Why we must always give attention to retirement planning
By Sylvia Juuko
Lockdown measures have a way of stimulating retirement thoughts. If you are fortunate enough to continue to work remotely, it is clear that work as we know it is constantly evolving.
For most of us, it is a mode that we are used to walking away from home to go to another place to deliver your skills, goods or services. The comparison of lockdown and retirement may be far-fetched, but it did give us an idea of how to get the most out of a time when the commuting routine no longer exists.
The question we therefore need to answer is how can you continue to be of value in order to provide your skills, goods and services in an environment of restricted mobility. Thriving in this new status quo can be considered successful if you are adequately compensated for that effort.
Regardless of where you are in your financial journey, you cannot afford to ignore retirement planning. When you are young and at the beginning of your professional life it is easy to postpone meals for this stage of your life, but it will inevitably happen. As the common saying goes, once you start earning income, you need to plan your retirement. For employees, you also need to plan for the day on which your income suddenly disappears. Your ability to cope with this can be measured by how many months you can survive if your income is abruptly cut off.
Usually retirement is assigned to the compulsory age, at which most institutions consider either 55 or 60 years. However, money-conscious people can retire earlier than the mandatory age. Feeling good in retirement means generating cash flow from your assets that you can use to efficiently fund your current and future lifestyle without having to actively get involved in your work. Granted, when you’re struggling to cope with your daily needs, thinking about retirement planning can be a stretch. However, in such a scenario, you need to think seriously about how you will succeed in the retirement phase.
Particular attention should be paid to acquiring assets that will keep your money safe, those that are suitable for emergency situations, as well as those that, among other things, will give you cash flow to fund your needs.
That said, you can’t plan your retirement until you know how to manage your day-to-day decisions about money and how to increase your income to fund the lifestyle you want in the future. You need to clarify the attitudes and habits that prevent you from carefully managing your current income, but at the same time working on funding your retirement savings.
To begin with, you need to be clear about the life you envision in your sunset years. List the things you think are valuable and estimate their costs. You can then work backwards and list what you need to save or invest monthly or yearly to reach that age target. This should be done outside of your pension plan if you fall into the insured category.
The pension plans should be viewed as a complement to your other pension plans. Unfortunately, not many members of the working class are covered by pension plans.
Even those covered by some form of plan have now found that this is not enough, and many have survived their money. What people don’t take into account is that your current lifestyle is funded by a lot of perks. Or that since you are energetic, you have a lot of part-time jobs to manage. Remember that as you get older, you will not have the same level of energy to deal with the various sideline activities as you will inevitably slow down with age.
Ultimately, as you revise your financial plan and focus on retirement planning, you need to be resourceful in how to manage and grow your money. At the same time, you need to grapple with how we can recover from any costs incurred and be able to rebuild an asset that is resilient to future shocks.
The author works with the Bank of Uganda