So why start saving for retirement early?
Okay here is the thing, when we are young human capital is one of the most valuable assets we own.Human capital is simply the present value of your total expected future earnings or simply, the return you earn for investing your time and skills in a job or business.
Unfortunately it tends to be the most ignored in planning for retirement. Do not join the bandwagon, because guess what! The younger we are, the higher our human capital because we have more years to receive labor income, so starting your retirement planning on your very first paycheck is clearly most ideal.
Take for for example;
Kasyoki who is 26 years and Wanyonyi 39 years old. Both would want to retire at 55 years old. Kasyoki has 29 years of labor income she can continue to earn, while Wanyonyi has only 16 years. So as one ages, their human capital reduces, and reliance on financial capital increases. Now Wanyonyi needs to earn more from his financial capital to replace the human capital that declines to zero on retirement age to ensure his future is financially secured.
This is why starting early is the best.
At retirement, you are weak and worn out, and you only have as much wealth as you accumulated in your active days, this includes your retirement income. Therefore, as a prudent planner your goal should be to build up financial capital over the years to an amount that exceeds your anticipated retirement needs.
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This article is written by our Principal Officer Winnie M., who has vast insurance knowledge spanning over 10+ years in the industry. You can write to her and/or share feedback via this email email@example.com