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How to save up for retirement on a low income

It’s a lifetime ambition for most to have a smooth retirement. In Rwanda, the earliest someone can retire under the law is at 60 years, while the late retirement age is 65 years. 

Retirement is considered ideal if one is financially dependent at their old age.  It is not uncommon to find instances where people have to adequately plan for their retirement, simply by not saving enough, or mismanaging their investments or had to ‘exit’ strategy or plans.


Often the challenges are associated with lack of financial literacy and low savings over time among other challenges.


Financial experts advise that anyone can start saving for retirement at their first job, with recent research showing that it idea to develop a savings habit as early as one can.


Studies also show that having an account in one’s name from childhood is positively associated with financial outcomes later in life.

The establishment of Ejo Heza, a long term saving scheme that adopts targets salaried and non-salaried workers of Umurenge SACCOs. Sam Ngendahimana.

This might be because it orients one to financial systems engaging with financial products and institutions as they grow older.

Among the common challenges is making high-cost investments which often charge high fees can significantly reduce one’s retirement balance.

It’s common for individuals to make investment missteps, for instance, putting their money in mutual funds with high fees, which can considerably drain their assets over time.

Egide Ihimbazwe, an Economic Consultant based in Kigali, notes that to retire on a small salary is very possible; however, it requires one to start planning early and be committed to one’s goal.

Egide Ihimbazwe, an Economic Consultant. Courtesy.

Secondly, it is much easier if an individual makes their retirement contributions automatically and directly each month to their retirement account, he adds.

“Thirdly, someone shouldn’t just spend extra income received, instead, they should consider increasing their saving contribution percentage,” Ihimbazwe stated.

Additionally, the Economic Consultant points out that one ought to think about investing as much as they can as when they can. This will present an opportunity to have their assets work for them.

Teddy Kaberuka, a Senior Consultant and Economist in Kigali added that everyone with an income can plan for retirement regardless of the level of income. 

He said that normally, people earning a salary should save a portion on their revenue for retirement so that when the time of retirement comes, they will have put a significant portion of their income.

Teddy Kaberuka, a Senior Consultant and Economist in Kigali. Courtesy.

“My advice is to prioritize a savings culture for everyone. There is no particular strategy for retirement, but the formula is simple, whatever income or salary one earns, they should make sure that they save at least 20 per cent of it. It will help them in the future for investment or during hard times,” Kaberuka stated.

According to Himanshu Arvind Kapadia, a Consultancy Partner at JALI Partners Ltd, Kigali, a saving plan ensures that a person has enough money to enjoy comfortable lives and maintain their living standards when exit formal employment.

Himanshu Arvind Kapadia, a Consultancy Partner at JALI Partners Ltd. Courtesy.

He also noted that it is very much possible to save even if one earns what would be considered low income as long as they are willing to save consistently. This is through visualizing that building a secure future requires putting aside every small amount, even as low as Rwf100.

Kapadia urges starting  to save at an early age

“For example, let’s say one starts saving Rwf50,000 per month at the age of 20, and retirement age is 65. With compound 9 per cent rate of interest, they will have put away Rwf31.6 m when they retire at the age 65, he expounds,” he said.

Comparatively, Kapadia noted that if one starts saving Rwf50,000 per month at the age of 30 and retirement age is 65, with compound 9 per cent rate of interest, they would have put away Rwf13.30m.

 “People should keep tracking their cash outflow. Whatever the salary is, it is very important to keep track of their expenses. Whatsoever the amount they earn will never be sufficient to take all options available. Hence, keep eyes wide open to make sure of what they are spending on,” he stresses.

He further adds that one should also consider saving any extra income.

For instance, if they get a rise or bonus, they shouldn’t necessarily change their lifestyles but rather keep aside a certain percentage for retirement.

Retirement planning not only just helps an individual to maintain the desired lifestyle during their old age, but it also offers financial security to them and their dependents.

Financial Advisors emphasize that if one doesn’t save enough for retirement it is likely to result to into debt.

The government has adopted different initiatives aimed at promoting savings saving culture in Rwanda such as: The establishment of Ejo Heza, a long term saving scheme that adopts targets salaried and non-salaried workers; Umurenge SACCOs, Iterambere fund, integration of financial education into school curriculu.

There are other several savings initiatives offered by banks, Microfinance institutions and insurance companies, among others. These initiatives are expected to improve the savings culture in Rwanda.

According to statistics, total savings are still below 15 per cent of GDP compared to the target of 20 per cent of GDP by 2020.

The latest Finscope survey also indicated that lack of sufficient formal financial inclusion partly leads to to poor savings culture.

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