Will you retire a dependant or independent?
Out of every 100 Ghanaians that retire at 60 years, only two of them live comfortable lives. Twenty-three of them will have to work again after retirement to be able to make a living, a recent study by investment advisors in the country has revealed.
Advertisement
The remaining 75 normally rely on charity, pension payments and gratuities from loved ones, friends and family members to be able to survive. Should those handouts cease, these people will run into bankruptcy, the study indicated.
As revealing as this may be, the finding is a rhetorical inquisition of all prospective retirees and those currently below 60 years whether they will be among the two per cent, 23 per cent or 75 per cent cohort. Stated differently, the big question is: Will you retire a dependent or independent?
The answer will depend largely on what is happening to one’s income now it is coming as a continuous stream, especially what savings are being made towards retirement?
Impact of non-savings culture
While the research findings are heartbreaking, they paint a better picture of what a consumption mentality, which the country is dogged with, can do and has done for individuals and the nation.
With a savings to gross domestic product (GDP) ratio of 12 per cent compared to more than 50 per cent in most Asian countries, Ghana is unable to accumulate enough money through savings for development work and secure the future against a rainy day. It also exposes the Ghanaian as having a high propensity to spend rather than to invest earnings.
This has, over the years, put a great deal of strain on the economy and the living standards of the people and that is clearly manifested when a Ghanaian clocks 60 years.
This is because at that age, regular income ceases to flow and returns on investments, if any, will now be the source of livelihood for one's day-to-day expenses.
Other Trending Stories
In situations where those investments were not made while the person was still in active employment, those returns would surely not come and the obvious bracket would either be people aged between 23 or 75 - victims who either depend on retirement jobs or pension payments and gratuities to survive after retirement.
Mental shift
For investment analyst and Head of Databank Asset Management, Reverend Dr Daniel Ogbamey Tetteh, this is not good for the survival of the people and the well-being of the economy in general.
"As Ghanaians, we need to make a change from consuming all the resources that come to us and rather invest them," he said on the Springboard, a weekly motivational show on JOY FM on July 18.
While increasing cost of living and other challenges with low interests on savings have always been blamed for the low savings culture in the country, they turn out to be mere excuses when subjected to proper scrutiny. For instance, how come two people of the same salary and expenditure commitments will have different savings cultures? The answer is in the mental shift that Rev. Dr Tetteh of Databank advocated.
"There is that need for a mental shift from consumption to investment," he explained.
Where and how to invest
Agreeably, learning to invest at an older age can sometimes be the hardest job, especially in an environment where financial literacy is way below the global average.
However, with myriads of investments instruments, products and institutions nationwide, one can no longer feign ignorance for not investing.
The problem has to do more with the mentality and commitment to investing. Experience has, over the years, showed that people find it difficult walking into banks to deposit savings, which is the first and crucial step to investing.
But with the availability of standing orders, one can easily direct his or her bank to remit a specified amount to an investment firm or savings account without being directly involved. Also, one can easily create a separate account to hold non-salaried earnings such as tips, give-outs and all income not directly related to monthly income. This way, the temptation to spend the money is eliminated, making it possible for the savings to accumulate over time.
While it is good to save, it is generally not advisable to allow the money to over accumulate to higher volumes - they should be withdrawn and invested in fruitful and high-yielding ventures.
Beyond shares and securities (treasury bills and bonds), people could easily look to real estate, which is fast becoming a hot cake for investment.
With the rapid rate at which urbanisation is catching up with every corner of the country, no place is far nor is any community a village any more.
Advertisement
As a result, one's ability and willingness to invest in land by properly securing some parcels in places outside cities could just prove a big investment in the near future.
This is because in five to 10 years’ time, urbanisation will bring today's 'hinterlands' closer to the cities and that will reflect on the value of the land or the buildings on them. A typical case is Kasoa in the Central Region, which has gradually become a part of Greater Accra due to the pressure on housing in the capital city. Thus a decision to secure lands in other hinterlands now would be useful in the near future.
Some money market funds in the country are also doing extremely well and with good guidance from an investment consultant, one could easily rake in handsome amounts while relaxing at the comfort of his or her office.
But whatever one chooses to do with his/or regular income, it is important to note that the monthly salary is temporary and is also available while you are still active and legally permissible to work. When you are incapacitated or clock 60 years, that regular flow will cease to come and how to survive will definitely depend on the investment decisions you made while you were still earning those sums of money.
Advertisement
And as Bill Gates of Microsoft fame put it, "If you are born poor, it’s not your mistake, but if you die poor, it’s your mistake." Thus while it may be understandable to start work as a poor person, it surely will be unforgivable to retire a pauper and a dependant to family, friends and loved ones.