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.
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.
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.
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.
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.