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I can guess how World War III will start: Imagine two million elderly African parents resisting to move into assisted living facilities in the USA. You think their accents are thick now? They will be speaking in tongues. The word retirement is naturally loaded. If you are an African ex-pat living in the United States, it’s about to explode! There is always this famous predicament when it comes to African folks abroad: Retirement in USA Vs Returning to Africa. That’s not all. Finances, security, health, family and other factors will definitely add complications to this dilemma. Looking at finances alone, this group may never retire anywhere! Grab a cup of coffee and get cozy. Stay with me to the end. This might hurt a bit.
The black immigrant population in the U.S. rose to 4.2 million in 2016 according to Pew research. This estimate includes people born in places such as Jamaica, Haiti, Guyana and other places outside the African continent. Going by the US Census Bureau data, Africa has the fastest-growing number of immigrants. More than 2 million immigrants from sub-Saharan Africa lived in the United States in 2018. That’s not a negligible number. Imagine the population of Botswana with the economic weight of the United States GDP per capita. That would make one of the richest countries in the world.
Retirement in USA Vs Returning to Africa
Mass African immigration into the USA is fairly recent. The 2 million Africans currently living in the USA are within closely related age brackets. Unlike the previous generation which was mostly students, this group is settled. The Africans have established homes, families, businesses, and places of worship. These folks have entrenched themselves into the fabric of the American community far deeper than those who ventured before them. In many ways, the African group in the USA is a microcosm of American society.
With almost zero unemployment rate, these ex-pats, for the most part, have jobs and a good quality of life. Many have children and some are starting to usher in grandchildren. Within the next 20 years or so, there will be more than a million African ex-pats of retirement age in the USA. The passage of time dictates they must act, now. But before I get into why they may never retire, allow me to analyze the two schools of thought: retirement in USA Vs returning to Africa. To misquote Shakespeare “To go, or not to go, that is the question!”
Retirement in Africa
We all know Africa is a piece of paradise. It’s the best place to visit. You’ve got to go on a safari! Is there anything better than watching the tropical sun go down? It is the richest continent on Earth (if we look at natural resources). The food is awesome! African traditional dishes are as varied as its people. Don’t get me started! Vacationing in Africa is always like a prolonged honeymoon. (Ok, biased opinion). Let’s talk about retirement. In-home care is the most common living arrangement in most of Africa. The elderly stay with family members in a familiar environment. These family members, relatives or hired hands help with daily tasks. This is done to the last minute! It’s a beautiful circle of life. At least that what African people consider “normal”.
Rough re-integration phase
This ever-burning love of the motherland and acute nostalgia can lead to a romanticized version of your retirement. It’s easy to overlook the bitter reality: moving permanently to Africa after living abroad for a lengthy duration comes with a healthy dose of culture shock during the re-integration phase. It’s likely that you will be leaving your family, friends and familiar network behind. How will you fill your days? Who will you spend time with? What will be your support system? Will it be difficult to visit family abroad or them visiting you? Did I say this might hurt a bit?
Let us talk about money. Will you have saved enough? Inflation can erode purchasing power drastically. In some countries, inflation is as violent as a mugger. You may require far more money to support your lifestyle than you had anticipated. Do you have an income-generating activity already established? The current debt appetite in many African nations and the new scramble for Africa (China/Russia) is not something to be ignored. It’s hard to tell how these will affect inflation in the long run. East or west home is best. Well, at least for this school of thought.
Possible Culture shock
It’s easy to assume there will be no culture shock in your mother country. There many things that are considered “normal” in Africa that will make you sad. Very sad. Healthcare is a good example. For starters, people die from the most preventable and treatable ailments. It is normal for some African hospitals to detain patients who owe money. There was a recent news piece on this. The fact that patients who default on payment are detained is not something you are used to in the United States. And grieving the loss of a loved one might take a whole level of gravity: morgues are allowed to hold a body hostage until families can pay their loved ones’ bills.
Outside of healthcare, life does not get any easier. Whatever is happening now is already affecting your retirement. Currently, there is more red tape than you are used to in the USA. There are more “landmines” to watch out when acquiring real estate or other investments. There are more hoops to jump when getting simple things such as title deeds and development approvals. These investment obstacles during your productive years will ultimately damage your retirement plans. The lack of support for innovation, small businesses, and investors may mean fewer jobs in the future.
The level of impunity, leadership myopia and abuse of authority continue to go up. (SHH don’t make Africa look bad) You will have to re-learn how things work. It all depends on the country. Africa is a great place overall. Some countries are improving. Ghana is currently encouraging African Americans to relocate to the country. But this piece is not about which country is better per se. It’s about where the “110-year-old you” will get some sanity.
Children’s Lives Matter
Children can be the ultimate curveball. This can throw a wrench into the planning. Will they go willingly? Have they been there? Let us suspend willful blindness for a moment. First of all, you and the children may not agree on what it means to be “home”. America is home for most of these kids. Contemporary Hispanic immigrant groups are having to deal with this issue too. Like it or not, these are second-generation Americans. Something at the back of your mind also tells you that these kids will be better off in the USA. Can your American kids survive the African rough-and-tumble? Can they access your property if you are not alive? Can they be easily scammed, taken advantage of or outright robbed? Are there land grabbers in your native country or even in your family?
African parents, even abroad, are known to be harsh and strict. According to unreliable sources, they discovered “because I said so” line and that authoritarian parenting was made in Africa. At least that is the stereotype. Play along!. That does not seem to help much. Most of the parents I interviewed have failed to convince their adult children to move to Africa on a permanent basis. Yes, for them is Africa is a foreign land! If you have re-located to Africa with American-born adult children, I’d love for you to share your experience.
It’s hard to sell the benefits of Africa against life in the USA. First, all they see on the news about Africa is war, famine, poverty and political upheaval. Most American born Africans who have visited the continent generally like it as a vacation destination but not as a place to live permanently. The top concerns include Health care, rolling blackouts, day-long traffic jams and the high price of internet connectivity.
Wherever you go I will follow (said no one)
If your children choose to stay in the USA, will it be difficult for you to visit them when you are 110? (God bless you) Will it be a burden for them to visit you? Selecting a retirement place across continents could also mean – by default- that you have also chosen your final resting place. In most African countries the backyard is the cemetery. Will your descendants have access to your final resting place? That piece of property can be sold later by you-know-who, right?
Retirement in America
There are infinite reasons why Africans decided to immigrate USA – political, cultural, financial, educational, work, to be with family and others. It’s not all about money. There are infinite reasons why Africans will end up staying. But retirement in America presents its own set of challenges. It is not all rainbows and butterflies. The U.S. retirement savings system is basically made up of Social Security, defined contribution plans (401(k), 403(b) or 457), traditional pension plans (defined benefit), and individual retirement accounts (IRA and Roth IRA). In the USA the bills don’t retire. The list is long and includes electricity, gas, water, sewer, cell phones, cable TV, real-estate taxes, home, and auto insurance, food, entertainment. Then there are debts. The average American has $16,000 in credit card debt. The average debt load for Millennials is $30,580.
Retirement Statistics Will Scare You
Most Americans spend around 20% of their income on interest according to recent studies. 80% of Americans have some type of debt. 50% of Americans can’t cover a $500 emergency. Health care costs hover around $10,000 per person every year. That is why social security benefits alone cannot assure a comfortable retirement. The average Social Security recipient receives just $16,300 per year. It has been reported that 50% of the elderly will have most of their retirement income coming from Social Security. At the same time, nobody knows what the Social Security fund will actually look like in a few decades.
You can’t bank of the home equity either. At least 35% of all U.S. homeowners are Baby Boomers according to the data we reviewed. Here is the kicker. The baby boomers are expected to dump more than 20 million existing homes on the market in the next few decades. That oversupply may bring down home prices and equity. No one knows for sure. The good news is that some Americans are warming up to in-home care.
Assisted living care (or scare)
In the USA, assisted living is a type of care facility that aids seniors with daily tasks. You get a room, transportation, housekeeping, laundry, and some medical services. It’s not as evil as it sounds. It’s an institution that cares for the elderly. But it is also an institution that scares the daylight out of many Africans. The very idea of retiring in an old people’s home is very foreign. Many of these Africans are in the health care industry. They are aware of what living in such an institution looks like especially if it’s a low funded one. To be fair, it is not just Africans who do not like the assisted living concept. It’s not unusual in America for parents to resist this kind of care arrangement. Like Africa, the USA is a huge territory. Every state or region will have its own factors.
Dynamic African culture in the USA
African culture comes alive in its rich art, folklore, clothing, cuisine, music, and languages. There is one show in America that is making Africans look so good. If you have watched Chef Marcus Samuelsson’s series “No Passport Required” there is one episode that covers a range of West African cuisine in Houston, Texas. This is a must-watch.
“No Passport Required”
“No Passport Required” Houston episode showcases the dishes from Nigerian, Senegalese, Ghanaian, and Liberian. It brings out the best of Africa in the diaspora. I have to warn you: You will find yourself craving jollof rice, Suya and goat pepper soup. You can find the below products in Amazon.
To go, or not to go, that’s not the only question
The total African Diaspora worldwide is actually around 140 million if you count all people of African ancestry living outside the continent. Only the country of Nigeria has such a huge population. One doesn’t need to be on the continent to celebrate African roots and culture. Buying African products and services is one way to support Africa.
We can easily agree that “to go, or not to go” is not the only question. Finances, family dynamics, health care, and security will likely determine your retirement location. What can you control right now? Finances! When Bill Clinton ran for president in 1992, some genius put up a sign in his campaign headquarters reading, “It’s the economy, stupid.” We can come to the same conclusion. “It’s the Money, Stupid”. Regardless of where you will retire, you can’t get away from the fact that money will continue to be the biggest source of stress. Running out of money in retirement is currently the biggest nightmare for many retirees. I hope this thinking resonates with you.
The main reason Africans living in the USA may never retire
Africans in the USA are known for 5k, not 401K. Many have not saved enough for retirement. But to be fair, most Americans are behind in saving for retirement if you look at governmental studies. African ex-pats just happen to be a segment of American society. According to recent studies, 40% of US adults have no retirement savings at all. Americans are also living longer. This is supposed to be a good thing. But one of the biggest concerns about retirement is running out of money. More years more money.
Unique reasons why Africans have not saved enough.
Let us look at factors unique to African Immigrants in the USA. These are facts of life of why Africans have not saved enough, not excuses.
Late Start: Like other immigrant Africans in the USA join the workforce late. There are challenges to living in a new country. You a lot of spend time restarting your life by acquiring education, skills and a good job. It takes a while to learn how to invest in financial assets such as stocks, banknotes, bonds debentures, forwards, futures, options, swaps, mutual funds, and ETFs. Similarly, you will not be immediately familiar with markets such as NYSE, NASDAQ, and AMEX or the benchmark indices such as S&P 500, Dow Jones Industrial Average, and Nasdaq Composite. Too many acronyms and unfamiliar terms.
It is a little confusing to tell how the retirement systems work, at least initially. There is Social Security, defined contribution plans (401(k), 403(b) or 457), traditional pension plans (defined benefit), and individual retirement accounts (IRA and Roth IRA). You will hear the Wall Street lingo on CNBC but may not have a firm grasp of what it means. Bull market? Bear market? Ostrich, Pig, sheep! (I am not making these up) What about business formations types: Sole Proprietorship, Partnership, Corporation, S Corporations, and Limited Liability Company (LLC) – do you know their advantages and disadvantages? All this unfamiliarity may mean getting a late start on retirement planning and saving.
Education: Most of African immigrants did not rely on their parents to pay for their schooling in the USA. But they will pay for their kid’s education – using their retirement funds – because African parents are by nature are good at sacrificing for their children. In contrast, many American parents will let their children take college loans instead of sacrificing retirement funds – they reason that there are no loans available for retirement. For African parents, extreme sacrifice for their children is the ultimate emotional trap.
Remittances: For many immigrants sending money to their families in Africa is a norm. That’s money one could have gone to retirement column.
Inclusion Issues: In general, black retirees have lower savings, homeownership rates, and Social Security income than whites in the USA. These financial problems mean more health problems and low medical care. Africans are part of this racial minority. Opportunity barriers in one’s working years obviously lead to lower lifetime earnings and low savings.
Mandatory travel: If you are African expat living in the United States, you probably recall all those missed flights, the lost luggage and the long hours on African trips. You have learned to mentally block those dark times from your mind and focus on the good memories. But the fact is that most people have spent tens of thousands of dollars on these journeys. Some of the trips are family-related emergencies. You probably had no choice. Still, that’s money you could have saved.
Fraud: If you live in the USA you probably know someone who has fallen victim to shoddy deals by friends and even trusted close family members back in Africa. The fact that we all know someone is very troubling. Diaspora investors have also lost millions of dollars to fraudulent property deals. There always seem to be marauding scammers advertising attractive properties with impunity. Some of the groups have visited the USA. The legal processes that should ensure the land you acquire are unable to tackle these illegal transactions
How much do you need to retire?
So many factors go into determining how much of a nest egg you really need to retire. There is no perfect answer to this question. The 4% rule is a rule of thumb used by many financial advisors to determine how much a retiree should withdraw from a retirement account each year. Let’s say you make about $40,000. That funds your current lifestyle right now. The rule assumes you’d withdraw $40,000 (4%) from your savings each year based on your $1 million vested assets (What assets?). Other advisors argue that one million dollars is not even near enough. In the USA, how long $1 million will last depends on your home state. For this reason, some Africans will opt to relocate within the USA.
First, the chances that your children will relocate to Africa are not very high. The next generation may not be equipped to navigate the motherland the way you once did. These adults will make their own decisions. Secondly, odds are that you may not be able to save your way into the millions required to retire comfortably in the USA. Don’t shoot the messenger aka this analyst.
Let us look at the 4% rule again. It assumes a withdrawal of $40,000 per year. A quick question arises: Among the 2 million Africans, how many are on track to save one million dollars? I didn’t think many! And for the few who can save the million, for that money to last, we have to assume it will yield more than 4% after inflation (currently 3%). That’s is a 7% annual yield. Failure to get that yield means you will eat out the principal like a hot cake. Do you see how huge this problem is? That also means $100,000 will only last you at most 2 years. When you really crunch the numbers, the math points to people staying employed. The long-winded point I’m making here is that the 2 million Africans living in the USA may never retire. Unless they do something different right now. That brings me to my next point.
Investments, side hustles, passive incomes, and small business ideas
Effective entrepreneurship combined with saving and slashing costs can be a good way to address this situation. Besides working like crazy this group must investigate investment options, side hustles, passive incomes, and small business ideas. They must look into streams of income besides their daily occupations. The plan is to supplement and eventually replace the current employment income. This is something that many Africans are already started doing.
“If you don’t find a way to make money while you sleep, you will work until you die.” — Warren Buffett
Besides sending money to Africa like crazy this cohort must also consider creating some inter-generational wealth right here in the good old USA. This is especially true if the beneficiaries are not expected to leave soon. Unity among African immigrants has been a huge issue. This has prevented them from making any meaningful impact socially and economically despite the growing numbers. They have become this “silent minority” in the USA. We hope to bring together these nomadic dreamers, grinders, hustlers, passive income hunters, emerging entrepreneurs, business owners, founders, influencers and experts. They need a place to learn from each other. They need unity to thrive like other immigrant communities and develop some economic clout as a group.
Every small business starts with an idea. To get you started, check our collection of small business ideas and opportunities. We are not promising any nutty get-rich-quick schemes and pie-in-the-sky fantasies here. We recommend the below books to get you started.
You are the boss
Here’s something we can both agree on: There’s only one you. You have your own circumstances. You have unique DNA. Your hopes, thoughts, and dreams are unique. You are the boss. This blog merely provides an opinion based on the content creator’s research, experiences, and personal knowledge. The information presented here is not intended to address your circumstances or that of any specific individual.
I’ve performed some detailed research and turned over a fair few sub-Saharan rocks to bring you this tantalizing piece. (Cough!) Kidding aside, I want to sincerely thank you. There are over 1.5 billion websites on the World Wide Web but you found this little page. I’d love to hear from you in the comments. Ancient Africans had this unwritten law “never eat alone. It’s only fair to share this post. Actually it’s the African thing to do.
Mahugu Nuthu is a content creator known for his compelling and well-researched business analysis. MHGcode.com, provides insights and proven strategies for effective entrepreneurship, side hustle hunting, passive income pursuit, small business ideas, saving and tips on slashing costs.
This information is for educational and entertainment purposes only. The information that is shared on MHGcode.com shall not be interpreted or construed as financial, accounting, legal or tax advice and should not be acted upon without further professional advice.