Three strategies employees need for stress-free life in retirement

A sound plan during an employee’s working life helps one to avoid worries linked to financial distress in retirement. Photo/FILE  NATION MEDIA GROUP

By Isaiah Opiyo

In Summary

• When they join active employment in their twenties, employees are confronted with the fear of premature death because they still have a lot of plans ahead in their career
• In their mid-30s or early 40s, their worries shift towards the fear of prolonged life. At this point, most employees feel the pressure of plunging into financial difficulty should they outlive their benefits set out in the retirement plan
• This fear was evident during the meeting as participants shared stories of the past members who had retired from active employment in their 60s but were in their late 80s or 90s and possibly had outlived their pension plans

November is usually a hive of activities involving annual general meetings for staff retirement benefit schemes.

Members, mainly employees, are informed on status of the outfits, financial and investment portfolio performance.

Recently, as a guest at a pension scheme run by a local bank, I observed an interesting session that grabbed my attention.

In its programme for the day, the scheme invited a former colleague aged 75 and still a member of the scheme to share his retirement experience after the “long weekend” from active employment.

As the pensioner narrated his experience I realised that the members became curious as questions like — “What’s it like, being retired?” or, “How does it feel, being a retiree?” or, “What are you doing now in retirement?” and “What time do you get out of bed, now that you’re retired?” — rendered the air.

I found the questions helpful as they guided me to realign my presentation to address some of the concerns the participants had raised.

From the session, I observed that during employment, workers are often confronted by two fears — premature death and that of aging.

When they join active employment in their twenties, employees are confronted with the fear of premature death because they still have a lot of plans ahead in their career.

In their mid-30s or early 40s, their worries shift towards the fear of prolonged life. At this point, most employees feel the pressure of plunging into financial difficulty should they outlive their benefits set out in the retirement plan.

This fear was evident during the meeting as participants shared stories of the past members who had retired from active employment in their 60s but were in their late 80s or 90s and possibly had outlived their pension plans.

During my presentation, a participant asked: “How one can one evaluate retirement income adequacy?” This question is not unique but common in many annual general meetings I attend.

Many employees grapple with the fear of whether their retirement savings will be sufficient to fend for their life during the dreaded “long weekend”.

To evaluate how well retirement income will allow an employee to maintain one’s standard of living after retirement, use of an income replacement ratio of retirement benefits to pre-retirement earnings is recommended.

When you retire some expenses are reduced or eliminated, for instance, work-related expenses and saving, therefore, a replacement of 70 to 80 per cent of prior earnings could produce a comparable standard of living in retirement.

Interestingly, most staff who work in organisations where employers do not have pension schemes have placed their hopes on the social security as the source of their livelihood when they retire. This is quite risky