OPINION: The Obstacles Ugandans Must Overcome For Successful Retirement

By Daniel Alifaki

A blissful retirement doesn’t happen by chance. It requires deliberate planning and sacrifices during your working years and the journey is not an easy one.

There are numerous challenges that one must overcome to secure their well-being in their sunset years. Addressing these obstacles requires self-awareness of individual financial behaviours, a comprehensive understanding of the economic landscape, and the evolving pension system.

A recent status of the labour sector indicated that Uganda’s unemployment crisis had deepened to levels last witnessed during the peak of the COVID-19 pandemic. 

Businesses took layoffs to beat the high fuel and taxes that have increased their costs and eaten into their profits. Therefore, job market dynamics caused by difficulties in the business operating environment, technological advancements, and shifts in industry demands, have led to uncertainties in career trajectories.

As individuals plan for retirement, the unpredictability of economic conditions and job uncertainty pose a considerable challenge.

Ugandans still struggle with a poor savings culture and according to a past report by Enwealth Financial Services, only 12% of us have an established savings culture. Thus, layoffs pose a threat to pension contributions.

Only a small percentage of the population has an emergency fund to cover 6-12 months of living expenses as they look for a job. With competing financial priorities and the perception that retirement is a distant concern, many resort to withdrawal of their pension contribution as permitted by the law.

Continually dipping hands into their retirement pot reduces their total pension savings which can become seriously inadequate if they don’t catch up after finding new employment. Fostering a culture of regular savings from an early age is essential for building a robust financial foundation for retirement.

Tough economic conditions are usually accompanied by the inflation monster. The eroding impact of inflation on the purchasing power of money is a concern for retirees. Inflation can diminish the value of savings and reduce the real value of pensions over time.

Considering inflationary trends and incorporating inflation protection strategies into retirement planning is vital for financial resilience. However financial literacy remains a barrier.

Many Ugandans may not fully understand investment options, risk management, or the significance of diversification. Bridging the financial literacy gap through educational initiatives and accessible resources is essential to empower individuals to make informed financial decisions.

While efforts have been made to enhance pension coverage in Uganda, a significant portion of the workforce, especially in the informal sector, still lacks an adequate understanding of pension provisions.

Even with the various incentives to save to the National Social Security Fund (NSSF) and the availability of personal pension schemes, informal workers are yet to fully embrace pensions. Expanding pension coverage to include more workers is crucial for a comprehensive retirement support system.

In some cases, such retirees who lack a pension may rely on family support as a safety net. While familial bonds are integral, dependence on family for financial assistance can strain relationships and may not be a sustainable solution. Encouraging self-sufficiency and independence in retirement is crucial for individual well-being.

Longevity risk has also become a ‘concern’ nowadays. Increased life expectancy, while a positive development, introduces the risk of outliving one's savings. Longevity risk requires careful consideration in retirement planning to ensure that individuals have sufficient financial resources to maintain their desired lifestyle throughout their extended retirement years.

There is also the risk of medical expenses escalating during retirement and consequently impacting the financial well-being of retirees. Planning for healthcare expenses should be ntegral to a comprehensive retirement strategy.

Government policies and regulations play a pivotal role in shaping the retirement landscape. Continuous evaluation and adjustment of policies, such as pension regulations and tax incentives, are necessary to create an environment conducive to retirement savings and financial security.

By navigating these obstacles with strategic planning, collaborative efforts from stakeholders, and a commitment to financial well-being, Ugandans can aspire to enjoy a fulfilling and secure retirement.

The Writer is the Chairperson of Mazima Voluntary Individual Retirement Benefits Scheme. 

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