Owning a home for retirement, one of the main targets of most Ugandans or Africans, has been named as the main causes of old-age poverty, according to some experts.
While, according to the African traditional setting, it is one of the goals of any young man and to a lesser extent, woman to own a residence, it is the focus given to it during the time of active working age that matters.
According to Alan Lwetabe, the Director of investments at the Deposit Protection Fund of Uganda, the mistake most Ugandans make is having construction of a house when planning for their retirement benefits. According to him, most Ugandans retire with money not enough to cater for the construction of a house and their other needs, advising that they might be better off renting.
He says, if any person is to have a house in their old age, construction, or better still paying a mortgage, should start almost as soon as they start earning, so that their retirement benefits may help in completion.
Lwetabe, also a board member of Chartered Financial Analysts (CFA) Society East Africa, advised that there are various financial products both designed for big lump sum retirees and those that retire with less money.
He gives an example of spreading investments in treasury bonds across months to ensure that every month, the investor will be assured of an income that can then be used on rent.
His view was supported by Robert Kabushenga, former New Vision chief executive and now proprietor of Rugyeyo Farm Ltd, who said that as the economic situation changes, priorities by young people should also change.
According to him, unlike in the previous decades, currently, there are many organisations that offer tips on managing a lump sum and can also advise on how to acquire a house. Otherwise, according to him, starting to build a house on retirement is not prudent.
Speaking at NSSF’s talk dubbed “Making your benefits count: Managing lump sum payment”, Esther Kasirye, a certified coach at the International Coaching Federation wondered how a retiree would be able to maintain renting without an income.
The talk is part of the financial literacy program the National Social Security Fund started for its savers after realizing that more than 65 per cent of the members who withdraw their retirement benefits, die in poverty. This, according to the Fund, is partly attributed to the overspending retirees do, including spending most or all of their savings on acquiring land or constructing.
Coach Kasirye, a businesswoman and retired banker, said building a house even in later years should not be discouraged, but that it may be prudent to include a sale plan, in case the need arises so that the proceeds may be used in income-generating ventures.
The speakers advised that it is high time that Ugandans learn to stay away from their cash because of the temptation that comes with it.
Kabushenga said since his retirement in early 2021, he has learnt to live without cash and this has helped him reduce his spending habits, adding that cash in the wallet encourages him to make unplanned spending.
His tip is that any money that comes unexpectedly is a lump sum and how the receiver spends it is the way they would spend a withdrawal of NSSF benefits.
On his part, Lwetabe agreed that the closer one keeps cash to themselves, the faster they are likely to spend it, adding that instead, it is advisable to have a spending plan at the beginning of the month. According to him, for example, a salary increment should not lead to a more luxurious lifestyle, but instead, the increment should be saved.
Apollo Mbowa, the Manager of Financial Literacy at NSSF, said that most Ugandans in employment actually earn more than what is enough for them, but they are not aware because they live in luxury.
He gave an example of employees who get salary cuts but still cling to their jobs, an example that they were living in luxury before even when they claimed that they were being underpaid.