Why the Desire to Own a Home Should Spur You to Save For Retirement

I sat in the living room of former Retirements Benefits Authority (RBA) Chief Executive, Dr Edward Odundo, and one thing was certain, I want this kind of future for myself.

“I bought this house before I retired and it really makes my life easier now because I only pay land rates, not rent. I would have been having a bad time if I was paying rent and/or a mortgage loan,” he says. Dr Odundo is a retirement expert and the Director at the School of Pension and Retirement Studies (SPRS). He also doubles up as a part-time lecturer at the University of Nairobi.

Well, you might think you are miles away from retiring but retirement is always closer than you think. There are various things that Dr Odundo recommends individuals to take care of before retiring. You ought to have a medical cover, liquidity, cleared loans and most importantly have a house of your own.

Money is hard to come by after retirement

Most people think that pension is enough to cater for you after you retire but actually it’s not. Pension is only 10% of what you used to earn which is a huge drawback. If you were earning 10,000 in a month you will be receiving 1,000 pension in a month. It is very difficult, if not impossible, to get by when you are not receiving the same amount of money you used to.

This is why renting a house should not be an option when you retire. It is highly likely you will be using the entirety of your pension to pay rent. Dr Odundo hence advises that you build or buy a home and you will have solved that problem. Your pension will be used for other things but not to pay rent.

Clear your mortgage loan before retiring

When you’re working, money trickles in every month and you are always assured of a salary so it is easier to pay rent but once the monthly salaries stop coming in things will drastically change. In fact according to the former RBA boss, when clearing loans you should prioritize your mortgage loan.

Why should you prioritize it you may ask? Retirement comes so fast that most people are not prepared for it. A majority of Kenyans start worrying about life after retirement when it is five or less years to D-day. This is when you take a mortgage loan with a plan to build a house that you will live in after retirement.

Dr Odundo advises that you get your loans paid before retirement, especially your mortgage, because failure to do so might result to you losing your house. Getting a house with loan money is one thing but having that house taken away from you because you could not repay the loan is a whole other nightmare. Trust me you don’t want to be renting a house after retirement because getting rent will be a hustle you will not be fit for.

Renting price would have increased by the time you retire

Whether you are two years or 30 years away from retirement, there is a high possibility that the rent you are paying right now will have increased by the time you retire. This is because property taxes and maintenance costs increase over time with inflation. These costs are then passed on to renters in the form of rising rents. On the other hand, inflation can also cause rising real estate prices, which act to your benefit as a homeowner. So why not build your own house and some rentals too if you can?

As mentioned earlier in this article, money is scarce to come by after retirement. If you are struggling to pay rent right now with your full salary, how difficult will it be to pay rent when you are only getting pension and the rent is way more than what you are paying now?

Rural home or Urban home?

“You should have both,” Dr Odundo immediately says when asked whether one should build a house in the rural area or in an urban centre.

“It gives you a sense of comfort when you have a home in the rural area because you will have somewhere to relax and relieve yourself of a busy life. A house in the urban area gives you proximity as and access to services you might need, for example medical services,” he adds.

The issue with having a house in the urban area is that the place might become commercial and you will be forced to move. It is safe that you also have a house upcountry so that in case your home in the city does not feel like home anymore, you can always move to your rural home.