There’s an age that comes with its fair dose of reality. When you realise that time has indeed gone by and that retirement that you used to think is so far away is staring at you in the face or is at least real enough to start occupying your mind. It could be just a factor of your age, you’ve clocked a certain number and maybe you even have those pay slips that show you how close you are to the official retirement age. Maybe you just realized you cannot work at the same rate for the rest of your life or you simply do not want to. Your energy levels are not quite what they used to be five or ten years ago. You accept that the rat race i.e. where we work to earn to spend, then work again to earn to spend and so on, is no longer sustainable. You can no longer be unintentional with money because the day when you may not have that income is now a reality. The do nothing plan must be changed to become the fast forward or acceleration plan. The fact is, most people are financially unprepared for retirement. If their salaries or incomes were taken away they cannot sustain their lives. As we financially prepare for retirement, it may help to identify those things that we definitely must deal with before d day.
- Debt Repayment
You really don’t want to be paying off debt in your sunset years. At least debt that directly requires you to be working to pay it off like the loans that are directly checked off from salaries. There may be no salary to do this. It’s one thing to have an asset e.g. property that has its own income stream and servicing its debt. But the debt where you physically have to be at work is risky. This has shown up in our lives through home mortgages, unsecured loans, credit card debt, consumer related debt, school fees loans and so on. List down your debts. Any loans that cannot pay themselves without your input need to be cleared pre -retirement (Click to Tweet this thought). Make a plan to pay them off as quickly as possible. As much as you want it, forego that new car because time does not allow you the luxury of yet another debt that doesn’t work in your favour. Use that money to pay off your mortgage.
- School Fees Fund
Will you be done with this when you retire? In our courses we come across many people who will still be paying hefty university fees when retired. This means, unless you want your children to get scholarships, there needs to be some money sitting somewhere to accommodate this. Do the math, find out what this will cost and ask yourself what your plan of action will be. Many people have made the mistake of taking children to very expensive schools earlier on, only to find that it came at the expense of university. Facing the numbers may help with more objective choices with schools.
- Spending plan
If you do not have a budget, there is never a better time to develop one than now (Click to Tweet this thought). You see as much as retirement is nearer, for many people this is when they are also at the peak of their earning potential. Most people in this his age bracket are earning a lot more money and hence the temptation is to spend. Left unchecked, these higher incomes may lead to a false sense of security. Remember you are not wealthy because of today’s income irrespective of how well you live. How long can you survive on the same lifestyle without that income coming in next month? That’s how wealthy you are. Keep your lifestyle in check despite the temptation. Create a spending plan for your monthly income and expenses. But take it a step further and decide what lifestyle you will adopt. There may be things that are important to you to have or do. Identify them. However, there may be other things that can be put aside and resources used to do some of the things we are talking about in this article.
- Retirement Fund.
If you have a pension at work, this is definitely part of it but your pension will never fully fund your retirement. Do you know that if you spend Kshs 100, 000 today you will need approximately Kshs 400, 000 to spend on exactly the same things in ten years? This is why your pension will not be enough. You will need to have income coming in from somewhere. This is why the plots of land at that point will not help you. They may have appreciated in value but if they are not generating some source of income, they will not put food on your table. You still need to eat even in retirement. Having a home is great, but homes don’t come inclusive of paid utility bills, medical bills, rates, school fees etc. Other investments will need to be doing this. Start looking at those investment avenues that will generate income.
- Personal Plan
Just because you have retired does not mean you will do nothing. It’s just a different season where you may do different things and granted at a different pace. What is that for you? Some of these activities may even help in continuing to generate some level of income for you. There are people who sit on boards of companies offering their experience and expertise. Maybe you want to mentor others. It could be to farm, write a book etc. Some people start new businesses in retirement. Think about it and start working on it now. If you plan to start a business in five years start now with one client and learn. Find out now what it takes to be on a board, be a writer etc.
Retirement is not a surprise but being prepared for it requires intention.
Centonomy runs a financial acceleration program for people past the age of forty. For details email Waceke on firstname.lastname@example.org | Facebook/WacekeNduati| Twitter@cekenduati