Explainer: Why planning for retirement should start now

Retirement planning is no longer a distant concern but an urgent financial necessity, as rising inflation, a weakening naira and the soaring cost of living continue to erode incomes, savings and long-term financial security.

The reality is becoming increasingly clear AS waiting until the final years of a career to prepare for retirement may no longer be enough.

Financial experts say the difference between a comfortable retirement and one marked by financial hardship often comes down to one simple factor, starting early.

Speaking at a one-day media training workshop organised by Leadway Group on the theme, “Building Financial Wellness: The Role of Retirement Planning,” Rahinatu Omolamai, head of Personal Pension Plan at Leadway Pensure PFA, urged Nigerians to see retirement planning as a lifelong financial discipline rather than an exercise reserved for workers nearing retirement.

According to her, today’s economic environment has fundamentally changed how people should think about their financial future.

“The current economic realities, including persistent inflation, declining purchasing power and unpredictable income streams have redefined financial wellness and underscored the need for long-term financial planning,” she said.

Her message reflects a growing concern among financial planners that many Nigerians remain unprepared for retirement despite longer life expectancy and increasing financial pressures.

For millions of workers, especially those outside the formal employment sector, retirement often arrives without adequate savings, forcing many to rely on children or extended family members for survival. Experts warn that this cycle of dependency has become one of the country’s silent financial challenges.

Omolamai argued that retirement planning should not be viewed as a privilege for salaried workers alone, but that every income earner, including entrepreneurs, freelancers, artisans, self-employed professionals, business owners, sports personalities and Nigerians earning foreign currency should build retirement savings into their financial plans.

She explained that different pension products have been designed to accommodate varying income patterns.

While salaried workers can strengthen their retirement nest egg through Additional Voluntary Contributions under the Personal Pension Plan, self-employed individuals can contribute flexibly according to their earnings. Eligible Nigerians earning foreign currency can also save through Fund VII, allowing them to build retirement assets in foreign currency and reduce exposure to naira depreciation.

Perhaps one of the biggest barriers preventing many Nigerians from participating in pension schemes is the belief that pension savings remain untouchable until retirement.

Omolamai dismissed this notion, explaining that pension contributions are structured to balance long-term security with short-term financial needs.

She said contributors’ savings are divided into retirement and contingent portions, allowing eligible access to part of their funds under specific conditions while preserving the bulk of their retirement savings.

Another growing challenge, she noted, is inflation, pointing that with prices of food, housing, healthcare and transportation rising sharply over the years, money left idle steadily loses value.

“The purchasing power of the naira has weakened significantly over the years, making diversification an important strategy for preserving the value of retirement savings,” she said.

Beyond inflation, Omolamai highlighted another uniquely Nigerian financial burden commonly referred to as “Black Tax”—the expectation that successful individuals must continually support parents, siblings and extended family members.

While such responsibilities are deeply rooted in culture, she warned that neglecting personal retirement savings in the process could leave today’s breadwinners becoming tomorrow’s dependants.

According to her, proper retirement planning helps individuals fulfil family responsibilities without sacrificing their own financial future.

“It can help break the cycle of financial dependence across generations by enabling individuals to support loved ones without jeopardising their future financial wellbeing,” she said.

Financial advisers often point to one advantage that cannot be replaced once lost, and that is time.

Omolamai stressed that those who begin saving early benefit from years of compounded investment growth, allowing relatively modest contributions to accumulate into substantial retirement funds. Those who delay often have to save significantly more to achieve similar outcomes.

She described financial wellness as going beyond earning an income, but being able to meet present financial obligations, prepare for retirement, withstand unexpected financial shocks and leave a meaningful legacy for future generations.

In a country where inflation continues to squeeze household budgets and traditional family support systems are under increasing strain, retirement planning is gradually shifting from a financial option to an economic necessity.

“The greatest legacy parents can leave for their children is not merely financial inheritance, but ensuring they do not become responsible for funding their parents’ retirement.”