By Brian Bongomin
Retirement evokes varied expectations from different people everywhere. To some, retirement spurs thoughts of vacations, others dream of spending time with grandkids yet to some scary thoughts of scarcity come to mind. This diversity is partly driven by several common myths and misconceptions about retirement. We have identified these hindrances and how to resolve them so you to move confidently towards retirement.
It is a long way to retirement
Perhaps, the biggest belief of all is that young people perceive retirement as a faraway event. They believe that they still have time. They shelve the plans and think they will start later when a bit older or earn more money. This has been a hindrance to saving regularly and sufficiently and we have seen many only come to realize it is too late just a few years before they have to retire. However, the reality is the clock is ticking. Saving for retirement is a habit that you need to nurture even when your means are limited. If your income rises, you will have developed the right habits to put more into your retirement kitty. In addition, from whatever you can save now, you will benefit from compound interest on it no matter how small. You are young but old enough to plan for your old age.
The NSSF contributions are sufficient
While 5% of your salary is deducted towards the National Social Security Fund and the employer supplements with 10%, this may seem sufficient, but not in light of the long retirement years ahead. The reality is, that you may not be contributing during all the working years of your life as sometimes it takes years before securing employment coupled with increasing life expectancy and steeper financial demands during retirement.
For this reason, some employers have set up occupational pension schemes for their employees worth considering to supplement savings and meet your retirement goals. Individual pension schemes are also available, especially for those in self-employment or where there is no scheme in the workplace. The individual scheme allows individuals to contribute to building up their retirement fund and also can be a consolidating pot for any deferred retirement savings they may have left locked in past employer schemes. With oversight from the Uganda Retirement Benefits Regulatory Authority (URBRA), it is one of the most secure forms of savings.
Retirees need less money
When being nudged to increase your saving levels, one may wonder why they need to put in more money. It is another wrongful expectation that retirement the expenses will be lower than what they were during working years. Some believe that they will be okay without some of the comforts that they have grown into. While it is true that upon retirement, retirees no longer incur some work-related expenses, and might have built a home and children all grown up, it does not necessarily mean their expenses are lower. When planning for retirement, individuals must aim at maintaining their current lifestyle instead of compromising. It is therefore advisable to be strategic and dedicated when saving to achieve this goal. Our bodies grow frail with age and hence we become more susceptible to medical challenges. Our post-retirement medical needs will require a better financial fallback position.
Children are a retirement plan
Parents go out of their way to spend money on their children hoping that the children will take care of them when they grow old. The reality is while it is virtuous for children of their ageing this should not be your retirement plan. Evolving culture and recent global events such as the pandemic have shown that this should not be an expectation. With the high cost of living, the young people already have their hands full trying to make ends meet. In addition, massive job losses as we saw during the pandemic led tables to turn and we saw elderly parents having to suddenly financially support their adult children who had lost their sources of income. That said, taking your children as your retirement plan can result in a burdensome relationship and some stressful golden years ahead too.
Bongomin is the Manager Business Development & Operations, Enwealth Financial Services Limited. Email: bbongomin@enwealth.co.ug
