic investment cycles that economic theorists bandy around,” he says. With the right plan, even two years are enough to turn around one’s life in retirement, he adds.
Danson Ogola, a personal finance banker, says that people who launch their money plans late may miss out on the compounding effect of time when such projects are done earlier.
“People investing in their forties and fifties should ideally go for ventures that are bound to turn in a profit quickly to recoup their capital fast,” he says.
With the hindsight of their personal money blunders and experiences, older investors are likely to get things right from the beginning unlike youthful ones, adds Ogola. And to raise the requisite capital, Ogola advises older investors to take stock of their income carefully.
Two-thirds rule
“If they are formally employed, such people should consider using two third of their expected lump-some pension as capital and keeping one third as an emergency fund,” he says. “Like a salary, the two thirds rule also applies to retirees’ lump-some and monthly pension,” says Ogola.
The next step is to set goals for raising the balance of the money they would need to go it alone. This banker advises retirees intending to invest late to consider relocating or downsizing their domestic overheads.
“If you live in an area with a high cost of living, move to a less expensive area,” he says. This act alone can make a big difference in one’s ability to amass wealth.
Ogola adds that if children have left the nest, their parents may not have the need to live in big houses that could have appreciated in value on account of their neighbourhoods.
“Such retirees could consider selling such houses and buying smaller, less expensive ones,” he says. This has the benefit of raising capital for investment besides saving on power, repair and maintenance.
Jump-start
Many people worried about never accumulating enough money in retirement often take on jobs after the end of their formal ones to jump-start their investments. Consequently, there are many police and military retirees who become security consultants; retired teachers, education specialist; old bankers, financial gurus and so on.
But of course financial freedom in one’s sunset years depends on the cardinal rule that one should debt free upon retirement. If one carries loans into retirement, his or her potential retirement savings will go to credit repayment, penalties and interests. Paying only the minimum installments on such loans, with millions of pension money in the bank, is often the first major mistake that many retirees often make.
Clear loans
It’s prudent to clear off all existing loans in full upon retirement, even if the entire pension package is spent this way.
One will be amazed at how much this act frees his or her mind to start building up retirement savings over time.
