A lot of people believe that retirement planning in Nigeria and beyond is something you put off until much later in life. We’re here to dispel this myth and breakdown what it means to plan for retirement. Here is everything this article covers:
- What is retirement?
- What is retirement planning?
- When is the best time to begin planning for retirement?
- What are the benefits of planning for retirement early?
- How can you begin planning for retirement in Nigeria?
Imagine you have your final year exam to sit for. It’s the last hurdle for you to overcome before you finally secure your certificate and graduate from your university. You have a choice to leave preparation until the very last moment then end up being stressed and maybe even failing the exam.
Yet you’ll wisely choose to begin preparing for it at least a few months in advance in order to have a great result and pass with flying colours. You understand the importance of this big exam so you make sure to prepare.
Yet, when it comes to retirement, we decide to only begin planning for it when it’s almost upon us. Just like our final year exams, we should begin making plans well in advance so we can obtain the best results.
What is retirement?
Before we dig into retirement planning, let us first understand what retirement means. Retirement generally refers to the duration of a person’s life after they have left the workforce. This means a person who has retired has withdrawn from any type of labour and generally engages in activities for leisure purposes.
Usually, retirement begins when a person reaches a particular age. In Nigeria, this is 60 years old. If we take this definition a bit further, retirement can be defined as a state of financial freedom where you have control over your time.
The reason many people work is to satisfy various needs, particularly financial needs. Hence, even when they don’t feel like they still work. That is, they do not have full control of their time. In summary, true retirement is not tied to any age but a state of financial freedom.
What is retirement planning?
To fully understand the importance of planning for retirement, we first must understand what it is. Retirement planning is the task of identifying your retirement income goals and outlining the steps required to achieve them.
The steps for achieving your retirement income goals also include creating savings and investment plans that help you accomplish them. After these steps are clearly defined, you can begin to make adequate actions that will lead to you achieving these goals.
When is the best time to begin planning for retirement?
There’s no better time than right now! You might think it’s too early and that perhaps you have a few decades before you hit the Nigerian retirement age. But the truth is, you can never be too young for planning for life after you’ve retired.
Long-term planning is great to achieve those goals you have outlined. There’s much more time to put those plans in action and achieve your goals when you start early. We promise, your 60-year-old self will thank you for planning ahead.
What are the benefits of planning for retirement early?
Many people wonder why they should begin planning for retirement now. Here are a few benefits:
- Planning for retirement early ensures that you’ll be able to fully enjoy your retirement years.
- It’s a great way to take advantage of compounding interest.
- Achieving your retirement goals well in advance means you can choose to retire a little earlier than the official retirement age in Nigeria.
How can you begin planning for retirement in Nigeria?
You finally understand all about retirement planning now you’re excited to get started on it. We’ve put together a few steps to help you get started.
- Outline your needs: The first step is to outline your needs for retirement. These can fall under a number of categories like accommodation, healthcare and even feeding.
- Estimate how much it will cost to cover these needs: You’ve got a list of needs for retirement now you can estimate how much you need to cover your retirement needs. When drafting these needs also make a point to factor in inflation too.
- Make a feasible plan to cover these retirement needs: You now have a concrete idea of how much you may need monthly during retirement. Begin to plan how you can save and invest so that you can enjoy the benefits.
- Open a pension account for your retirement fund: A great way to plan for your retirement is to have a pension account which is an account solely made to house your retirement funds. Some contracts of employment entitle you to have funds deducted from your salary. You should also consider finding out whether having a Pension Fund Administrator is something your employment covers.
Retirement is definitely something you should begin to plan for as early as you can. With Cowrywise, you can begin saving and investing ahead of retirement seamlessly. Begin here.