What is your retirement plan?

Planning : Business research and saving are key components of preparing for retirement. Photo from http://www.blossomwm.com

What you need to know:

Retirement. Retirement should be a time to enjoy the fruits of the many years of hard work. However, this is unattainable if one has no savings or plan to finance retirement. Having a plan and making good investment decisions should start way before retirement rolls around

It’s never too early to have a retirement plan. Preparing well beforehand guarantees you financial security when you finally reach retirement.
Unfortunately, even the best laid plans can fail. There are workers who diligently saved for retirement and drew up a business plan to invest their savings only to watch the money go down the drain because of ill-informed investment decisions.
Mr Edward Ochwo, who worked as a clerk to Parliament for more than 21 years was lucky that when he retired in 1989, he promptly received his pension which he put to good use and is now a happy retiree.
Like Mr Ochwo, there is need for everyone both in public service and private sector, formal and informal employment to have a retirement plan.

Retirement schemes
By June 2016, Uganda Retirement Benefits Regulatory Authority (URBRA) a government body had licensed only three pension schemes in Uganda which are National Social Security Fund (NSSF), Kampala City Traders Association Retirement Fund and Mazima Retirement Plan.
The social security fund is an accumulative amount which employers and employees in the private sector contribute to guard against the economic and social distress that would otherwise be caused by substantial reduction or cessation of earnings resulting from retirement, death and other permanent mishaps.
Mr Ochwo recalls that as a civil servant since 1962, his money was first saved with the then Uganda Commercial Bank cum Stanbic Bank until there was Public Service Pension scheme.

Need for an investment plan
In 2016, URBRA commissioned a survey which revealed that the number of individuals who are saving for retirement through public pension provisioning, occupational retirement benefit schemes, and personal retirement saving plans is still low yet retirement benefit arrangements are an important source of income for the elderly.
Dependency syndrome
According to Mr Richard Byarugaba, many people in Uganda have a poor saving culture and the dependency ratio is at 60 per cent. Many expect that their children will take care of them during retirement.
“Unfortunately,” he says, “dimensions have changed and these days it is everyone for himself. The children now have families to care of so they may not be able to care for their parents. This alone is reason to save.”

Contributions
Any employee who is not in public service but is above 16 years and below 55 years is eligible for an NSSF contribution of five per cent while their employer contributes 10 per cent from their monthly salary.
The employee then gets their benefits from NSSF when they attain the age of 55 years as a lump sum because at this age they are considered to have retired from regular employment.
Ms Alice Abukito, the administrator of Mazima Retirement Plan says the scheme is voluntary and targets the informal sector with mainly mobile saving, standing orders from one’s bank account and soon interswitch. One can save from as little as Shs2, 000 every day, week or month.

When to withdraw
There are instances when a client gets a problem before they reach 55years of age. Mr Byarugaba says under such circumstances, one can request to make a withdraw.
“If a client has not been employed under a contract of service for a period of one year, if they get permanent physical or mental disability, when they immigrate permanently from Uganda to a country with no reciprocal arrangement with Uganda, in case of death of an employee, the survivor’s benefit shall be payable to the survivors,” he says.

Bad investments
The retirement package in the public retirement scheme is first given as gratuity and monthly pension while the security fund is given as a lump sum. Although his first investment was ruined during the National Resistance Army (NRA) war, Mr Ochwo was lucky to receive a monthly pension as a former civil servant which he used to make more investments.
“There was a gratuity lump sum and monthly pension. I had invested in developing a piece of land in Kakiri where I planted sugarcane but it was ruined during the NRA war. I had also invested in rice growing in Tororo, had grown some Eucalyptus trees, a farm house and a poultry farm,” he says.
With the NSSF package given as a lump sum, excitement usually sets and leads to wastage by many people as Mr Moses Majweega, an NSSF beneficiary, explains.
“I received a lump sum of Shs 90 million which I had saved for more than 15 years. Someone told me it was nice to have farmland. I went ahead and bought 14 acres of farm land at Shs50M and everything that was required to run the farm. When I was about to start farming, I was told that whoever had sold me the land was not the rightful owner and therefore did not have authority to sell the property. By that time, I had used almost all the money. With the little that was left, I shifted to a place where the cost of living was relatively cheaper,” Mr Majweega says.
Ms Abukito advises that in case a retiree makes wrong investment choices, they can try to patch up it up with late savings. Although the sprint may not be enough to put you where you would have been had you not made wrong investment decisions, it help you have a better shot at a comfortable post-career life.
“With a ruined investment, one needs to relocate to an area where the costs of living are relatively lower. If you have substantial equity in your home, you may be able to tap into it for retirement income by downsizing to a less expensive home and/or a cheaper car,” Mr Ochwo advises.

Postponing Retirement
One may choose to continue working for some more years even after reaching retirement age. Extending your career can improve your retirement prospects. You may also consider a part time job because after 55 years, you might not be strong enough to work full time.
“At retirement, one may choose to do consultancy work, look for a job where they need a senior employee, start your own business or go into volunteer work to remain productive but also earn some money even after retirement,” Ms Abukito advises.

Financial literacy
Unfortunately, some retirees are driven by excitement and go ahead to spend their saving for instance in organising weddings to marry a second, third or even fourth wife or make a wrong investment choices based on whims.,” he says.

Poor saving culture
Ms Maureen Nalukwago a businesswoman says many employers and employees in the private sector focus on business survival and growth, old age security and the associated need to start saving are not a priority.
Continuous education and motivation to save is important to bring about financial behavioural change.