My name is Martin, 56, and just retired. I am seeking advice on how to organise my finances for a comfortable life in my sunset years. My details are as follows:
● 7 acres in Kitale for subsistence farming with a 3 bedroom farmhouse
● Equities – Sh900, 000
● Provident fund – Sh14 M (subject to taxation)
● Sacco shares – Sh6 M
● Cash in savings account – Sh1.5 M
● Housing Sacco savings – Sh400, 000
● NSSF – Sh300, 000
● Monthly expenses – Sh100, 000
● Annual medical insurance cover – Sh150, 000 (Sh12,500 monthly)
How do I consolidate all these into a viable cash flow programme? What do I need to do with all these to earn good passive income and live a comfortable life in my retirement years?
Inziani Khasiani, executive director, Klientele Kenya
The returns on your various investments as currently constituted should be able to earn you approximately Sh79,000 arrived at as follows: Provident fund balance at 5% is Sh58, 333.33 [due monthly], Sacco shares at 5% Sh25, 000.00 [due annually], savings account 4% Sh5, 000.00 [due annually], equities at 4% Sh3, 000.00 [due annually], Housing Sacco savings at 5% Sh1, 666.67 [due annually] and NSSF bringing no return. The total comes to Sh93, 000, and if you take away tax at Sh13, 950 you’ll be getting a net of Sh79, 050.
The total investment balance is Sh23,100,000. I recommend these funds be redistributed in investments that will allow income streams on a monthly basis or at most half yearly.
I recommend that 45% goes to Money Market Funds(MMF) , 30% to infrastructure bonds, 20% to Sacco and others at 5%. The amounts for investment under the respective heads with the estimated monthly returns after tax against each investment would be Sh10,395,000 in MMF with a return of Sh 66,268.13, Sh6, 930,000 in infrastructure bonds with a return of Sh75,075, Sh4, 620,000 in Saccos with a return of Sh22, 907.50 and Sh1, 155,000 in other equities and savings accounts will return Sh4, 090.63.
The total returns from the redistributed investments is Sh168, 341.25. Other than infrastructure bonds that will pay interest on a half year basis, all the other investments will pay interest monthly.
The only drawback in the above redistribution is that assuming you live for another 30 years, the value of your assets will not have any capital appreciation. This would best be achieved through real estate investment. Recommendations in real estate would be a redistribution from money markets and infrastructure bonds, and will largely depend on your risk appetite.
The fact that you’ve retired shouldn’t keep you away from new opportunities. Develop a nose for opportunities. For example, there is a government drive for people to plant trees. You should consider a minimum of half an acre of your shamba to be under trees. Trees that are aged 10 years and beyond are a sure source of income.
In addition, consider upscaling your skills in an area you love. This can bring in additional income besides doing something of passion to help you overcome the boredom that often creeps in after retirement. BY DAILY NATION