Think Retirement Planning beyond NSSF Savings!

By its own admission, 98% of NSSF member payout is spent within the first 2 years. The fund likes to call this wastage, but I call it inadequacy. People simply receive peanuts after many years of work. The current average payout is UGX 16M. Put in mind that the average salary around Kampala and Wakiso is UGX 1,000,000. Using NSSF's recommended replacement rate of 60% means the worker needs to have a monthly income of UGX 600,000 per month. After 2 years the retired worker would have spent UGX 14.44M to pay their living expenses, hence the depletion after 2 years for 98% of the retired savers.

The Uganda Retirement Benefits Regulatory Authority (URBRA) research shows that the average retired Ugandan spends 10 to 17 years in retirement. If we calculate UGX 600,000 and the maximum years in retirement, it means the worker needs to retire with a total amount of UGX 122,400,000 (i.e. 17 years X 12 Months X UGX 600,000). But this is not happening for 98% of the people that save with the fund.

While researching my book “The Great Financial Rebuild”, I also found out that even the amount recommended for saving at 15% of your gross pay takes you more than 70 years to replace your current pay generated from passive income. Clearly, no one is going to be working in the same job or in formal employment for 70 years.

What can you do on a personal level?
It starts with you accepting that the savings at NSSF (if you have any) will not be enough for you to retire on save if you take a drastic cut on your living standards.  Therefore, you should start building a portfolio of investments that would deliver the income replacement you need in the time you are comfortable with. In reality, it’s all about your savings rate and the asset net worth you need to have at retirement. I am happy to advise but bear in mind that I have no quick fix and it will take time and discipline to get you over the line. The best thing you can do is to begin saving and investing today beyond your NSSF Savings.

About the Author: Livingstone Mukasa, a Financial Advisor, Entrepreneur, People’s Professor of Streetnomics, and the Author of “The Great Financial Rebuild” &; “Investing for the Future” Contact +256772459167 email: livinbusiness@gmail.com

Popular posts from this blog

‘Most Ugandans live for 18 years after retirement’

For many retirees living in Uganda, the life expectancy after retirement from work is only 18 years, the Uganda Retirement Benefits Regulatory Authority (URBRA) has disclosed. Data from the retirement benefits authority suggests that this falls significantly below the life expectancy of individuals in First World countries, where retirement can span up to 110 years, the Monitor reports. “The government and all stakeholders in this sector should develop and implement good plans that are favourable to pensioners so that they live genuine life after retiring,” said Director of Supervision at UBRA, Daisy Lynda Nabakooza. Nabakooza urged individuals aged 18 to 25, employed in either the formal or informal sectors, to initiate retirement savings. She counselled them against exclusively prioritizing purchases such as the latest phones or cars, which is a common trend within this age group. More data from the authority further indicated that “in the real sense when a person was earning SHS 3 m...
Read more

What Happens if You Run Out of Money in Retirement?

Image
Last week I had a discussion with one of our members at Mazima Voluntary Individual Retirement Scheme who withdrew his National Social Security Fund (NSSF) benefits last year upon reaching the mandatory age of 55 years. He is still engaged in active employment but his worry is that the NSSF benefits have run out hardly after one year and he has no hope of getting near anywhere near what he got from NSSF. This article is intended for those who have not started saving for retirement as well as those whose retirement benefits may not be sufficient in retirement or those who are already in retirement and have run out of money. Running out of money in retirement is a real dilemma for many as it exposes you to financial hardship and reduced quality of life. You may need to rely on family members for financial assistance, reduce your standard of living, or make significant lifestyle changes. Retirement is a period of leisure, self reflection, and pleasure, but it also requires ind...
Read more

Personal Finance Checklist for 2024; Bonus Tips.

Image
This lesson is a  follow up and expansion on the one we learnt yesterday.  I have spent a considerable number of years advising people about their personal finances and I have seen near miracles happen when people act.   Many years ago I coined a slogan “If you are not thinking then you are sinking” and I really don’t want you to sink in 2024; instead I want you to prosper. These things are not complicated at all!  1. You have to master your needs and deal decisively with your wants. For the uninitiated needs as those things you can’t live without and wants are though that you only buy if you have the capacity to do so. Reign in your expenditure because you are not an “Expendable”. There is a way tomorrow comes and finds you unprepared only to embarrass you; even in old age.  2. Make it a point to save even if you don’t earn enough. Most people think they don’t earn enough and wait for an increment in their earnings to save. Well since you don’t...
Read more