Avoid going broke in retirement

Mortality rates are declining in many countries around the world. People are living longer than expected, hence the prospects of retirement and outliving retirement savings has become a major concern of many adults. Pension for life is almost non-existent.

  Living as a retiree is becoming unfashionable for many because of rising life expectations. There are steps however that can help you not run out of money.

You need to have a budget. A budget gives you a clear picture of future expenses. To achieve this, you need to take time to consider your major sources of income – cash inflows and basic expenses. Also capture future expenses. For instance, transportation and dry cleaning expenses may decrease or increase. A new hobby also can offset your savings. If you are also planning to travel to new places, your expenses will also take a hit. Not sticking to a budget and spending too much are sure ways of running into financial trouble a few years down the line. Hence you need to curtail your expenses.

Move to a less expensive city. Cities like Lagos, Abuja, Port Harcourt are very impractical places to live if you do not want to go broke in retirement. Look for other places where the cost of living could lighten the load on your wallet.

Consider inflation. In today’s world you could require more than twice the amount of naira you would have needed many years back to buy same amount of goods and services. This is despite the fact that inflation was relatively low in those periods.

Find investments that will not expose your money to too much risks or inflation. Some experts say you should have 40 percent of your portfolio in stocks during retirement. However considering the fluctuations of the Nigerian stock exchange it will be wiser to diversify your investment in other areas. This will help absorb the shock should any major change occur. Talk to a qualified financial investor to assess your personal financial situation to develop a portfolio that works best for you.

Set up a withdrawal rate and stick to it. A withdrawal rate is the amount of money that you need to take from your portfolio at a particular period. You can readjust it periodically by reassessing your rate at some defined interval based on factors such as how long you expect to live, your current spending and plans for future spending. Have a conservative withdrawal plan.

Get a second job or set a small business. It may not be too much – just something to add extra income to your portfolio. According to a 2014 Merrill Lynch Retirement Study, 47 percent of retirees say they have worked or have plans to work during retirement. An approximate 72 percent of pre-retirees age 50 and over say they want to keep working after retirement.

  The times are changing and a growing number of retirees are questioning whether long retirement without work is practical, desirable or affordable. In a country like Nigeria where the economy is very unpredictable, prices can skyrocket any minute and they often do not come down when things stabilize, having form of income generating work is recommended.

Do not neglect your health. It is far better to eat right, exercise, and always keep your check-up and test appointments than neglecting them and spending your savings on sickness.

FRANK ELEANYA