Saving for retirement: start now, thank yourself later

Retirement can feel far away, which is exactly why it is so easy to postpone. But when it comes to long-term saving, when you start matters more than how much you start with.

The power of starting early

Consider two savers who each put away KSh 5,000 a month and earn the same average return of 8% a year:

The early saver contributes only half as much again, but ends up with more than twice as much — because earnings have longer to earn their own earnings. That is compounding. Figures are illustrative, assume a steady return and ignore tax and inflation.

Building your plan

1. Know what you already have

Many employees are members of a pension scheme and contribute to the NSSF. Find out what your statements show and what they are likely to provide.

2. Decide on a monthly amount

Even a modest, regular amount builds meaningfully over decades. Increase it every time your income rises.

3. Keep long-term money separate

Your SACCO deposits and share capital grow over time and earn returns. Resist the temptation to treat long-term savings as a spending reserve — that is what your emergency fund is for.

4. Clear expensive debt

High-interest debt works against your savings. Paying it down is one of the best “returns” available.

5. Plan to retire debt-free

Aim for loan terms that end well before retirement, so your income in later years goes to living, not repaying.

The best time to start saving for retirement was ten years ago. The second-best time is this month.