You’ve been diligently saving for decades and the time you’ve been preparing for is finally here – retirement.
But when you stand on the threshold of this new chapter, you may find yourself facing an unexpected challenge: the transition from saving to retirement to actually living in it.
This shift is more than just a change in daily routine; This is a fundamental transformation of your financial strategy and mindset.
Evaluate your finances
The key to a smooth transition lies in careful financial planning. As you approach retirement, it’s important to assess your financial landscape.
Start by getting a clear picture of your expected retirement income from all sources – pensions, NSSF, personal savings, and other investments. Compare it to your anticipated costs to ensure you have a sustainable withdrawal strategy.
If possible, work with a financial advisor to create what some experts call a “retirement paycheck,” a systematic way to withdraw from multiple accounts that maximizes tax efficiency and ensures your money lasts.
They can help you determine the optimal sequence of withdrawals from taxable, tax-deferred, and tax-free accounts, taking into account your unique financial situation and goals.
It is also wise to build a cash buffer of 1-2 years of living expenses in an easily accessible account. Think of it as a financial shock absorber, helping you weather market downturns without being forced to sell your investments at inopportune times. This strategy can provide peace of mind and financial stability as you adjust to your new retirement life.
Re-evaluate your investment strategy
As you transition, don’t forget to gradually change your investment strategy. If you invest heavily in the stock market, you may need to take a more conservative approach to protect your nest egg.
However, it is important to maintain some growth-oriented investments to fight inflation in the long run. After all, retirement can last decades, and your money needs to keep up with rising costs.
When it comes to stocks, the rule of thumb is to subtract your age from 100 to get the percentage you should be in stocks.
Check your healthcare costs
One of the most important expenses you will incur in retirement is health care. As you age, medical expenses often increase, so it’s important to have a solid plan.
In the current transition from the National Health Insurance Fund (NHIF) to the Social Health Insurance (SHI), it is important to talk to an insurance broker to help you understand the new offers and options to address any gaps with personal health. insurance. Take the time to understand the different parts and additional coverage options for both insurances.
Post-retirement medical fund contributions are another aspect to consider when you are young and healthy. This can potentially lock in lower premiums and protect your assets from being lost due to longer-term care needs.
Explore active retirement
For those looking to stay active and involved while earning extra income, the gig economy offers many opportunities. If you have a specific skill or area of expertise, consulting or freelancing can transition into a more passive income stream as you build your client base and potentially hire someone else to handle day-to-day operations.
Freelance work in your area of expertise through online platforms can allow you to continue using your professional skills on your own terms.
Remember, while this income stream is often called “passive,” it usually requires some up-front work and ongoing management. It is best to start developing these sources of income before you retire to give them time to grow.
Not only can this be financially rewarding, but it also gives you the chance to stay mentally fit and connect socially. The key is to find a balance that provides financial benefits without compromising the freedom and flexibility that retirement offers.
The transition from saving for retirement to retirement is a journey that requires careful planning and adaptation. With a solid plan, you can create a comfortable and financially secure retirement.
Mr. Wafubwa is the Managing Director, Enwealth Financial Services Limited.
