Financial Planning for Retirement at Kenya School of Government

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Learn about personal financial management and preparation for retirement at Kenya School of Government. Key reminders include the importance of planning for retirement to maintain a comfortable life. Understand the income replacement ratio and the necessity of saving adequately for post-retirement needs like medical cover and reduced income. Start planning now to secure your future financially.

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KENYA SCHOOL OF GOVERNMENT KENYA SCHOOL OF GOVERNMENT SRBS SRBS PERSONAL FINANCIAL MANAGEMENT PERSONAL FINANCIAL MANAGEMENT IN PREPARATION FOR RETIREMENT IN PREPARATION FOR RETIREMENT THURSDAY, MAY 30, 2024 THURSDAY, MAY 30, 2024

OUTLINE 1. Key Reminders 2. Personal Financial planning 3. Sources of additional income prior to retirement 4. Activities to consider as you undertake financial planning in preparation for retirement 5. Post retirement medical fund 6. Misconception about pension

POINTS TO NOTE Zamara, the KSG scheme administrator reminds us of the following through the individual benefit scheme statements: Life moves so fast, one day you are celebrating your first salary and the next you are celebrating your retirement In retirement you will be celebrating living expenses such as medical costs and living your dreams at the same time

POINTS TO NOTE.. Conti.. We therefore need to plan and track in order to live a comfortable life In order to live a good life you will require 70- 80% of your pre-retirement income to enjoy the same standard of living you had before retirement. This is called income replacement ratio Whenever this ration is not met, mostly it leads to high dependency ratio in Kenya thus increasing the poverty rate among the elderly

Personal Financial planning In order to avoid financial embarrassments during retirement members are required to have a financial plan. If you fail to plan, you ve planned to fail, you have to be realistic about your plans and think ahead. create a plan that considers your expected lifespan.

Personal Financial planning conti.. In this plan, include your i. Planned retirement age, ii. Retirement location, iii.General health, and iv.The lifestyle you want to lead before deciding how much to set aside.

Personal Financial planning conti.. Update your plan regularly as your needs and lifestyle change Members are urged to begin saving adequately now to cushion from the following after retirement: Medical Cover Reduced income Low lumpsum Income variability Access to credit

Personal Financial planning conti.. It becomes a question of postponing current consumption or foregoing present luxuries to save and invest to survive future dry spells of money after retirement. Members need to understand their spending habits with a view to accumulating more savings than incurring unplanned expenditures. Self-discipline on money matters would be a key stepping stone towards financial independence.

Personal Financial planning conti.. As one plans for retirement, it is advisable to develop and implement balanced-diet meal plans and undertake regular physical exercises to avoid huge medical costs after retirement attributed by unhealthy diets

Sources of additional income prior to retirement SACCO loans for investing in income- generating assets or other profitable investment instruments such as real estates Increasing contributions to employer- registered pension schemes, employees could also raise NSSF contributions to boost the retirement kitty

Sources of additional income prior to retirement conti.. Side hustle e.g consultancies, business like manufacturing, retail, farming, part time jobs etc Invest surplus funds in bills, bonds, money markets, shares, fixed deposits etc Avoid withdrawing benefits after change of jobs

Activities to consider as you undertake financial planning in preparation for retirement 1. School fees for children Ascertain how much you may require after retirement for your children s school fees. Start saving more towards your pension for ease of settlement of fees. School expenses include field trips and cost of extra-curricular activities.

Activities to consider as you undertake financial planning conti.. 2. Retirement home During the working years, employees stay in staff, rented or owner-occupied houses. Cases have been reported of employees being evicted from staff quarters or rented house at the end of the employment period. Members are encouraged to own a retirement homes during their working life that would meet their needs and lifestyle. Note that moving to a cheaper residential area within town will be a temporal solution because of no regular source of income.

Activities to consider as you undertake financial planning conti.. 3. Loan repayments All loans should be repaid before retirement. During working life members are encouraged to take loans preferably for activities that will generate income in future. Avoid loans for luxuries especially to purchase assets that will depreciate in value.

How retirees invest /spent the lump sum amount after retirement NOTE: Most pensioners who retire are paid around Kshs. 1 to 3 Million as lumpsum payment. Is this amount enough for the following activities? Pay school fee for children Farming like chicken, pigs, cows Business like manufacturing, retail or service Build or buy a house to live in Buy Land Real Estate investment Settle bills like medical e.g chronic diseases etc Pay Loans

POST RETIREMENT MEDICAL FUND This is a fund where a members are encouraged to make contributions towards the post retirement medical cover There is no minimal nor maximum monthly contribution set by the School

WHEN TO ACCESS POST RETIREMENT MEDICAL FUND A member will access only upon retirement or early retirement On medical evidence of ill health to the satisfaction that a member is incapacitated to discharge his/ her duties Upon the emigration of a member from Kenya to another Country Post retirement medical fund will not be used to purchase a residential house

HOW TO ACCESS THE POST RETIREMENT MEDICAL FUND Before attaining the normal retirement age, a member may opt to have the funds transferred to another medical fund elected in writing by a member Use the funds to purchase a medical cover Use the funds to offset any medical expense incurred as and when they fall due

HOW TO ACCESS THE POST RETIREMENT MEDICAL FUND Cont Transfer the post retirement medical fund for purpose of purchasing a medical cover Purchasing an annuity for the purpose of purchasing annual medical cover premiums

Misconception about pension Not an urgent matter and it is only for the elderly to think about. Average working life is around 30 years and current expectancy life is around 75-80 years The family will take care of you after you retire. Note that the high dependency rate in Kenya is increasing poverty among the elderly.

Misconception about pension conti Pension is only meant for people who are employed. Retirement happens even when one is self employed or in the informal sector Saving for pension is complex. Pension is not an investment vehicle. Members are reminded that pension is designated for retirement