How best can I invest my Sh2.4m pension?
I work in a government parastatal. When I retire at the end of this year, I will be entitled to a pension sum of Sh2.8 million. After Sacco loan deductions, the amount will reduce by Sh.1 million and I will be getting around Sh50,000 a month. I have about Sh600,000 in my NSSF account. I have not invested anywhere else. Michael  Photo credit: Pool  Rhina Namsia,  Founder and CEO, The Acemt Consulting  Running out of money after retirement is a genuine concern. Be aware that you may be blessed with more years after retirement than those you spent in employment. This means your daily expenses need to be catered for. Taking care of your health also becomes a very critical issue as you age. The Sh50,000 youll be getting can be used as disposable income for your daily expenses. Assuming all your children are done with schooling and you have a home already, these expenses include food, small medical expenses, transport or fuel, entertainment, friends and family. Your lump sum investment figure now stands Sh2.4 million. Try to settle on low risk investments. However, this doesnt mean you should be extremely conservative. Use 70 per cent of these funds to purchase a Treasury Bond. Choose an infrastructure bond with a coupon rate of at least 10 per cent. This means you invest Sh1.6 million in bonds. A 10-year bond with a 10 per cent coupon rate will give you an annual return of Sh168,000. You will be receiving Sh84,000 every six months for the entire 10-year bond life, and upon maturity, your Sh1.6 million investment capital will still be guaranteed. You will now have a remainder of 30 per cent of the total lump sum. Use 20 per cent or Sh480,000 to buy stable and fundamentally viable blue chip stocks. This should be a diversified portfolio with annual dividends. Keep in mind that unlike government bonds, returns on stocks will depend on market performance and forces such as demand and supply. This is why you must carefully choose the stock to pick. You can then put the remaining 10 per cent (Sh240,000) into a savings account or money market fund with interests above the inflation rate. This means that the interest earned should be north of nine to 10 per cent. This should be money you can access in the event of an emergency. The other alternative is to invest the Sh2.4 million in an income drawdown fund. This is a fund that allows a retiree to reinvest their accumulated retirement benefits through a fund that can earn interest or allow for a withdrawal on monthly, quarterly, semi-annual, and annual basis. Income drawdowns are capped at 15 per cent per annum on the amount that you can draw down from the funds (also known as withdrawal percentage) of your outstanding account balance. This money can cover your expenses such as post-retirement medical cover. If you invest a lump sum of Sh2.4 million you would be able to draw down up to Sh360,000 per annum or Sh30,000 per month. This payout may be sustained for a period of between 20 and 40 years assuming the prevailing economic conditions and a stable interest rate environment are maintained. The minimum drawdown period is 10 years, after which the member can opt to either continue with the drawdown arrangement, take up annuity, or take the remaining fund balance as a lump sum. In retirement, you will want a fixed guaranteed return because of the assured cash flow. Photo credit: Pool  Robert Ochieng,  Investment and financial advisor at Abojani investments  It is commendable that you have amassed Sh3.4 million. Considering that you will receive no other income apart from pension, you need to put this sum in a relatively safe investment instrument. Such include government bonds and the money market funds. You will need these returns to sustain you till your sunset years and possibly pass inheritance on to your dependents. You may also need to limit your spending, given that your regular monthly salary will no longer be a guarantee. The Sh2.4 million can be split as follows:  Sh200,000 for an ordinary savings account. This will come in handy in the event where an emergency or an urgent issue arises. Sh1 million should be invested in a money market fund. This will earn you about Sh80,000 per year at a rate of eight per cent. Sh1.2 million should be invested in a government bond. This should earn you an interest of 12.5 per cent per annum, which translates into between Sh130,000 to 150,000 in interest per year. With your investment in the money market fund and government bond, your annual interest earnings will be at least Sh200,000. That will be 10 per cent of your invested lump sum. Added to the monthly pension of Sh50,000, you will have a mean monthly income of about Sh66,000, which should be enough to maintain your retirement lifestyle. At retirement, your expenses should be directed more towards medical care.