Retirement planning is not a luxury

Retirement might feel like a problem for the "future you," especially for those in your 20s or 30s.
 But here is the truth: time flies, and the sooner you plan, the more control you will have over the life you want later.

In this region, where informal savings dominate and employer pensions are rare, retirement planning is not a luxury, it is a necessity.

 It is important to note that planning early is not just about saving money, it is also about making sure you can live comfortably when you retire.

 It is about deciding what kind of life you want in the future and taking the right steps now to make that happen.
 The goal is to be financially secure so you do not have to stress yourself - or your loved ones - about money later on.
 Let us distinguish between regular savings and a dedicated retirement fund.

 Many people keep all their money in one account for bills, shopping, and other expenses.
 But financial experts suggest having a separate account just for retirement, one you don’t touch until you are retired. Think of it like saving for your future self, just like you had saved for a person that you are responsible for.

Tracking your spending and sticking to a budget helps you stay at the top of your finances. It prevents unintentional overspending.

 Investing in various financial instruments is another key strategy. Options such as bonds, unit trusts, and specialised savings accounts can provide a stable and growing fund for retirement.

For instance, investing in a 20-year bond could yield returns in the form of coupons (interest payments), providing regular income during retirement and returns your principal at maturity.

The key is to learn about different options and pick the ones that match your goals and how much risk you are comfortable taking. If you are younger, lean into equities. Are you nearing retirement? Prioritise stability.

 The cost of living during retirement is often underestimated. Thanks to modern medicine and enhanced security nationwide, we are living longer, which means more years without a pay cheque. That is why it is important to plan for things such as shelter, food, healthcare, and other recurring expenses.

 Calculating your current expenses and projecting them for the future, while considering inflation, can provide a clearer picture of the amounts required.

 If Shs200,000 covers monthly bills, you will need Shs400,000 per month or more in 20 years due to inflation, and that is a conservative projection.

Uganda’s inflation rate (average inflation rate for 2024 was 3.8 percent) quietly erodes savings so compound interest plays a crucial role in retirement savings.
 Even small, consistent contributions can accumulate significantly over time.

Retirement planning
 Retirement planning is a multifaceted process that requires early action and strategic financial management.

 By setting up dedicated accounts, diversifying investments, and understanding future needs, you are buying freedom: the freedom to retire on your terms, grow your matooke garden, or spoil future grandchildren without worry.

Joshua Mazune is the managing director of Maru Credit Uganda.