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Aim for financial independence, as you mark Independence Day

As the theme for the national 59th independence says, secure the future through mindset change. You cannot attain financial independence in retirement if you don’t plan and work for it today.

COMMENT | Lydia Mirembe | As we celebrate our 59th National Independence anniversary, it is a good time to reflect on our individual financial independence. Robin and Dominguez in their book Your Money or Your Life, define financial independence as the status of having enough income to pay one’s living expenses for the rest of one’s life without having to be employed or dependent on others. This is especially a good state to be when one retires.

Sadly, there are many people who work hard all their lives but are still afflicted by poverty upon retirement, never enjoying financial independence. They invest in a wide range of seemingly productive projects, which in reality do not guarantee the much-needed cash flow in retirement. How can Ugandans plan for a safe and secure retirement, characterized by financial independence?

As the theme for the national 59th independence says, secure the future through mindset change. It all starts with the mindset – what type of retirement do you want to enjoy; what are your aspirations; are you really aspiring for financial independence? You cannot attain financial independence in retirement if you don’t plan and work for it today. It requires you to develop a culture of ­financial planning and saving. Will your current funds and investments give you the independence you desire?

Here are some key considerations to make it happen:

  1. How are you are going to meet your retirement needs? how expensive will your needs be? The quickest proxy is to understand whether you want to maintain your current lifestyle. Statistics show that you will need more than 70% of your current earnings to maintain your current lifestyle. Do you have an investment that can maintain that?
  2. Start saving: having understood your retirement needs and aspirations, start saving, keep saving. Start early, save small, be consistent, let the savings grow.
  3. Invest: You need to understand the available investment options. There are licensed professional fund managers who can provide advice on what to invest in prior to and during retirement. At individual level, it is also important to learn some basic investment principles; learn about things like inflation, economic trends, trending investment information, and the like.
  4. Avoid investment mistakes prior to retirement. There is a tendency to invest in things that make us happy – a good home, a nice car, a country home, a farm, a few businesses. However, all these items are not true investments because they just create prestige rather than generate cash flow. They are a liability not an asset because you have to supplement them with your current income. Think of investment vehicles that will guarantee cash flow. Passive income funds government securities, corporate bonds, real estates, equities are some of the options to consider.
  5. Avoid post-retirement investment. Some people, upon receiving their retirement package, think they can do investments for themselves at an old age. They start business ventures in areas where they have no knowledge and experience. Some of them fall prey to Ponzi investors. Some retirees invest in construction projects and spend all their benefits without ever completing the buildings. There is a tendency to rely on friends for investment advice, yet there are licensed professionals who could offer support. Other retirees think they can keep the money at home and spend it piecemeal as they go along in life. All these are mistakes that can be avoided. Even in retirement money must be invested wisely. Retirees can buy an annuity; go for programmed withdrawal of benefits; invest in government securities…. All such investments can ensure cash flow in retirement, leading to financial independence.
  6. Don’t touch your retirement savings; let the money grow. From the onset, distinguish between retirement and other emergencies, and save for both. It is not prudent to use your retirement savings for other emergencies, such as Covid19. Once you start seeing your retirement savings as the solution to your current pressing needs, then say goodbye to financial independence in retirement.
  7. Health care needs are a reality in old-age, but a financially independent retiree will be assured of reliable and affordable healthcare. Retirement Sector actors are beginning to encourage people to save not only for retirement but for old-age medical cover. Some licenced agencies in the retirement benefits market have introduced products to take care of retirement medical cover.
  8. If you want to enjoy financial freedom in your latter years and to maintain a comfortable standard of living, you have to sacrifice some of your current expenses and keep them for the future when you are old and not working. Building a retirement savings pot throughout your working life is critical and should start as early as possible.

Government instituted the Uganda Retirement Benefits Regulatory Authority (URBRA) to regulate and supervise the establishment, management and operation of retirement benefits schemes, to protect the rights and interests of savers. You can now save for retirement with the assurance that your funds will be prudently invested, well managed and available upon retirement.

With good retirement planning and saving, you can declare your Financial Independence Day!

Happy Independence Day to all Ugandans!

*****

 Lydia Mirembe is the Manager Communication, Uganda Retirement Benefits Regulatory Authority (URBRA)

3 comments

  1. Ms Mirembe
    Thanks for that insight into financial independence. However, how does one get retirement financial independence with URRB when most of us candidates of retirement do not know it’s existence nor what it stands for?

    Please advise accordingly and be vigorous at it.

    • Dear Mr Muhigirwa,

      URBRA is an autonomous body established by virtue of Section 2 of the Uganda Retirement Benefits Regulatory Authority Act 2011, Act No. 15 of 2011. It is responsible for regulating the establishment, management and operation of retirement benefits schemes in Uganda in both the private and public sectors. The Authority is responsible for supervising institutions which provide retirement benefits products and services. URBRA is an oversight body and NOT a Retirement Benefits Scheme.

      There’s a lot of information about Uganda’s retirement benefits sector and you can find it here on this website: https://urbra.go.ug/

      The most important consideration here is: How are Ugandan’s preparing for retirement; are they saving with a licenced institution; are their savings safe and growing?

      Remember it’s never too late to start saving for retirement. If you hadn’t started already, please start today. On the URBRA website, you’ll find a list of licenced schemes and their performance year-on-year, then you can choose which one you want to save with.

      If you’re formally employed, you’re probably saving with NSSF already. Consider topping up on that NSSF saving, through voluntary retirement saving.

      Best wishes

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