6 Things Wealthy People Do To Plan For Retirement

By embracing disciplined financial habits, making informed investment choices, and staying focused on long-term objectives, individuals across diverse income levels can lay the foundation for a financially stable and gratifying retirement.

By Albanus Muthoka

Retirement planning can seem complicated but at its core is consistency and a clear long-term vision. While many believe that constructing a robust retirement plan is a privilege reserved for the affluent, the reality is that several strategies employed by the well-to-do can be embraced by individuals with diverse income levels.

Let’s explore six distinctive approaches that both the wealthy and those with more modest means can leverage for a secure retirement.

Embracing Frugality

Wealthy people have mastered the habit of vigorous saving. They don’t necessarily equate their status with extravagant spending. The foundational principle is to live beneath one’s means. Affluent individuals tend to be aggressive savers and are always looking to increase the amount of assets they have invested — as a habit. This doesn’t imply refraining from expenditures; instead, it involves consistently spending less than one theoretically could.

Moving Beyond Conventional Saving Methods

While practising frugality aids in saving money, the wealthy take a step further by actively investing for growth. Instead of merely saving, they allocate these savings into growth investments. You are more likely to find their cash, for example, in a money market fund instead of a bank account whose rate of returns is lower.

In the first half of 2023, small cash savers made the least significant returns at 3.6 per cent as banks opted for wholesale lenders to support their lending, a report by the Business Daily indicated. The idea is consistent allocation to a diversified portfolio that grows steadily over time. The emphasis is on earning and growing, often utilizing methods advantageous for tax shielding.

Strategic Planning to Minimize Taxation

Investing for growth frequently involves a strategic consideration related to taxes. Wealthy individuals strive to minimize their tax liabilities when charting their retirement plans. The configuration of their investment portfolios is carefully crafted with tax efficiency in mind. For instance, if earning dividends in a taxable account triggers taxes annually, they might opt for holding non-dividend-paying stocks to defer taxes. If they are offered tax relief on pension contributions or an insurance policy, they take it!

Staying Disciplined

Surprisingly, there is no secret formula in wealth accumulation other than strictly adhering to core principles. Upholding discipline means living within one’s means, minimizing taxes, maintaining liquidity for emergencies, saving and investing as much discretionary income as feasible, and strategically allocating assets into growth-oriented categories. Discipline is paramount during market fluctuations, steering clear of panic-selling in downturns and avoiding over-investment during favourable market conditions.

Focusing on the Long-term

Retirement planning is a marathon, not a sprint. Wealthy individuals excel at maintaining a long-term perspective. They tend to be adept at staying on course and not losing sight of their lengthier-term goals.

Short-term market fluctuations are perceived as less significant in the overarching narrative. While market trends exhibit historical upward trajectories, focusing on the long term ensures retirement savings grow without continuous interference.

Balancing Liquidity

Maintaining liquidity is a pivotal facet of retirement planning. While this might not be as applicable for those with lower incomes, affluent individuals carefully consider their liquidity needs. Having sufficient liquidity guards against the need to sell illiquid assets at unfavourable prices due to unforeseen circumstances. This doesn’t mean everyone should invest in highly illiquid assets but underscores the importance of maintaining some level of liquidity based on individual financial pictures.

A secure retirement is not an exclusive privilege for the affluent. Most of these core principles can be followed by people of all income levels. The amounts earned, saved and invested might differ, but the core concepts often remain the same.

By embracing disciplined financial habits, making informed investment choices, and staying focused on long-term objectives, individuals across diverse income levels can lay the foundation for a financially stable and gratifying retirement.

Mr Albanus Muthoka is the Head of pensions Consulting at Enwealth Financial Services Ltd. Email: [email protected]

Latest

Odibets Gives Out 100 Goats Daily in Betting Promotion

Each goat from Odibets will be worth Ksh5,000 and will be rewarded to the lucky customers via M-Pesa.

Angry Standard Group Employees Wrestle With Auctioneers

In what looked like a movie, Standard Group employees moved to stop the auctioneers from carrying away the seats.

Inside Details of How Equity Sealed Deal to Acquire Rwandan Bank

Equity Group Managing Director and CEO, Dr James Mwangi, said the transaction Equity-Cogebanque deal was sealed on 30th November 2023.

Follow Us

Newsletter

Don't miss

Lupita’s Little Brother Junior Nyong’o Charting His Own Path in Acting

Junior Nyongó, who is also a musician and a DJ and now a graduate of UC San Diego with an MFA in Acting, is crafting his own solid path in the world of acting with roles in major theatre productions.

Safaricom To Power Tusker OktobaFest Beer Festival

Safaricom’s involvement in OktobaFest as a technology and payments partner will focus on fostering seamless in-festival connectivity, empowering the youth and Gen Z community through Safaricom Hook, and powering digital payments through M-PESA.

Music Producers Launch Organization To Streamline Recording Industry

Recording Industry of Kenya (RIKE) was launched on 9th October 2023. Registered in 2022 as a not-for-profit organization, RIKE aims to promote the collective interests of producers of sound recordings in the country.

Nairobi’s Hero Bar Listed Among World’s 50 Best Bars

World Best Bars: Hero Bar in Nairobi continues to climb the list, moving up six places to No.62 and Johannesburg’s Sin + Tax comes in at No.94. Dubai new entry Ergo is at No.69 and Melbourne’s Byrdi has re-entered the list at No.61.

Kenyan DJs Face Off In Smirnoff Battle Of The Beats Season 3

The Smirnoff Battle of the Beats Season 3, a DJ competition, is poised to unleash an unprecedented musical frenzy countrywide.

The Highs And Lows Of Betty Kyallo, Sisters Show As Season 2 Ends

Kyallo Kulture has always been, above all, about sisterhood, and in Season 2 we have witnessed the charm of it - the ups that gave us wholesome moments as the sisters led by Betty Kyallo spent time together.

DStv Beats CNN, BBC To Become Most Admired Media Outlet In Africa

DStv, MultiChoice Group’s leading broadcast service, has been named...

MultiChoice Revises Subscription Fees For DStv, GOtv

MultiChoice has announced price adjustments on some of their...

Octopizzo: How I Make My Money

"I've been doing this for 12, 13 years. It reaches a point where you no longer need to prove that you can make a hit record," he stated.

New Spotify EQUAL Artist Qing Madi Talks Music and Dreams

Heavily influenced by her cultural background and the lyrical arrangements of Kendrick Lamar, the versatile Nigerian prodigy is shaping the future of music with her unique genre-bending fusion of Afrobeats, Pop, Soul and R&B.
BUSINESS TODAY
BUSINESS TODAYhttps://businesstoday.co.ke
editor [at] businesstoday.co.ke

Odibets Gives Out 100 Goats Daily in Betting Promotion

Each goat from Odibets will be worth Ksh5,000 and will be rewarded to the lucky customers via M-Pesa.

Angry Standard Group Employees Wrestle With Auctioneers

In what looked like a movie, Standard Group employees moved to stop the auctioneers from carrying away the seats.

Inside Details of How Equity Sealed Deal to Acquire Rwandan Bank

Equity Group Managing Director and CEO, Dr James Mwangi, said the transaction Equity-Cogebanque deal was sealed on 30th November 2023.

1 COMMENT

LEAVE A REPLY

Please enter your comment!
Please enter your name here