Why financial illiteracy, disinvestments, undermine retirement

In the December 21 2023 edition of the Wall Street Journal, Shinobu Hindert, a San Diego certified financial planner, says: “Retirement can be a very beautiful phase of life, but planning for it is a puzzle. Without knowing how long retirement will last, you have to decide when to leave work, where to live, how to spend your days—and what it will cost.”

In fact, Robert Kabushenga, the former managing director of the New Vision, a government owned daily newspaper, says he does not want to hear the word “retirement” because it connotes end of life when people end formal employment. To a great extent, look around and compare the quality of life and the lifespan of retirees and the people in private business.

Mr Kabushenga who is now 55, says retirement is an old concept from the old industrial world of work where after toiling for 30 years in a factory, the industrialist suddenly sent employees home due to declined productivity, without equipping them with other skills during employment. In the end, the employees remained home waking up every morning just to sleep again.

The question then is; “What else can such a person contribute to society?” Kabushenga advises people to stop being defined by what they do, because should they, the day they stop doing that work, that’s when they get cooked. He explains that while still in formal employment, seek financial education from people who know how to manage money, to create products that can continue giving you monthly income so as to avoid the shock of the monthly salary suddenly stopping to flow. He warns against seeking financial advice from witchdoctors, Imams, pastors, people poorer than you.

During a recent financial education session organised by National Social Security Fund and UAP old mutual for employees nearing retirement, although much of the conversations rotated around savings and financial literacy, the latter stood out prominently.

Mr Kabushenga who was the keynote speaker, said had he had this kind of education during his formal employment, he wouldn’t have blown his money on “useless” assets such as fancy cars some of which are rotting away in his compound today.

“There is a difference between calendar age and biological age. There is a whole life after 55 to worry about because life is better, life expectancy has gone up. You need to think before you go to cash out the savings at NSSF, what you will do in the next 20 years” he told the audience.

Carolyne Owomuhangi, the head of communications, UAP Old Mutual told the participants that during their recent interactions with journalists, women and university students, they discovered the low levels of financial education in the population.

“Financial education is critical for the quality of life. It lays the foundation for financial independence. It empowers you to make solid financial decisions by shielding you from financial risks and losses. It is transformative,” she said.

When asked what they are planning for retirement, the participants had varied responses most of which rotated around financial planning and management.

Patrick Odong, an accountant with Uganda Revenue Authority, said he is planning to remain active in private practice supervising projects in agriculture and farming where he intends to invest his money so that he can monitor his savings.

Kenneth Byoona, a public health specialist says it is time for him to engage the community with the wealth of knowledge he has gained over the years to make the community a better place because when his neighbours are in a better position, he will feel secure in his retirement since they will not be disturbing him.

James Odongo an accounting lecturer at Makerere University Business School said his involvement with some village savings and lending groups run by persons with disabilities in Eastern Uganda, has taught him to stop interpreting retirement as  acquiring land, building houses or buying assets for children but creating income streams for emergency funds that deal with social insurance.

These include emergencies such as sicknesses and injuries. He says this involves diversifying areas where one saves money and retirement benefits and these could be as small as village lending and savings schemes especially when one has excess money.

He says if one is deliberate about saving such money, in 10 years’ time, the money will have accumulated.

“If every month you saved Shs300, 000, in 10 years will you not be able to buy yourself land or a house? Don’t put investments in the children but let them study so that whatever you are doing, is for yourself. This gives you a chance to create a legacy during retirement because that means you are seeing the future right now,” he says.

Like Mr. Byoona, indulging in community activities and events involving PWDS, has enabled him to help them transform their lives such that they save for burials, they have started commercial ventures, they can now pay for their treatment and some have been able to attract commercial banks.

Ausi Ssentongo, a lecturer at Islamic University in Uganda, said before the financial literacy education, it never occurred to him that low risk investments attract low returns while high risk investments also attract high risk returns that could make one to lose all their money like he has seen already situations where people have lost all their money.

Job insecurity?

On the other hand, Robert Funa, a public health consultant says in the US before the Covid-19 outbreak, the major worry among employees was job insecurity because it meant no guaranteed income to support oneself but after the mass retirements that came with Covid 19, but these days people in the US retire as soon as they can rather than deal with the toxicity in the workplace.

“The funny thing is that unlike Uganda where there is mandatory retirement, there is no mandatory retirement age in many Western Countries. Question is do you have enough nest egg to cover your expenses in retirement? How much do you need—saved to retire?” he says.

Regis Namuddu, the director MUBS leadership Centre advises employees to develop a positive attitude to retirement the moment they get formal employment they should start seeking professional financial advice so as not to blow up their savings and quickly slide into abject poverty because this helps you decide where best to invest the money.

David Kabiswa, a former director at an NGO said when he clocked 52 years, he decided to do a transition of consulting in financial literacy after observing that many people struggled with retirement when they left employment later in life because of many psychological insecurities which set in.

“People struggle with retirement. That word itself makes you feel that you have come to the finishing line. My mum died recently at 90. Some people live a lot longer when they overcome that emotional fear. Plan your money, it is not a joke. It is not about how you make it but it is about the psychological insecurities,” he says.

Looking ahead

Bernadette Bakkidde, a lawyer said when she was previously employed, her greatest fears rotated around school fees for her children, looking after her unemployed nephews and cousins as well as parents but when she decided to quit her job and become a consultant , especially for women to access land justice, help them with taxation and gender justice, she is overwhelmed by the amount of work she has to deal with daily and the money she is earning.