Think about the future as much as you want to enjoy today’s pleasures. FILE PHOTO | NMG
Despite a mixed bag of performances, some organisations will
still go ahead and implement their motivational and retention strategies
for rewarding employees.
More often than not, the
reward takes the form of a bonus, or in some quarters popularly known as
the 13th salary cheque, upon conclusion of annual reports. This bonus
is the most sought after and exciting reward in any business.
To
those firms that will make the cut and offer bonus for their employees
however little, kudos. To the ones that are unable to get around to do
so, there is always a next time.
Regardless of the
bonus employees receive over the coming weeks or months, a strong urge
to spend is heightened due to accumulated festive debts, promises or New
Year resolutions.
Truth be told, one is inclined to spend on the good things in
life when these funds hit the bank account. I have in the past
experienced colleagues salivating at new car, new furniture, the latest
curved 55-inch TV complete with a surround system, fine whiskey, cognac
and wine, the latest set of handbags, shoes or the much desired spa
treatment.
It is alright for one to spend the extra
cash on whatever they want. This is because money will always find needs
to take care of.
Unfortunately, the last thing that
most people consider is retirement savings. Rarely do we think of making
hay while the sun shines for long- term goals.
Strangely
the concept of living for the moment is so ingrained in today’s working
population that most people do not have the remotest imagination that
one day they will not have the energy to work as they do now, and they
will need to somehow keep a semblance of their current lifestyle
standards when they advance in age. In short, most people don’t have a
retirement philosophy.
According to the Retirement
Benefits Authority (RBA), less than 20 per cent of Kenyans actively save
for their retirement. The industry regulator has previously warned that
this means nearly 80 per cent will end up retiring into poverty,
putting pressure on their extended family to take care of them in old
age.
It also means that the current government monthly
cash transfer programme to citizens aged over 70 will come under greater
pressure as people live longer than expected due to advances in the
medical sector.
This may force the government to either
raise budget funding or worse, withdraw the welfare as an austerity
measure further deepening the crisis. But it can all be avoided if
concerted effort is made by employees to increase savings for their
retirement years.
While staff may celebrate getting a
boost of cash that’s outside of salaried income, it’s important for
individuals to put this money to work for retirement.
The
best way to boost your retirement savings is to place all or part of
the additional money in a retirement benefits fund. Fortunately, Kenya
has a robust retirement benefits industry that is well structured and
governed.
The
downside of not saving sufficiently for retirement today is that most
people will overdepend on relatives in old age and face early death.
Best practice in financial advice dictates that 50 per cent of one’s
bonus be put in a retirement benefits fund or long term investment
assets targeting retirement.
A retirement benefits
plan has the benefit of low risk and seldom will the principle be
touched. A retirement savings typically earns a compound interest, thus
the need to start saving early.
Simply put, the
compound interest rate that a salary bonus invested in a retirement plan
will earn is higher than the annual salary review rate. In this case,
the bonus is a worthwhile investment for the sunset years.
So, think about the future as much as you want to enjoy today’s pleasures for it was not raining when Noah built the ark.
Ezekiel Owuor is Managing Director, CIC Life Assurance Ltd.
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