Retirement Planning: How To Get Started For Maximum Benefits

If you are anything like the rest of us, you’re probably wondering why you should bother saving for your retirement when there are so many other good things to spend the money on now. Won’t the future sort itself out? In a word, no.

Anyone nearing retirement age will tell you the years slip by and building a sizable nest egg becomes more difficult if you don’t start early. You may not earn a lot of money as you begin your career, but there’s one thing you have more of than richer, older folks: time.

You may think you have plenty of time to start saving for retirement. After all, you are in your 20s and have your whole life ahead of you, right? That may be true, but why put off saving for tomorrow when you can start today? Below are some of the reasons you should start saving for retirement.

Compound Interest

Seemingly tiny contributions made at an early age will over the years multiply… “The power of compound interest”. Therefore, the sooner you start saving and investing, the earlier you take advantage of compound interest; making it easier to achieve that financial goal.

Consider a scenario where you start investing in the market at 1,000 shillings a month, and you average a positive return of 12 percent a year, compounded monthly over 40 years.

ALSO READ: The Road to Achieving Financial Freedom and Why NSSF is Your Partner

Your friend, who is the same age, doesn’t begin investing until 30 years later and invests 10,000 shillings a month for 10 years, also averaging 1 percent a month or 12 percent a year, compounded monthly.

Who will have more money saved up in the end?

Your friend will have saved up around 2,300, 000 shillings. Your retirement account will be a little over 11,700,000 shillings. Even though your friend was investing over 10 times as much as you toward the end, the power of compound interest makes your portfolio significantly bigger.

Employer Matching contribution:

If you have access to an employer-based retirement plan, take advantage of it. Most employers will match some of your contributions, so you’ll benefit from having an extra boost to your savings. When you choose not to contribute towards your retirement, you are quite literally saying “NO!” to money that the employer is freely giving to you.

Less Tax:

The Government, which most of us feel takes too much from us, actually gives tax breaks to all who contribute to retirement schemes. You can get as high as 20, 000 shillings as a relief before your salary is assessed for tax! For example, an individual earning 50, 000 shillings and making a monthly contribution of 5,000 shillings will be taxed at 45,000 shillings.

Remember, the longer you wait to plan and save for retirement, the more you’ll need to invest each month. While it may be easier to enjoy your 20s with your full income at your disposal, it will be harder to put money away each month as you get older. And if you wait too long, you may even need to postpone your retirement. You are young and the future is in your hands.

Get started today with the National Social Security Fund (NSSF) and have your money work for you. With NSSF, your money is safe.

NSSF invests the members’ savings in secure, high-yielding investments such as government securities, real estate, and shared equities. This means that your money is always working and available when you need it.

One of the biggest reasons to save with NSSF is because it is the road to attaining your financial freedom. Of course, the next level of financial freedom is keeping your emergency fund intact while saving for other goals, like retirement, a home, vacations, or your child’s college costs.

Nevertheless, retirement should come first since you can’t borrow for it. Saving up through NSSF generally means having more money at your disposal when you stop working.

You’ll know you’re on the right track when you can allot portions of your paycheck—even if they’re small—to several needs simultaneously, including regular bills, debt payoff, and short- and long-term savings.

How to Get Started With NSSF

You can register with NSSF using the USSD *303# or by visiting the nearest NSSF office. Click Here for more information on member registration.

If you are an employer interested in registering yourself/your company with NSSF, please Click Here for more information on employer registration.