Saturday, December 22, 2012

Retiring into the unknown: Part 3

They will give you a wheelbarrow after 30 years of loyal service

We all would want to live our sunset years at peace and enjoying the money hard earned during our more youthful years. Picture watching your grandsons and daughters grow and letting your sons and daughters live comfortably without having to bog them down with your needs. Sounds good but it is not always rosy for majority occasioned by very poor planning, if any planning at all. Majority of Kenyans become dependents at old age when poor health takes a toll on them and all they can do is reminisce of the good times, recount unfulfilled financial goals and blames it on their kids, after all they utilized all the money as you educated them, clothed them and provided food for them. Sounds logical to say that they are the ones who ensured you never got rich, mind you it is a God given responsibility to take care of them. The expectation of people with such a mentality is that when the kids do well, it is payback time and they must take care of you during old age. However, we all know that it is not always the case especially when your kids start to see you as a liability.

So what do we need to do to prepare well for retirement?

1.            Understand that the Pension that you shall get (if any) will be of minimal value by the time you receive it and it will only help you keep afloat. I know of a guy who was a provincial prisons commandant (quite a big post) and all he got as lump sum payment for pension was a mere 2M and he receives monthly pension of 20k after working for 30 years. For such a guy, having not invested or even built a family house, his idea was to go to shags and use to 2M to build a house and survive on the 20k monthly pension for recurrent expenditure…wow.. What I know is that by the time you receive your retirement package (many years down the line), the amount will have been eaten up by inflation such that the value will be so minimal, and you won’t believe it. So quit relying on this amount…it should only complement your other cash if at all you’ll wait to retire at 55 years.

2.            Big Mistake: You retire and assume that you shall start a business that will keep you busy and earn you some cash? At least we know from some earlier posts that 90% of businesses fail within their first 5 years….you need lady luck to smile at you to succeed in your first attempt on business at 55 years. Succeeding on this one is like the proverbial camel going through the eye of a needle story…unless you success is written high up in the stars (one in a million chance). So brother /sister, start doing business as early as you get a chance, in your early years you can afford to fall flat in your first attempts, dust yourself and rise up…after all business is not for the faint hearted.

3.           Don’t you underestimate the power of saving and investing and especially when you are young and have all the time in this world. Picture saving consistently 5k per month (very modest) for 20 years…..simple calculations add to 1.2M …now assume you save 5k per month for the first 5 years, 10k per month for the next 5yrs, 20k per month for the next 5 years and 30k per month for the last 5yrs…..adds up to 3.9M…

Suppose then you introduce the element of investing you savings above…even if you got a modest profit of 25% per annum on you investments …compounded…I don’t want to imagine how the figures would be….20M…30M..50M perhaps.

Surely, you must do it stocks, unit trusts and Treasury Bills..whatever..but so something

4.            Remember how important it is to buy appreciating assets… I once bought a plot in Syokimau like 10yrs ago at 80k..back then there were wild animals. But where did the wild animals go to…Imagine if I bought like 6 plots at the same price. I hear the current price could be 1.5M…*6 = 9M ….sounds juicy.
Go to Maasai land….where you can get an acre at 30k and hold for 10 yrs. They might label you a speculator..whatever.. but it is the forces of demand and supply in our crazy world of real estate that makes you the money…fundamentals notwithstanding.

5.            If you are able, you might get to this level where you have some rental units. It is not so hard. Somewhere in your working life, you can afford to take a big loan, buy a nice plot somewhere. Even if it means doing a single unit per annum..for 15 years you’ll have 15 units each getting you a rent of 15k..and that means at the age of 55 and above, you’ll not need to go round your sons and daughters places with a begging bowl. Heck, you will even afford to have something they’ll inherit, small fights notwithstanding, and a few generations will remember you for your hard work. Occasionally, you will even afford to organize some get-togethers for your big family and you eat some goats. Tell those grandkids who will care to listen about how life was when you were young and how organized you were.

But look at it this way. You might get to level 5 above when you are 40 years of age. I don’t see why you should even continue working as most educated slaves do. Therein lies a smooth transition between employment life with its own challenges and an independent life where you can dictate your schedule. How sweet it is to get off the shackles of employment at around 40yrs…It is very possible only with proper planning and taking practical steps towards early retirement.

Life does not follow a straight path and am sure some of us are in our 20s, 30s, 40s and 50s. Most importantly, we need to prepare for our later years and you surely must be able to do something well in advance before the day of reckoning when they bid you goodbye and give you a wheelbarrow and some gumboots. After all, how many are even lucky to get there especially with downsizing of companies, retrenchments thereon, contractual jobs and general job insecurities all over….prepare for that rainy day because chances of it coming are much higher than you think.

We will now break for a while and resume our lessons in the new year. When we resume, we shall look at inherited land, selling the same and crazy repercussionsIt is our sincere hope and desire that we shall learn and most importantly practice what we learn.

Merry Christmas and a happy, blessed New Year 2013 to all our readers and followers. You are blessed!

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