5 Steps to Retirement Planning

5 Steps to Retirement Planning

No matter how much you love your work, there will come a time when you’ll decide to fully retire. Some people retire early (because they want or have to), some retire later, while some people find it’s best to slowly ease out of the workforce rather than retire abruptly.

Most people have financial goals they feel are more pressing than planning for retirement but to support your lifestyle without a steady paycheck and live your golden years on your terms, you need a retirement plan. The end goal of retirement planning is having enough money to stop working and do whatever you want. 

How can you plan for retirement in Nigeria?

Here are some questions you need to answer to help you get started:

1. When should you start planning for retirement?

2. When can you retire?

3. What do you want to do when you retire?

4. How much do you need to retire?

5. How much will you earn from your savings/investments?

 

1. When should you start planning for retirement?

Start Early

Even though it’s never too late to start retirement planning, you should start planning your retirement as early as your 20’s. The earlier you start planning, the more time your money has to grow – you have time and the power of compounding in your favour.

It also reduces the chances of you having to be financially dependent on your children or family. 

2. When can you retire?

Decide your retirement age

When you can retire comes down to when you want to retire and when you’ll have enough money saved to replace the income you receive from working. The most common retirement age is 60 years, but it varies from person to person.

Estimating your retirement age is an important step because this tells you the timeframe you are left with to plan for retirement.

3. What do you want to do when you retire?

Know your retirement needs

This might be difficult to visualize initially but the key to a secure retirement is to plan ahead. Retirement is expensive. A good plan will account for various sources of retirement income and your possible expenses. Estimate your retirement expenses, consider future medical costs and plan where you’ll live.

Understanding your retirement lifestyle helps you determine how much you will need to retire according to your standards. 

4. How much do you need to retire?

Determine your retirement corpus

The amount of money you need to retire is a function of your current income and expenses, and retirement goals. Ascertain your annual expenses and factor in inflation to calculate how much your present expenses will amount to at the time of retirement.

This is the amount you will need every year to meet your expenses. You can use this Retirement Calculator to help you calculate how much you will need to retire. 

5. How much will you earn from your savings/investments?

Create an ideal portfolio

Successful retirement planning isn’t solely dependent on how much you save, but also where you invest it. If you don’t have access to a workplace/pension plan or  you’re looking for the best options for additional retirement savings, you can consider safe investment options.

Depending on your current age and the risk that you can afford to take, choose investments that will best grow your money and help you build a diversified investment portfolio. Estimate your investment growth over time with OVERWOOD’S investment calculator to estimate how much you need to invest each month to reach your retirement goals.

It’s never too late to get started

Retirement is a continuation of life and not the end of the good life. The idea is to invest aggressively when you’re young, and then slowly dial back to a more conservative mix of investments as you approach retirement age. You can choose to manage your retirement savings on your own or hire a financial advisor.

Retirement is a long-term goal, and investing for it is a long-term process. Make future you proud by investing for later, now.

As in all successful ventures, the foundation of a good retirement is planning.

– Earl Nightingale

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