By Francis Ewherido
I was invited by the men in my parish to give a talk on planning for retirement last Monday. I have always seen retirement as a practice that is global in nature, but personal in application. We must all call it quits at some point, but when and how?
Retirement comes in many forms: Some people retire from one organization and resume in another, not totally because of the money, but because they feel they still have the energy to go on. Some others retire and go into another line of business.
Some retire to pursue their passions. Some become consultants, but some retirees are not keen on consultancy because they do not want to compete with people they used to give jobs to or ask for favours from subordinates they used to bark orders at. Some retire due to ailments, while others simply retire to enjoy their lives. Retirement simply means to “withdraw from one’s position or occupation or from active working life.”
The experts advise that we should start planning for our retirement the day we start working. That is partly why the PENCOM Act 2004 as amended in 2014 makes it mandatory for companies to make periodic remittances on behalf of its employees.
The company contributes a minimum of 10 per cent of the employee’s salary, while the employee contributes a minimum of eight per cent. The fund is remitted to the employees account with a pension fund administrator.
The employee is entitled to the bulk sum after some years in the event of loss of job, permanent disability or retirement. Another official retirement plan is the gratuity paid when you retire or resign after working for a number of years. We also have group life insurance policies and group personal accident insurance policies to take care of premature retirement as a result of permanent disablement.
Besides these official plans, we are expected to make personal plans for our retirement, which usually should be based on our areas of interest (stocks, farming, real estate, information technology, business, etc.) because, like many human efforts, your chances of success and fulfillment are enhanced if you are doing what you genuinely love doing.
The advice to create multiple streams of income also dovetails into retirement; your financial security is better guaranteed on retirement if your retirement plan is based on multiple streams of income. I have seen retirees who suffer because they are asset rich, but cash poor. For some, tenants are not paying rents and they are having problems disposing of their property due to sentimental valuation or sheer absence of buyers. They suffer because real estate was their only retirement plan.
Ordinarily, if you are talking to young people just starting life about planning for retirement, it is pretty straight forward. First, ensure they are on the right track, that is to say, living their dreams, fulfilling their purpose in life or doing something they are good at doing.
This is very important because excellence is very difficult when you are not passionate about what you are doing? They should also be financially literate so that they can make informed financial decisions.
Beyond official retirement plans, they should imbibe the saving and investment culture early so that they can start building their financial nest via multiple streams, even as they buy cars, clothes, rent/build a personal home and other expenditures they will put resources into.
But the talk was mainly for people in their late 30s and above. Some work in organized environments where pension and gratuity schemes are already in place. Others are in the informal sectors either as employees or self-employed. Some have no gratuity or pension scheme in place and no other retirement plan. They are just preoccupied with immediate issues: rents, school fees, feeding, etc. Well, we have a saying that whenever you wake up every day is your morning. Today is when to start. I always advise people in the informal sector to have a PENCOM account with a pension fund administrator via their companies.
They should do it, not because it is a government regulation, but as one of the vehicles for retirement planning. The advantage a pension account has over a retirement bank account is that until the time stipulated by law, you cannot access the funds in your pension account, but you can always withdraw from your retirement bank account if you are pressed for cash.
The next step, particularly for those who still have much grounds to cover in terms of making arrangements for retirement, is to do a critical analysis of current source(s) of livelihood. Can it/they get you to the Promised Land? If yes, no problem; just set SMART (specific, measurable, achievable, relevant/realistic and time-defined) goals and begin to implement them. But if no, then it is time to start making adjustments.
Nobody should go to his/her grave miserable and unfulfilled. Many of us have spent our lifetime doing jobs we are not happy with. God endowed every one of us with natural talents. Building our sources of income around these natural talents is the route to ultimate fulfillment and success.
Many of us missed doing so ab initio, because we had nobody to guide us. Now that we know, we do not have an excuse. The minimum is to continue doing what we are currently doing, while honing our natural skills until such a time when they will become income earners.
It is important to have a reasonable amount of money or asset to live on at age 60, which is the age stipulated by many companies for retirement. It is very painful if at 60 years you still jump out of bed every morning to go to work and the only reason is that if you do not, you will go hungry by noon. A roof (one room, flat or mansion) over your head, which you can call yours at retirement, is also very important. It is not good for a retiree to worry about house rent.
I have deliberately left out children as part of retirement planning because retirement and old age are delicate periods of your life, and ideally, you should be on the driver’s seat. But if you must rely on your children, let it be a last resort. Remember, the newer generations of children are becoming more and more selfish and undependable. We shall discuss in details why children should be a last resort subsequently.