RETIREMENT … ALREADY?

A presidential directive to reduce the retirement among public servants to a proposed 50 years from eth previous 60 years has got a few knickers caught in a knot. And understandably so.

Who is the 50 year old civil servant? The 50 year old servant – assuming he has worked only in the civil service, begun work in 1986 give or take a year or two. He has sweated through the prospect of several retrenchments, put his children through school, paid the medical bills of ailing parents and relatives, all in all forged an acceptable life for himself.

In many cases they are just beginning to come into their own, setting about providing for their retirement looking to the next 10 years to actualize their retirement plan.

So you can call them unlucky. But surprisingly anecdotal evidence shows that their relatives in the private sector are often times worse off.

Often better paid, with better benefits accompanying the jobs the private sector worker is often lulled into a false sense of security. They are shielded from the true cost of living when provided with fuelled cars, free medical care and worst of all, the promise of a huge paycheck on retirement from NSSF and their in-house provident fund.

What is the cost of retirement? Experts suggest that in planning your retirement you should plan for an income of at least 70% of your current take home pay. But that assumption has come under sharp criticism because it assumes your costs will come down in retirement because you may have fewer dependants – this of course does not hold up under scrutiny.

Ugandans are dieing at an older age with the benefit of better health care, however it is these medical bills that are increasing the cost burden on older citizens.

The combined effect of lowering the retirement age and greater longevity means the cost of retirement will inevitably rise.

The sources of possible income will include a pension, gratuity and passive income from assets and businesses that the retiree might have set up.

First of all there is false perception that your pension will substitute your salary. Many times the monthly is a fraction of your salary at the time you retire. In addition the gratuity which comes in one big lumpsum is something to look forward to, but a quick calculation will often show that it can barely take you two years assuming you withdraw your current take home salary on a monthly basis.

People start up all sorts of side businesses during their working lives and as long as they are employed and subsidizing the businesses monthly it is all good until they retire. Then they quickly find the business can not stand on its own, neither can it sustain them and then we are all back to square one.

As for accumulated assets, assuming a generous rate of return of even 10 percent annually then the asset which is to sustain you has to be at least ten times the value of your annual expenses.

And its laughable to think that just because you have built yourself a house and are no longer paying rent you are set. The reality often is that you pay more in utility and maintenance bills in your own house than you pay while renting.

Does all this make you dread you retirement years? It should, with the effect of making you start seriously planning for the sunset of your years.

Unfortunately we have had barely 50 years of indigenous working class in Uganda so we are all at sea when it comes to retirement planning.

But maybe a few ideas. As early as possible we have to get a grip of our personal finances, know to the last coin where we earn our money from and what we spend it on. Then we need to burn indelibly on our souls, and live by, the saying “Its not how much we earn but how much we keep that counts”.

Frugality is a virtue but perish the though that you can ever save enough to see you through retirement. Therefore a new set of skills has to come into play beyond the discipline of saving – business management and investment, both acquired skills.

And of course the earlier we start acquiring these skills the better.


Published May 2010, New Vision