As you approach retirement age, it’s important to have a solid financial plan in place to ensure a comfortable and secure retirement. Unfortunately, many people in Kenya are not adequately prepared for retirement, and the consequences can be dire.
By establishing a financial safety net, you can guarantee the preservation of your current lifestyle and the ability to relish your retirement years.
Creating a retirement strategy is vitally important. You need to start saving for retirement as soon as you start earning income. The earlier you start saving for retirement, the more time your money has to grow. Even small contributions over a long period of time can add up significantly.
A well-planned retirement will ensure that you have a consistent source of income and allow you to maintain your lifestyle in the future.
In this blog, we’ll explore some of the major financial safety nets that older Kenyans can rely on to secure their retirement.
National Social Security Fund (NSSF)
National Social Security Fund (NSSF) is a government-managed retirement benefit scheme that provides social security protection to Kenyan workers. NSSF membership is mandatory for all employees earning a minimum of KES 6,000 per month, and contributions are deducted from their salaries.
The National Social Security Fund (NSSF) is designed to provide social security protection to its members in both the formal and informal sectors of the Kenyan Economy.
It’s a defined contribution scheme, meaning that the amount you receive upon retirement depends on how much you contributed during your working years.
Participation for both employers and employees are compulsory. The fund is both a pension fund and provident fund.
Pension plan -A third of accumulated benefit will be paid as a single lump sum amount and the remaining two thirds Paid as a regular income for life upon retirement or can be withdrawn from the fund in a minimum of 10 years.
Provident plan -The accumulated amount will be paid in one single lump sum upon retirement.
Individual Retirement Benefits Scheme (IRBS)
The Individual Retirement Benefits Scheme (IRBS) is a voluntary pension scheme that provides retirement benefits to individuals who are not members of an occupational pension scheme. This scheme is suitable for self-employed individuals, business owners, and those in informal employment. IRBS allows you to contribute as much as you can afford, and the amount you receive upon retirement is determined by the amount you contributed plus any investment returns earned.
Individual Retirement Savings Plan (IRSP)
An Individual Retirement Savings Plan is a personal retirement savings plan that you can set up with a licensed fund manager or a financial institution. You contribute to the plan on a regular basis, and your money is invested in a range of financial products such as stocks, bonds, and mutual funds your savings will grow exponentially over time while earning interest.
On attainment of your selected retirement age, the firm will pay your accumulated retirement benefits in accordance to the option selected at the inception of the policy, you can withdraw your savings as a lump sum or receive regular payments.
Occupational Retirement Benefits Scheme (ORBS)
The Occupational Retirement Benefits Scheme (ORBS) is a pension scheme provided by an employer to its employees. It’s a defined benefit scheme, meaning that the amount you receive upon retirement is predetermined and based on your salary and years of service. ORBS is suitable for employees in formal employment and is a crucial safety net for retirement planning.
Public Service Pension Scheme (PSPS)
If you’re a government employee, you’re eligible to join the PSPS, a pension scheme that provides retirement benefits to civil servants. The scheme is managed by the Public Service Commission, and contributions are deducted from employees’ salaries.
Personal Savings and Investments
Personal savings and investments are an essential part of retirement planning. It’s essential to start saving early and consistently to build a substantial nest egg that can support your retirement lifestyle. You can invest in assets such as stocks, bonds, mutual funds, and real estate, among others, to grow your savings and provide a regular income stream upon retirement.
Insurance Policies
Insurance policies such as life insurance, health insurance, and critical illness cover can provide financial protection in case of unexpected events that may affect your retirement savings. Life insurance policies can provide a lump sum payment to your beneficiaries upon your death, while health insurance and critical illness cover can help cover medical expenses that may deplete your retirement savings.
Key takeaway
Securing your retirement requires careful planning and a mix of financial safety nets that can provide a stable income stream to support your retirement lifestyle.
The National Social Security Fund, Individual Retirement Benefits Scheme, Occupational Retirement Benefits Scheme, personal savings and investments, and insurance policies are some of the major financial safety nets that older Kenyans can rely on to secure their retirement.
It’s important to have a personal savings plan in place to supplement your retirement income. This can include investments in stocks, bonds, and real estate, as well as a savings account or fixed deposit with a bank.
Remember, it’s never too early or too late to start planning for your retirement.
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