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Your Pension May Not Be Enough

September 18, 2023
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Yes, when you are retired your pension may not be sufficient to fund your lifestyle . It is a frightening prospect, but unfortunately that doesn’t make it any less true. In the first part of this series we discussed how retirement planning protects you from financial defenseless once you retire. In the second part we discussed how retirement annuity is a safe alternative or addition to pension. But while anuity is a safer alternative to relying on just your pension, it still may not be enough for your retirement.

What Does It Mean to Retire Comfortably?

I should preface this by saying that circumstances differ from person to person. Some people are comfortable living off a significantly lesser income. But if this is not the case for you, then you must be wary. If you had properly saved your pension or bought a retirement annuity from a trusted insurer, you may still ultimately find yourself with a significantly lower income than when you had a job.

We already discussed that the ideal amount of money to save for your retirement is 80% of the gross income of your final year of employment. But let’s say you are paid 1 million naira per gross income per month. Your Monthly income would thus be 1 million. If you rely purely on your pension or your annuity during retirement, you would need at least 800,000 naira per month over the course of 20 or so years to live comfortably during retirement. This is not even taking inevitable inflation into account.

The Importance of Investing for Retirement, And Why It is Absent in Nigeria

The fact remains that you still need to invest intelligibly in order to retire comfortably. In countries such as the UK, state mandated retirement saving programs often have investment opportunities. Such as the Defined Contribution Scheme or The Federal Thrift Savings Plan.

Unfortunately, such plans are often not available in Nigeria, and this is because of a clear lack of demand. This in turn is due to a severe lack of investment culture in Nigeria. Investment culture refers to societies willing to spend effort and save money now to receive dividends far in the future. If you ask a Nigerian if they would rather receive less money now or more money 20 years from now, 9 out of 10 of them would take the money now. This is understandable, we have already touched on how unstable Nigeria has been in the 21st century (and how this instability is getting even worse as time goes on).

Here is an example of hos instabilities has stifled investment culture. Due to unaffordable healthcare, the average Nigerian life span is 60 – 65. As such, many Nigerians do not believe they should bother to risk what they have investing for a time they won’t enjoy for long.

The Creation of Personal Investment Culture

You must create your own personal investment culture in order to properly enjoy your retirement, this is because your pension alone is not sufficient. Don’t focus on getting money here and now, just like savings you need to focus on the end goal: enjoying your retirement in comfort. That being said, investing can be risky, especially when your future is on the line, which is why you should partner with a reputable retirement planner like Coronation Insurance [insert link here] to properly plan  your investments, which will then pay dividends for your retirement, allowing you to live your best life..

To speak with an expert retirement financial advisor, click here.

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