Do I Move My Retirement Savings from a Sacco to  Retirement Scheme or Use an MMF? Money254 Cash Clinic

Over the last 5 years, I’ve been contributing Ksh15,000 monthly to my retirement savings plan and so far I have around Ksh900,000. I have been keeping this money in a sacco account but I read somewhere that having a retirement scheme may be better. But reports I have read online suggest that the returns are very low. Given the volatile market, I’m concerned about the future. ***What adjustments should I make to my contributions or asset allocation to reach my goal of Ksh10 million in 15 years? ***And what are the benefits of saving in a retirement scheme as opposed to just putting the money in traditional investments such as a Sacco, Money Market, or a government bond.

I borrowed Ksh2 million at 12% interest per year to fund a home renovation project. My monthly repayments are Ksh30,000, but with rising living costs, I’m struggling to keep up. ***In retrospect, would taking out a personal loan with a lower  interest rate or securing a different type of financing have been a better option?

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Juma, Nakuru

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1. Meeting the Ksh10 Million Goal:

Current Plan: Saving Ksh 15,000/month for 15 years at a 10% annual return (typical SACCO rate) will yield approximately Ksh6.5 million, short of the Ksh10 million goal.

Adjustments Needed:

Increase monthly contributions to Ksh 22 ,500 to meet the goal at a 10% annual return or diversify savings to include higher-yield options like endowments,government bonds or balanced funds for better returns.

2. SACCO vs Other Options:(pros and cons)

SACCO: Offers moderate returns and access to affordable credit but lacks the tax benefits or structured growth of retirement schemes.

Money Market Funds: Ideal for short-term savings but may not provide the growth needed for a 15-year goal.

Government Bonds: Provide higher, stable returns and are ideal for long-term goals. Consider bonds with interest rates of 12–15% annually.Remember that the rates might go down depending on factors influenced by broader economic conditions and global financial markets.

Retirement Schemes: Provide tax relief and professional fund management, making them suitable for long-term goals.

Recommendation: Combine SACCO savings with endowments and government bonds for stable returns and retirement schemes for tax benefits.

3. Loan Management:

Explore refinancing the home renovation loan to lower interest rates or extend the tenure to reduce monthly repayments.

Use part of the SACCO savings to offset the loan if penalties for early repayment are minimal.

In summary,diversify savings into SACCOs, endowments,government bonds, and retirement schemes while revisiting loan terms to ease financial strain.

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