My name is Ambrose. I am 57 years old, have three adult daughters and three sons, and a grandfather of four. I am single. My wife moved to the Democratic Republic of the Congo in 2004, leaving the then young children in my care. Her existence is questionable as there has been no contact with her since she ran away with her lover.
Currently, I am working in heavy jobs in Eldama Ravine, Kenya to earn a living. My children work separately elsewhere in the country. I am expecting a lump sum of 2 million shillings from my previous international employer in three years. When this money comes, I will be too old to do heavy work or engage in any strenuous work. Can you give me advice on how to use this money to get a monthly benefit to live comfortably? I want to be financially prepared and mature to avoid suffering in old age.
Enziani Khasiani, Financial Advisor and Managing Director, Clientel Kenya
Congratulations on your expected lump sum pension fund from your former employer. Planning for your future is a wise decision and I hope some of the suggestions below will help you achieve financial stability in old age with the expected funds.
Your investment journey begins with a plan and a time frame. When you know how long you will invest and what you hope to achieve, you can put the structure in place to make it happen.
Successful investing is a journey, not a one-time event, and you will need to prepare yourself as if you were going on a long journey. The first step in personal finance is to take control of your money through a budget. Budgeting is the foundation of personal finance. It is the process of creating a plan for your finances, identifying your income and expenses, and tracking your spending.
Creating a budget begins with identifying and documenting your income and expenses. Once you have identified your income and expenses, you can create a budget to make decision-making easier. Start this process now. You have less than three years to build this foundation. Seek help from a third party for accountability and consistency. And when the money comes in, don’t rush to spend outside of your plan. Avoid investments that promise the unreal, such as tax avoidance or forex schemes that promise unrealistic monthly returns.
The decision to start a business in old age using retirement money is often discouraged due to the high failure rate. Starting a business in old age using retirement money can be risky. However, with careful planning and thinking about safe, low-risk business ideas, it can still be a rewarding experience for you in your retirement years. A good business can provide you with a steady source of income in retirement.
A successful business can provide you with additional income to support your retirement lifestyle and achieve your financial goals. Running a business can keep you mentally stimulated, socially engaged, and physically active, which enhances overall well-being and a sense of purpose.
Eldama Ravine in Baringo County is known for producing high quality honey due to its tropical climate which is conducive to beekeeping. Beekeeping requires low investment. The operating costs are also low, which will provide you with enough capital to invest in other options. There are several private and government institutions that assist farmers in beekeeping. There are also several marketing channels to sell honey.
You should consider signing up for training opportunities in beekeeping, and if appropriate, you can start beekeeping when the money is available. Joining a group of farmers who are already working in this field will provide you with support.
Beekeeping is an example of a safe, low-risk business approach that can help you enjoy the benefits of running a business in your retirement years. If you work with financial advisors, you may discover other opportunities to consider.
Another safe channel to invest the expected amount is money market funds. Money market funds are among the most popular investment vehicles in Kenya. This is because they invest in highly liquid securities such as cash equivalents, government securities and highly rated debt-based securities, and are therefore highly secure. They also offer relatively higher returns to investors compared to traditional savings accounts. The interest paid monthly can be used to cover living expenses.
The last investment option you should consider is a pension fund. Pensions are ideal for individuals with a low risk appetite and also provide liquidity to the member upon retirement. Pensions are designed to provide long-term income to individuals during their retirement years.
Annuities are based on a series of payments, usually monthly, over a specified period or for the rest of an individual’s life. The payments received can be used to cover living expenses.
When you have made the final decision about where to invest your expected funds, you will need to set aside some funds to cover potential healthcare costs. The recommended healthcare provider will be the government’s National Health Insurance Fund or its proposed successor. You will need to set aside funds to cover insurance premiums. Premium amounts due in subsequent years should be covered in your budget planning.
You should consider setting aside a portion of the total amount as an emergency fund to cover unexpected expenses or financial setbacks. Try to have the equivalent of three months of living expenses in a liquid account that can be accessed at short notice. The amount of living expenses will be determined by tracking the budget.
As your knowledge of investments grows, you may be able to engage a suitably qualified financial advisor who can guide you on how to invest in other instruments such as tax-exempt but high-yielding infrastructure bonds.
For example, investing Sh1 million in these companies at 18% which are already in the market will yield Sh180,000 per annum, which is equivalent to Sh15,000 per month.
Finally, discuss your financial plan with your children to make sure they understand your wishes. Consider involving them in discussions about your financial goals.
If you have any financial issues, email us at (email protected) and leave your contact number. Financial questions will be answered in this column.