Tuesday, January 21, 2014


Last week I celebrated my 42nd birthday. I don’t need a birthday to remind me of my fading mortality – tennis on Sunday does that very well for me thank you, but with every passing birthday the urgency of retirement grows.

At my 30th birthday I got into my head that I should retire from employment by the time I was forty. That hasn’t happened yet but thanks to that resolution I am much clearer about what it wold take to retire any time soon.

In my attempts to plan my retirement I have learnt a few things that maybe helpful for all other mere mortals, read people who do not have access to or are unwilling to plunder state coffers to pad their nests.

1.      Start planning from the end and work backwards

How much would it take to keep you in retirement? For a start take your current annual salary, that should be the return on investment from any of your investments that you will be relying on in your retirement. So for example if your annual salary is sh10m given the 91-day treasury bill yield of about 10% you would need assets of sh100m. The easy way of thinking about it is if you retired today your asset base should be at least ten times your current annual salary. They say the best time to have planted a forest was 20 years ago, the next best time is now. Start building that asset base today.

2.       Be clear about where you are now

In line with the above goal it is good to have an unvarnished picture of your current financial health – your income, your expenses, your asset, your liabilities and your net worth. Emphasis should be on building your asset base faster than your liabilities in these two figures lies the truth about whether you will survive or not in retirement.

Not to burst any bubble, but if you are relying on your NSSF money to provide you a comfortable retirement, take your current NSSF savings and divide by your current annual salary to get how many years you will survive on it. I haven’t found anyone who can live beyond four years on his NSSF monies and that is a short time if you retire at 55 and live to 70, or even 65.

3.       If a deal is too good to be true it is 

In our attempt to build our asset base any number of deals come our way. To be able to get a grip of what is being offered it would do well to invest in some education to shore up your financial literacy. For example what is a realistic return in investment? If someone comes around peddling an investment showing a return 20% a month you have to wonder, especially since the central bank is offering less than a percent a month. A sound grounding in the basics of financial literacy will be the gift that keeps giving...

4.       If not for you, do it for the next generations

One of our most debilitating tendencies is to think that the wealth we create is for us to eat. Essentially we have just taken the subsistence mindset of our forefathers and scaled it up. In the west they talk of building wealth for generations to come. When you have a legacy in mind -- a much long term view, you think differently, you behave differently, you spend differently. Imagine how much sacrifice, work and thinking would take to build an enduring institution that will live beyond yourself and your children?

Everything starts with an idea, a way of thinking. What I have outlined above is far from a turnkey solution but it is a way of thinking. These are the principles the variations are as many as the people reading this article. It is not impossible to settle into a comfortable retirement where you enjoy your current lifestyle or even better – even if you don’t rob the bank...


  1. " if you retired today your asset base should be at least ten times your current annual salary." Classic...!!!

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