Have you considered or visualized the sort of life you would like to have when you’re 60 years old and older? Will you be globe-trotting, an active philanthropist, caring for your grandchildren? Living out your twilight years in your definition of comfort? The good news is if you haven’t thought that far ahead about life after retirement, you’re in good company.
It recently dawned on me that I only have short to medium-term plans, plus on and off thoughts on my legacy. While I don’t want to wait until my hair has gone grey to live out my dreams, I haven’t given much thought to my twilight years. One thing I am certain of is that I don’t want to be a burden to my family in my old age (if I can help it). I would prefer to be self-sufficient and focus on making the world a better place.
Some of you may, like me, think that you can live off your pensions. But, the salient question is, “will your pensions sustain your current lifestyle in old age?” That’s where retirement planning comes in.
What is Retirement Planning?
According to Investopedia, retirement planning is the process of determining retirement income goals, and the actions and decisions necessary to achieve those goals. Retirement planning includes identifying sources of income, sizing up expenses, implementing a savings program, and managing assets and risk.
In simple terms, it is preparing a financial strategy to sustain you in your post-work years. One such strategy is having a pension fund.
Financial security in retirement doesn’t just happen. It takes planning and commitment and, yes, money.
Three important questions to ask yourself:
- Do I have a Retirement Savings Account (RSA)? RSAs are to ensure the saving and investment of your funds on your behalf until retirement. A Pension Fund Administrator (PFA) manages the RSA. The Nigerian Pension Reforms Act mandates your employer to make monthly contributions from your salary to your RSA. For those operating in the informal sector, there are pension plans for you too.
- Is my employer remitting my contributions into my RSA monthly? In Nigeria, 18 percent of your monthly earnings (in the proportions of employee 8 percent and employer 10 percent) goes to your pension. Only your employer can remit contributions on your behalf. Hence, please crosscheck your monthly RSA reports from your PFA to ensure that this is being done. Don’t get ripped off of your hard-earned income and pensions!
- Are my contributions enough? It is advisable to increase your pension fund by making voluntary contributions. In other words, undertake to save more in your RSA besides the amount deducted by your employer. This is to ensure that you can live the kind of life you imagine for yourself in your sunset years.
Don’t wait until the last years of your working life to make and put in place a retirement plan. You can start saving for your retirement from now. My post, How to start and sustain a consistent savings habit, will aid you on this journey. As Lao-Tzu famously said,
The journey of a thousand miles begins with one step.
Have you given a lot of thought to retirement planning? Do you have a plan in motion? If yes, please share in the comments section what strategies have worked for you. Also, do share what you would like to do when you retire.
LEGAL DISCLAIMER – The above post is not intended as legal, financial, investment or tax advice. It is for your information only. Before making any commitment of a legal or financial nature please seek advice from a qualified wealth/financial advisor or any other independent professional advisor.
Eli you should add one more Question. In fact it should be No 1. HAVE I SET UP A PERSONAL SAVINGS/PORTFOLIO TOWARDS RETIREMENT?
This should be first line preparation towards retirement. Remember not everyone has a RSA-a statutory obligation under PENCOM Act.
Each of us will retire leave active work at some time irrespective of wherever we work or whoever we work for. Personal financial planning is key. Setting up some additional levels of financial stability is imperative for any smart thinking person.
Dear Funke,
Thank you for your contribution. Having a personal savings & investment plan, and implementing same, are very crucial.
It’s so easy to get caught up in the now and forget to plan for later
So true Ayetu. It can seem that old age is light years away.