Long life and prosperity – ten tips for retirement

Life spans are getting longer and it is not unusual nowadays to spend 25 or more years in retirement. Careful planning is necessary to build substantial savings reserves now to be sure that your financial resources can last as long as you do. Sadly, far too many retirees end up impoverished in their later lives or are totally dependent on family members. Here are ten tips to consider:

1. The earlier you start saving, the better

In your 20s and 30s, retirement may seem like it’s a lifetime away, but it is never too early to start planning for it. Right from your first job, start to set clear goals and start working towards them. Those who start saving even small amounts on a regular basis in their 20s, have a better chance of building substantial savings over a long period of time.

2. Reduce your debt

Debt can be a huge burden particularly where you are no longer earning regular income. Even if you cannot afford to pay it off completely, as you approach retirement, try to reduce your debt, particularly the high interest debt.

3. Will your pension be enough?

It is increasingly rare for a pension to be able to cover all your needs; you may need to replace virtually all of your pre-retirement income once you stop earning a regular salary. Your pension will have to be supplemented with personal savings and other earned income. The more you contribute to your retirement savings, the greater the opportunity for your account to grow.

4. How much will you need?

An on-line retirement-planning calculator will help you to estimate how much you will need in retirement. Your current income is a good starting point for calculating this. Experts suggest that one may need between 60% and 80% of current income to maintain your current lifestyle in retirement. How much do you have to save now to generate the kind of income to afford the lifestyle you desire.

5. Develop your knowledge

Financial security and financial literacy are closely linked; how you save is just as important as how much you save. Seek professional advice but you must also take responsibility by developing a broad understanding of the basic investment principles and available savings and investment options so that you can make better-informed investment decisions. Review your plan periodically to ensure that it remains appropriate for your needs.

6. How much risk can you afford to take?

Everyone’s retirement goals are unique and a diversified investment portfolio that aligns with your age, financial situation and risk tolerance will help you manage that delicate balance between risk and return. Obviously, one seeks higher returns, but higher returns also mean greater risk. Spread your funds across asset classes including cash, bonds, stocks and real estate; include some diversification across currencies and borders.

Investing for retirement is different from investing in retirement. As you approach retirement, be more conscious of protecting your nest egg from the risk of loss from market volatility, inflation and currency devaluation. Your investments should become more conservative and investment choices geared toward earning income from interest, dividends or rent. However you still do need to balance risk and return in order to achieve your long term goals.

7. Cut back on expenses

Now that your children are grown up and have left home, do you really need all that space and the high maintenance costs of a vast home? How often do your children or grandchildren actually come to stay? Re-assess your priorities and look at ways of downsizing to cut back on your expenses, so that you have enough money to fund a long and comfortable retirement.

8. Health is Wealth

Good health is key to a successful retirement. The endless opportunities in retirement can only be attained if you have invested wisely and remained healthy. Medical expenses tend to increase as you age, so preventive medical attention including regular screening and a healthy lifestyle is essential. Even the most elaborate retirement savings plans can be totally decimated if you find yourself in poor health and without adequate health insurance in place.

9. Postpone retirement

If you have done all you can and the numbers just don’t add up, consider easing into retirement by working part time. You have so much experience and skill to contribute, so if you are not tired, do consider this option. You may have to postpone retirement or revise your retirement goals downwards, particularly if your family members are not in a position to fully support you.

10.  A new beginning

The traditional view of retirement is changing. No longer the end of work life, for some retirement has become a new beginning, a time to re-invent yourself. You now have the time to explore new interests or to convert your hobbies, talents or skills into paid opportunities such as tutoring or consulting that keep you productive, mentally stimulated and fulfilled. Take a cue from our President. At 72, he rose to the occasion, and is now President of the Federal Republic of Nigeria.

Nimi Akinkugbe

Nimi Akinkugbe has extensive experience in private wealth management. She seeks to empower people regarding their finances and offers frank, practical insights to create a greater awareness and understanding of personal finance.