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Retirement is a significant milestone in one’s life, and for a country like ours, it often comes with unique challenges and considerations. Deciding when to retire is a crucial financial decision that requires careful planning and thoughtful consideration of various factors.
I understand that the conventional retirement age for many organisations falls between 60 and 65 years. However, it’s important to realise that you don’t have to adhere strictly to these age markers. Retirement doesn’t have to be a fixed milestone; it can be a flexible decision that aligns with your financial comfort and stability. However, none of us want to retire only to find ourselves struggling to make ends meet. That’s why it’s crucial to ask yourself some essential questions to help you determine the right time to retire in Nigeria.
- Am I financially ready?Â
Let’s say your current monthly living expenses in Nigeria amount to N200,000 (or N2.4 million annually). If you plan to retire at the age of 50, you’ll need funds to support yourself from age 51 to 100 (although Nigeria’s life expectancy is 85 years), considering that some people live longer and some live shorter.
If you do the math, N2.4 million multiplied by 50 years equals N120 million. Now, you might think, “Well, that doesn’t sound too excessive.” But here’s the kicker: Nigeria’s long-term inflation rate is around 12%, which means that the cost of living will keep rising year after year, and you may need billions of naira to maintain your current standard of living at retirement.
Evaluate your savings, investments, pension, and other income sources to ensure you have enough funds to maintain your desired lifestyle throughout retirement. MoneyAfrica has financial experts who could help you create a retirement plan that accounts for inflation, healthcare costs, and unexpected expenses.
- How much will I receive as a pension if I retire early?
Public and private sector workers contribute to the Pension Fund Administrators (PFAs) during their working years, and these funds are designed to provide income during retirement. You need to be aware of the rules governing your pension and how they align with your retirement goals.
According to the Pension Reform Act 2014, a worker can access 25 percent of the savings in his RSA, if he loses his job and does not get another after four months. However, if an employee attains legal retirement age or clocks the age of 50 years, they can have immediate access to the RSA.
- Do I have enough money to maintain my lifestyle and goals?
Consider the kind of lifestyle you envision during retirement. Do you plan to travel, start a business, or simply enjoy a relaxed life at home? Your retirement age should align with your goals and the funds required to achieve them. Ensure that your retirement income can support the lifestyle you desire.
- Are there debts that would make life difficult?
Before retiring, aim to settle outstanding debts, especially high-interest loans or mortgages. Being debt-free in retirement can significantly reduce financial stress and enhance your financial security. Therefore, before you decide to retire early, aim to be debt-free.
In conclusion, deciding when to retire in Nigeria is a complex process that involves a combination of financial readiness, age, pension benefit, and personal goals. It’s essential to start planning early, regularly reassess your financial situation, and seek professional advice when needed. By taking a proactive approach to retirement planning, you can ensure a financially secure and fulfilling retirement in Nigeria. Remember, retirement is not just about leaving work; it’s about entering a new phase of life with confidence and peace of mind.
If you need a financial advisor to help you plan early retirement, then you should be speaking to our financial experts. Send a mail to sales@themoneyafrica.com.
P.S. In our next Wednesday’s newsletter to you, we will discuss all you need to know about pensions in Nigeria. Be on the lookout!
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