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How to Build a Concrete Retirement Plan
Money Management

How to Build a Concrete Retirement Plan

Your children are not your retirement plan. It doesn’t matter how much money you pump into their education or how well they do in their lives. You have an obligation to raise them to the best of your ability. But believe it or not, they have no obligation to raise you in your old age.

Now let that sink!

Now that we have got that out of the way, what comes to mind when you think about your retirement? Do you picture yourself in a lovely home with a few chickens and a dog enjoying a good life, finally relaxing, spending time with the family, traveling, and vacationing as you will? 

Or do you see yourself running around trying to raise cows or run a bakery with your subpar baking skills? Or are you one of those who think ‘kesho itajitetea’? If you are in this category, you may want to take a step back and re-evaluate.

The difference between these scenarios lies in how well you plan and prepare for the day you retire. It is never too early to start thinking about your retirement.

If you want to be in a situation where you do not have to struggle to raise the next meal when you are old and wrinkly, you need to start planning for retirement today. 

What Is a Good Retirement Plan

A good retirement plan means different things to different people. For some, it may mean simply being in good health, with a roof over your head and meals on your plate. 

For others, a retirement without enough money to travel abroad every so often and maybe surplus to throw into a political party campaign kitty is a failed life. 

Whatever your dreams are, a good retirement plan starts with you clearly defining your retirement goals. What is it you need for when you are no longer actively working and bringing in an income? Once you have this figured out, use the questions below to help create a plan.

  • At what age do I want to retire?
  • How much do I need to retire comfortably? (This can be in liquid cash or assets)
  • How many years do I need the money to last for me to live comfortably?
  • How do I achieve this?

Now with this at hand, let's focus on how to achieve your dream retirement. This is the most important part of the plan. After all, we can all dream, but most of us rarely achieve these dreams. Below are five critical tips that will help you achieve your dream retirement. 

5 Simple Steps for Creating the Perfect Retirement Plan

Get rid of all debt

Debt is not bad; as Robert Kiyasaki, the author of The Art of the Start and Rich Dad Poor Dad, states, the best way to make money is by leveraging other people’s money. But not all debt is good debt

In fact, when it comes to retirement, accumulating too much debt can work against you - it is safer to save and invest more for the future than accumulating too much debt. Therefore, your first focus should be to eliminate as much debt from your life as possible. Debt can be expensive and eat into your retirement plans. 

Worse still, if you carry unsustainable debt into retirement, they will eat into the income supposed to support your other priorities like health care, travel, and leisure activities. It can also drain your retirement income and savings fast. 

Eliminating debt gives you a better grasp of your old-age financial strategy. So, as a priority, make a list of all your debts and make a concrete plan on how to repay them. Ideally, you want to avoid carrying them into your retirement at all cost.

Invest for the long-term

You may have often heard that ‘idle money is dead money.’ As you struggle to put money aside for your retirement, do not let that money lie around in a bank account and ‘look pretty.’ I mean, who doesn’t want to see a few more zeros on their bank statement? 

Instead, ensure that any extra shilling that you set aside for this cause is appropriately invested. There are very many investment options available in the market today. All you need to do is a little research and choose what works best for you - preferably long-term investments options. You can also hire the services of an investment advisor to get you started. 

Do you want your money to grow with you as you grow old? Then, just like a tree, plant it now and progressively water it. The money will certainly grow with you, and by the time you are ready to retire, the money will be ready for harvest. 

Plan for all retirement income and expenditures

By now, we already know that a goal without a plan is only a wish. It is easy to assume that you are set for your retirement now that your savings and investments are figured out. 

But the truth is, no matter how much money you have set aside for retirement, without a proper income and expenditures projection, the money will disappear sooner than you can say, “I am retired.” 

Of course, it’s crucial to have a retirement strategy, but it’s just as important to have a well-thought-out financial plan that will help you make it successful. So is a step by step guide on how to make a solid retirement financial plan:

  • Step 1. Estimate your retirement timeline. For example, do you want to retire at 40, 50, 65, or 85?
  • Step 2: Estimate your retirement income: this includes your retirement pension, savings, income from your investments, and any other kind of income you expect after you are retired.
  • Step 3: Figure out where you want to spend your money and list your expected spending. To make the process simple, stick to a yearly budget for now. 
  • Step 4: Plan for any unexpected changes. For example, plan for losses on your investments and any unexpected expenditures.  

Plan and prioritize for future medical expenses

Old-age medical problems are one of the reasons why it is hard to break from the shackles of ‘black tax’ in most African families

There is no guarantee that a human body will not break down or go through unexpected health problems, especially in old age. It is normal, and it is what makes you human. Many people mistakenly assume that you are invincible because you have been healthy the whole of your life. 

That is why many people go to great lengths to make great plans for their retirement and forget the most crucial part - to make elaborate medical plans. 

If your health suddenly tumbles without a medical plan, you could end up either depleting your retirement kitty or reling on other people (mainly your children) for medical care. None of which is ideal. 

So plan now. This is why this point is prioritized and not included in the planning for retirement expenses point above.  

Prepare a retirement home.

Another important factor to consider when putting together a retirement plan is your retirement home. Where are you going to enjoy your days after retirement? Surely, you are not expecting to move into your son’s new mansion just because he was finally able to build his dream house in a prime location, are you?

Do you already have a family home where you and your spouse can enjoy your late years as you watch over your grandkids? Do you maybe live in a foreign country and would prefer to move back home when you retire? Do you have a townhouse but would prefer to spend your sunset days by the sea or in the countryside together with the birds?

Whatever your preferences are, it is never too early to start preparing your dream retirement home. If you already have your family home and do not mind living in it, you are in luck because the money you would spend on a home will go to your investments or other retirement expenses. 

Wrapping Up

Well, this is no cheat sheet because everyone has their unique needs when it comes to retirement. Some people even have kids who would go through hell to make sure their parents have all the best things life offers when they are old.

But the truth is, good preparation is always better than hope for a mirage. Do not wait until it is your last working day to start scrambling around for a retirement anchor. This article aims to give you a starting point and point you in the right direction. Now the ball is in your court. 

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Doris is a finance professional, freelance writer and SEO expert. She has experience helping businesses of all sizes create content that helps improve their site quality and increase their online traffic. She is a personal finance and wealth creation enthusiast and a frequent contributor to Money254. Visit Doris' personal website to learn more about her work.

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