Retirement is the goal that every working man and woman aims for in their life. It is the chapter in your life where you can rest after a lifetime of hard work. No more early mornings, no more stressful meetings and no more nightmarish deadlines, just relaxation. But what will you do if you run out of money during your retirement? What if you find yourself spending more than you did while you had a job? How will you be able to fund this new chapter in your life?
If you retired without planning for it, you will find yourself falling into these harrowing pitfalls. That is why retirement planning is vital.
Understanding Retirement Planning
The essence of retirement planning is to make sure you are financially stable while you enjoy your retirement. It is a simple proposition preretirement, as most of your income comes from your job’s salary. But when you are retired and no longer have that salary, things become more complex. You need to figure out what you will spend throughout your retirement, and where the income will come from. And most importantly, you will need to figure out if this source of income will last your entire retirement.
While it is never too late to start planning for your retirement, the sooner you begin the better. This will lessen the tax on your lifestyle and current finances as you prepare for your future. There are four key steps to planning for your retirement.
1: Perceive Your Goal
The average retirement in Nigeria lasts 20 years, and you will be expected to fund yourself throughout those years. Now, how much do you spend in one year? Multiply your annual budget by 20 to see how much you will need to live comfortably upon your retirement. There is also the 80% rule. It states that that you will annually spend 80% of your gross income from your final year at work to retire comfortably. Ultimately, these two ideas are just guidelines rather than hard rules. Everyone’s retirement budget is different: but the two guidelines provide a baseline for your retirement spending calculations.
The approximate number from your calculations is now your retirement goal: how much you need to live your retirement to the fullest.
2: Start Saving
The average retirement age in Nigeria is between 60 and 65. From the moment when you start planning, up until you retire, you need to start saving money so that it can fund your retirement. This is why it is better to start your retirement planning when you are younger as it means you need to save less per year (or on the flipside, it also gives the opportunity to gather more money for your retirement, allowing you to possibly increase your retirement income goals).
While it is not common in Nigeria, some companies will help with saving for retirement through a pension plan. A pension plan is a retirement account where you will contribute 8% or more of your salary and the company will contribute an extra 10% of your salary to this account, so you may use it when you retire. If your company does not offer such plans, try to suggest for one to be put in place.
3: Start Investing
There is always the danger that no matter how much you save, it will not be enough to fuel the life you hope to live during your retirement. After all, unforeseen events like emergencies or currency inflation could affect your savings in a way you did not see coming. That is why you also need another source of income as well as your savings, so that you can add to your stockpile of funds. A valid option that some people take is seeking part time work, but if working during your retirement is not for you, that is where investments come in. Try to invest in different promising options to diversify your portfolio, increasing the likelihood of profitable returns.
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4: Hire A Retirement Partner
Retirement planning is a complex process which will affect your life when you are financially at your most vulnerable. Any mistake made could have dire consequences for you and those who rely on you. That is why the best course of action is to not plan your retirement alone and choose a retirement partner who can help you fund that chapter in your life.
Coronation is an excellent financial services partner you can hire to help you plan for your retirement. With profound knowledge and understanding of both domestic and international financial markets, we form strategic alliance with every client. We use a squad of extensively skilled portfolio managers, acclaimed research analysts, prudent risk management approaches to achieve optimal returns for our clients while adeptly handling risk. To get stated, click here