Can You Recover If You Start Saving for Retirement Late? Things to Consider

Yes, you can still build a comfortable retirement if you start saving late. You may need to be more deliberate, save a larger percentage of your income, rethink your retirement age, or adjust the lifestyle you expect to enjoy in retirement. Starting late makes the journey harder, but it does not mean you have lost your chance.

Many people delay retirement savings because they are raising children, paying rent or a mortgage, supporting extended family, building businesses, repaying loans, or simply trying to survive on their income. Others assume they have plenty of time and will start saving when they earn more.

The challenge is that retirement planning relies heavily on time. The earlier you start, the longer your money has to grow through compound returns. When you start late, you have less time to benefit from that growth.

The good news? You can still take practical steps to improve your financial future.

1. Understand how late you are starting

Your age, years remaining before retirement, current savings, income and financial obligations all influence your options. Someone who starts saving at 40 has a different challenge from someone who starts at 55.

These are general guidelines, not strict age limits. Your actual financial position matters more than your age alone.

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2. Take advantage of compound growth

Compound growth happens when your investment earns returns and those returns, in turn, generate additional returns. Starting late means you have less time for this process to work, which makes regular contributions even more important.

For example, suppose two people invest KSh 10,000 monthly and earn the same hypothetical average annual return of 7%, compounded monthly.

The illustration shows why starting earlier helps. It also shows why starting late is not a reason to give up: regular saving can still build a meaningful fund. Actual returns will vary, and investment values can fall as well as rise.

If you start late, you may need to contribute more each month, invest for longer, or do both to work towards your target.

3. Calculate how much you actually need

One of the biggest mistakes people make is saving whatever they can afford without determining whether it will be enough.

Start by asking yourself:

• At what age would I like to retire?

• How much money will I need every month to maintain my desired lifestyle?

• Will I still be paying rent or a mortgage?

• Will I have dependants or other family members relying on me?

• What pension benefits or investments have I already accumulated?

• How much of my retirement income will need to come from my own savings?

Remember that your expenses may change in retirement. You might spend less on commuting and work-related costs, but more on healthcare, leisure, travel or home maintenance.

In Kenya, the Retirement Benefits Authority (RBA) suggests saving at least 10–15% of income as a general starting point, while noting that the right amount depends on your age, savings and retirement goals. Someone starting late may need to save considerably more.

If you have spent years putting off retirement savings, the idea of suddenly saving 30% of your income can feel impossible. Instead, create a plan that increases your contributions over time.

For example:

• Start by saving 5% of your income if that is what you can manage.

• Increase your contributions whenever you receive a salary increment.

• Direct a portion of bonuses, commissions, business profits or other windfalls into retirement savings.

• Review your contributions every six months.

• Automate contributions so that saving happens before you spend the money.

The objective is to build a sustainable habit and steadily increase the amount you invest.

5. Take advantage of retirement schemes in Kenya

You do not have to be formally employed to save for retirement. Kenya has several options worth exploring.

Before choosing a scheme, compare its fees, investment options, withdrawal rules, historical performance and tax treatment. Tax rules and contribution limits can change, so verify current requirements with the provider or the relevant authority.

6. Diversify beyond your pension

A pension scheme can be an important part of your retirement plan, but it does not have to be your only source of income.

Depending on your circumstances, you could also explore:

• Money market funds: For cash management and relatively liquid investments, while recognising that returns vary and capital risk depends on the fund. Advantages And Disadvantages OF Money Market Funds. Things To Look Out For

• Government securities: Such as Treasury bills and bonds, which can provide interest income if held under suitable terms.

• Shares and diversified funds: For long-term growth, depending on your risk tolerance and investment horizon.

• Rental property: If the numbers work after accounting for maintenance, vacancies, taxes, and other costs.

• A business or professional practice: One that can generate income without requiring your full-time involvement in retirement.

Do not invest in everything simply because you are trying to catch up. Choose investments based on your timeline, risk tolerance, liquidity needs and overall financial plan.

Be wary of schemes promising guaranteed high returns or unusually fast wealth creation. Desperation to catch up can make late savers particularly vulnerable to financial scams.

7. Deal with expensive debt

It is difficult to build retirement wealth when a large proportion of your income goes towards high-interest loans.

Review your debts and prioritise a repayment strategy, especially for expensive consumer loans and credit balances. At the same time, try to establish a small emergency fund so that unexpected expenses do not force you to borrow again or withdraw long-term investments. Finances: The Importance Of An Emergency Fund

You do not necessarily have to eliminate every debt before saving for retirement. Consider the interest rate, repayment terms, employer pension benefits and your cash flow when deciding how to balance the two.

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8. Do not forget inflation

KSh 50,000 a month might support a certain lifestyle today, but it will not necessarily buy the same things 15 or 20 years from now.

Inflation reduces purchasing power over time. Your retirement plan should therefore consider the future cost of food, housing, transport, utilities and healthcare.

This is why setting a retirement target based only on today’s expenses can leave you underprepared. Review your target regularly and consider how inflation affects both your investments and your future spending.

9. Consider working longer

Retirement does not have to mean stopping all income-generating activity on a particular birthday.

If you start saving late, working for an additional three to five years could help you in two ways: you have more time to contribute and invest, and fewer years during which you need to rely entirely on your retirement savings.

You might also consider consulting, mentoring, freelancing, teaching, running a small business or monetising professional skills.

The goal is not to work indefinitely. It is to create enough financial flexibility to retire when you can afford to do so.

10. Avoid sacrificing your present completely

It can be tempting to panic when you realise how little you have saved. You might decide to save every available shilling, neglect your health or abandon all enjoyment in an attempt to catch up.

That approach can be difficult to sustain. You still need to pay your bills, maintain your health, build relationships and enjoy your life today. Create a realistic budget that balances current responsibilities with future security.

The best retirement plan is not necessarily the most aggressive one. It is one you can follow consistently without putting your current financial wellbeing at risk.

Your late-start retirement action plan

Your checklist

Establish your starting point

Check pension statements, savings, investments, debts and monthly expenses.

Set your retirement target

Estimate future living costs and decide when you would like to retire.

Calculate the savings gap

Compare your projected retirement income with your target.

Choose your savings vehicles

Review NSSF, registered pension schemes and suitable additional investments.

Automate and increase contributions

Set up regular payments and increase them when your income rises.

Review your progress

Reassess your plan at least annually and adjust for inflation, returns and life changes.

Final thoughts

Starting retirement savings late is a financial challenge, not a financial death sentence. You may have to make adjustments, save more aggressively, or work longer than you originally planned. But you can still take meaningful steps towards greater financial security.

Do not allow regret over the years you did not save to prevent you from acting now. Start with what you have, understand what you need, and build a plan that reflects your actual circumstances.

The best time to start may have been 20 years ago. The next best time is today.

Check out

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