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Why you should plan for retirement

According to the recently released data on pension registration in Nigeria, about 8 million Nigerians are registered in one form of pension

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Retirement savings, Millennial shares financial management strategies you should adopt, How to save millions this year

According to the recently released data on pension registration in Nigeria, about 8 million Nigerians are registered in one form of pension plan or the other. Compared to prior year, there have been about 0.6 million more registrants in 2018 thus far.

While the increase and the number of registrations are heartwarming, it still appears that more Nigerians are either still vaguely aware of the problems associated with retirement years or are not actually planning for retirement. It could as well be that those who have not jumped into the retirement plan bandwagon, while aware of the need to plan for retirement, may be feeling that there is no way to cope with the issues that come with retirement, choosing to concentrate on today and letting tomorrow take care of itself. If there is any time to plan for retirement in Nigeria, it is now.

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In the good old days, one of the reasons parents sent their children to schools was to ensure that they, the children, would take care of the parents at old age, at retirement. That used to be the case when employers came to the universities on recruitment drives at the end of each academic year when the jobs existed.

But today, we have more universities in Nigeria than job openings. With the rate of unemployment so high in Nigeria, aging parents who had hoped that their children would take care of them at retirement, are increasingly seeing that hope evaporate. The alternative to that, therefore, is to plan and save for retirement.

Another reason to plan for retirement is that increased medical technology has given rise to increased longevity so much so that people in this generation tend to live longer than past generations. With all the reasons for retirement planning and savings, why are more Nigerians not saving for retirement? However, that not a lot more people are saving for retirement could be due to some roadblocks that come against retirement planning.

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One of the major roadblocks to retirement savings is the tendency for people to use all their full after-tax earnings to support their current standard of living with nothing left for “tomorrow”. Living a lifestyle that caters to what the society demands and not what you need is the major reason for spending all our income taking care of the now, forgetting about tomorrow. Many would like to look like the jones, the crème de la crème of the society by building houses with so many living rooms and toilets when part of that money could have gone to retirement savings.

In Nigeria today, everyone wants his house to be “all ensuite”, how I wish we all shall be “all ensuite” with our retirement when the time comes. In the alternative, people should follow a budget that allows them to live within their means while providing for retirement savings.

Another roadblock to retirement savings is unexpected expenses. Unplanned or unexpected expenses like medical bills, repairs to homes or autos, and periods of unemployment disrupt retirement savings accumulation. To curb the effects of these unexpected expenses, financial planners have advocated that people should set aside an emergency fund of approximately 3 to 6 monthly income.

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Inadequate insurance coverage is another impediment to adequate retirement savings accumulation. Data and research have shown that uninsured or underinsured people hardly recover from the financial catastrophe arising from disability, prolonged ill health or traumatic auto accidents. It is therefore recommended that, where feasible, people should buy health insurance to take care of unforeseen health emergencies without eating into their retirement savings.

Lack of retirement plan at the place of employment is another factor that stymies retirement savings accumulation. While it is difficult to get a job in Nigeria, opting to work only for companies with retirement plans is a luxury and a choice that does not come easily. However, it does not hurt to nose around for such companies while still employed and do not hesitate to jump ship if you can find a job in a company with a good retirement plan.

One other impediment to retirement savings accumulation is lack of financial literacy. Many employees are ill-schooled in investment and finance, talk less of retirement planning. Thankfully, the internet is replete with materials on this and you will be doing yourself a world of good by reading up on those.

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A final but serious factor that impedes retirement savings accumulation is the tendency to direct or divert already accumulated retirement funds to other purposes. Please use them for what they are, retirement, do not dig hands into what you have already accumulated to buy a car, or go on vacation. Cut your coat according to your cloth and save for your retirement.

Some retirement funds offer loans to owners, if yours does, borrow from them rather than making an out right withdrawal and by paying interest to your retirement fund, you are paying yourself for borrowing your money rather than paying a bank for borrowing their money.

The downside, however, is if the interest charged by your retirement fund is less than the rate of return on the said fund, you may loss the difference, but bye and large, it is better than borrowing from the bank.

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Patricia

Uchenna Ndimele is the President of Quantitative Financial Analytics Ltd. MutualfundsAfrica.com and mutualfundsnigeria.com (both Quantitative Financial Analytics company website) is a leader in supplying mutual fund information, analysis, and commentary on African mutual funds. We provide reliable fund data; and ratings information that will add value to fund managers, the media, individual investors and investment clubs.

1 Comment

1 Comment

  1. Oluwafemi Onojobi

    March 2, 2020 at 2:47 pm

    Thanks to the author for this thoughtful piece which every income earner need to key into for a blissful old age.

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Stock Market

Nigerian stock investors lose N55.17 billion, as Zenith, GTBank and MTN finish lower

Market breadth closed in favor of the bear with 17 tickers closing in the red.  

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Nigerian Stock Investors lose N55.17 billion, as Zenith, GTBank and MTN finish lower

The Nigerian Stock Exchange began the first trading week on a negative note, as the All-share index fell by 0.44%. The downturn was impacted by losses recorded in large capitalized stocks.

The All-Share Index (ASI) dipped by 0.44% to 24,200.60 index points. Accordingly, Month-to-Date and Year-to-Date losses stands at -1.12% and -9.92%, respectively, while market capitalization stood at N12.624 trillion after declining by N55.17 billion.

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Market activity level was inverse to the broad index, as total volume and value traded significantly improved by 75.67% and 139.55% to 231.23 million units and 2.154 billion. STERLNBK was the most traded stock by volume at 77.5million units, while MTNN finished the most traded stock by value at N1.124 billion.

Market breadth closed in favor of the bear with 17 tickers closing in the red against 14 gainers.

With the exception of the Industrial and Consumer Goods Indexes which closed 0.26% and 0.08% higher during the day due to price appreciation in NACHO, LIVESTOCK, and BUA CEMENT respectively, all other sectors were negative.

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READ MORE: Why the NSE Pensions Index should be replaced

The decline in MOBIL and Eterna Oil pressured the Oil & Gas index down by 1.91%, the Banking index trailed to wane by 1.70% as a result of decline in ZENITHBANK and GTB, while losses in WAPIC, CUSTODIAN and LAW UNION prompted a 0.35% decline in the Insurance Index.

Top gainers 

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CAVERTON up 7.73% to close at N1.95, CILEASING up 6.33% to close at N4.2, AFRIPRUD up 6.25% to close at N4.25, NASCON up 5.26% to close at N10, BUACEMENT up 0.61% to close at N41.2

Top losers 

MOBIL down 9.97% to close at N173.4, ETERNA down 6.70% to close at N2.09, ZENITHBANK down 2.99% to close at N16.2, GUARANTY down 2.00% to close at N22, MTNN down 0.95% to close at N115.

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Outlook  

Nigerian bourse finished on a bearish note, triggered by sell-offs in bluechip stocks. Nairametrics envisage cautious buying, as geopolitical uncertainty heightens.

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Stock Market

Unclaimed dividend stands at N158.44 billion, over N100 billion from unclaimed shares

The figure has been on the increase despite the introduction of e-dividend.

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Lamido Yuguda, Unclaimed dividend stands at N158.44 billion, over N100 billion from unclaimed shares

The total value of unclaimed dividend in the Nigerian capital market closed 2019 at N158.44 billion and over N100 billion of the amount are from unclaimed shares.

This was disclosed by the Securities and Exchange Commission via a report from the News Agency of Nigeria.

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The development revealed that the figure has been on the increase despite the introduction of e-dividend, which was introduced by SEC in 2015. From about N100 billion in 2017, it closed 2018 at over N120 billion.

Dividend is company’s earnings, decided and managed by the company’s board of directors, and paid to a class of its shareholders.

The earnings turned unclaimed when a shareholder fails to claim an already paid dividend after six months.

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READ ALSO: Reps to investigate alleged illegal withdrawal of $1.05 billion from NLNG account

Breakdown: The components, according to the report, showed that unclaimed dividends with companies (15 months and above) stood at N119.01 billion.

The ones with registrars amounted to N14.64 billion and unclaimed dividend less than 15 months old stood at N24.77 billion.

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Why the figure rises: Head, Office of the Chief Economist, SEC, Mr Okey Umeano, explained that value has been on the increase since the market has been witnessing surge in large number of unclaimed shares.

He said, “The main issue why unclaimed dividend is rising is because we have a large number of unclaimed shares.”

According to him, many investors during the banking consolidation bought shares with different names as well as other people’s names which they were yet to rectify.

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“As companies declare dividend, those accounts would equally be paid, leading to increase in unclaimed dividend figure.

“The commission introduced a forbearance window for multiple accounts to enable investors that bought shares with different names to regularise their accounts in order to reduce the quantum of unclaimed dividends.

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“SEC gave a window for people to come and rectify the multiple subscription thing.

“Many people have still not been able to claim their own because some of them have forgotten the names they used.

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“Some have not been able to prove to their stockbrokers that they are the owners of the shares.

“So, we still have a large chunk of those shares, and anytime dividends are paid, those shares are not claimed and those people don’t get their dividends,” Umeano said.

Explore useful research data from Nairametrics on Nairalytics

Until the number of unclaimed shares goes down, unclaimed dividend problem will continue.

On the way forward, he assured that the commission would continue to put pressure on all the people involved in order to curb the problem of unclaimed dividends.

Umeano called on investors to go and prove ownership of their shares, noting that SEC was not prosecuting anybody.

“SEC has given them amnesty to go and claim their shares and as people are claiming those shares, unclaimed dividends number will go down,” he added.

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Stock Market

U.S Stock futures soar high as investors await earning results

The outlooks are supposed to give investors and stock analysts more insights.

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U.S Stock Futures Soar High, as Investors Await Earning Results

The S&P 500 index futures soared higher on Monday before the official opening of the U.S stock market, as stock traders awaited outlooks for the week from major blue-chip brands. The outlooks are supposed to give investors and stock analysts more insights about America’s economic performance.

Futures on the Dow Jones Industrial Average gained 223 points or 0.8%. The move implied an increase of 244 points at Monday’s open. S&P 500 futures added 0.7%. Nasdaq-100 futures contracts rose 0.9%.

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Explore useful research data from Nairametrics on Nairalytics

“We think earnings are likely to recover in the second half of the year and excess liquidity will continue to support risk assets,” said Julie Fox at UBS Private Wealth Management told Bloomberg News. “We see further potential in global equities and think there’s some upside in segments of the market that have underperformed during the crisis.

Quick fact; American Stock futures are simply standardized contracts that global traders use in purchasing or selling the U.S stock in a future date. This means  that the U.S stock futures give an insight into what global  investors see before the market opens, or after it closes

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READ MORE: Gold rises above $1,800 amid COVID-19 surge, weaker dolla

However, Milan Cutkovic, Market Analyst at AxiCorp in a note to Nairametrics explained the growing concerns global stock traders are facing presently. He said;

“There is no need to fear summer doldrums. With a global pandemic, on-going Brexit negotiation, increasing tensions between the United States and China, and the US election campaigns, there is no shortage of topics to keep market participants occupied.”

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