Retirement may seem like a very far event to you today until it isn’t. And when the time finally comes you may be woefully unprepared for it. Fundamentally they are three reasons why. First, you may have only a faint idea of the amount of time it will take to create the kind of life that you want in retirement. It takes between 7-15years for the average working class to achieve their goals. Second, you may not know the amount of money it will require to create the kind of life that you desire. It will take the same amount of money that is funding your life today and even more if you want to sustain your living standard in retirement. Third, you may be hoping to plan for retirement later when your paycheck is bigger.
This may seem like a good idea but it is unwise. By the time you think you are ready for retirement planning the cost will overwhelm you. In fact, there is no amount of extra income that can make up for late retirement planning. Thus, if you do not want to be overwhelmed by the cost of late retirement planning you must start planning today. Only early retirement planning can make you enter retirement with confidence. Confidence is a product of preparation and knowledge and without these two you will reach the retirement gate behaving as though it was a surprise.
Retirement is never a surprise as most people make it to be. It was part of the contract from the very beginning. As soon as you received your first employment later retirement was part of the deal. You knew when you would retire and there was a definite time and year for your retirement coronation. Thus, if you find yourself at the retirement gate behaving as though retirement was a surprise. Your employer is not to blame. Retirement is not to blame. You are to blame.
Whether you choose to plan for retirement today or not, you will experience either of these three kinds of life. The first is the “downgraded life”. This is where the quality of your life crashes in retirement. That is your active career life becomes a more dignified life than the life you live in retirement. This happens when you put your hopes on pensions and fail to plan on time. The financial stability of pension is still in contention and if pension is all you are counting on in retirement, you have good reason to be concerned. Besides Pensions only represents 20% of your income and unless you have plans to augment it to 100%. Your living standard will crash from 100% to 20%. And this crash will be very visible for everyone to see. The second kind of life that is possible for you in retirement is the “same quality life”. This is where you can sustain and maintain the same quality of life pre- and post-retirement. Creating this kind of life means that you have to plan ahead for it and create the kind of passive income that can augment pensions. The third kind of life you can have in retirement is the “better retirement life”. This is where you elevate the quality of your life in retirement and live a better and richer life in retirement than your active career years. This is possible when you see retirement, not as a resting or slowing down phase. But as a phase of endless opportunities to create wealth. The life you would live in retirement you are already creating today. And depending on the kind of life you create there are three kinds of people in retirement giving three kinds of advice.
The first kinds of people are the Lamentation Crew. These are the people that give regret advice. Advice that comes from their own failure and lack of ability to plan for retirement. These people have become wise at a time where they can do little or nothing about it. People from the lamentation crew are like sounding bells, they warn and alarm everyone who cares to listen not to follow in their footsteps. They spread the message of fear, regrets, and had I know. This group may offer some insight into the consequences of failing to plan for retirement but they are unqualified to give you sound advice on how to plan. This is because they have not gained that experience through their own lives. The second kind of people are the Proactive planners and those that give the advice -Follow in my footsteps. These people were proactive in their financial planning and are qualified to show you how you too can plan. The only drawback here is that if you have gone past the ideal retirement planning timeline these people may not help you that much. The third group of people is the Bounce back crew. These are the people who were almost going to join the lamentation crew or have already even joined them. But learning about certain new information like this one was able to turn things around for themselves. These groups are committed to taking the actions and making the changes that is necessary to deliver their ideal retirement life. And through commitment, discipline and dedication now have the retirement life of their dreams. Advice from this group is the most beneficial as they can show you what to do and what not to do to have a restful retirement. If you would want to enter retirement with financial confidence you must listen to the last two groups. Only the counsel of these groups will produce the right results for you. You must be wary of the lamentation group as they are the most popular in retirement. Unfortunately, finding the proactive planners or the bounce-back groups may not be easy. And you may not have anyone close to you that belongs to this group. This is why we have created the solid wealth Better Life Retirement Planning Club where you can meet and learn from proactive planners and those who have turned things around for themselves. To learn more, send an email to firstname.lastname@example.org.
So now that you know why people become wise too late and the three kinds of life that are possible for you in retirement. Let’s now look at how to plan for retirement and the important retirement surprises.
How to plan for retirement
Retirement planning is all about planning for the second phase of your life. To plan for the second phase of your life successfully you need to first look at the first phase of your life and what is making it successful. There are four pillars that make your current life work. And these four pillars must be present in retirement to make life work. The first pillar is regular income which today is your salary. The second pillar is savings, which is the amount of money you put aside for investing. The third pillar is Investing and the assets that result from investing your savings. And the fourth pillar is risk protection which includes emergency funds, medical insurance, and all the extra paychecks that protect your purchasing power today. Extra paychecks like annual salary increases, bonuses, allowances, lump sum paychecks, and access to low-interest loans.
To thrive in the second phase of your life you have to create the four pillars that make life work. This is why early retirement planning is important because it takes about 5-15 years to get the four pillars solidly grounded. To ground these pillars, you need to do the following. Income-you needs to move from one income to multiple incomes. Savings you need to move from leftover savings (Less than 25%) to big portion savings (25% and up to 70%) and make your savings failure-proof. Investing-you needs to move from variable return-based investing to investing that create guaranteed income or cash flow that can sustain and elevate your living standard. And Risk protection you need to move from your current protected position to another protected position in retirement. Losing your medical insurance, guaranteed income, emergency funds, and the extra paychecks that protects your purchasing power after retirement exposes you to a huge list of risks. Thus, it is the combination of Multiple Income planning, big portions Savings, Passive Income Investing, and Risk Protection that makes a solid retirement planning program.
Unfortunately, most retirement planning programs focus on showing you how to live off your investments. Even though these investments are barely enough to sustain your living standards. I can assure you that no matter how much you earn today, you do not yet have the amount of money required to create the kind of life you imagined in retirement. Thus, the latter part of your career must be dedicated to earning more income, directing most of that income towards your investments. Building solid passive income, and shielding your years of hard work from loss.
So, if you go over your retirement plans and have no idea if you have a plan, are over-planning, under-planning, or mix planning. These four pillars will show you where you stand. If you need help building the four pillars that make life work. Send an email to email@example.com.
The important retirement surprises
Retirement surprises are not like gift surprises that are desirable and welcomed. There are unwanted and risky surprises that can derail your retirement plans. They include things like the things you wish you knew before retirement, what can surprise you in retirement and what you shouldn’t have wasted your time doing before retirement. The worse time to have these surprises is at a time when you lack the financial muscle to deal with them. Thus, the goal of this section is to show you the likely surprises that may expose you to risk in retirement and how you can avoid them or convert them to known and planned occurrences.
There are about seven areas where retirement surprise will spring out from if you fail to plan. I will highlight each of these seven areas briefly below and then show you what they mean and how to navigate them. Here are the seven retirement surprise areas
- Life Surprises
- Income Surprise
- Savings and Expenses Surprises
- Investing Surprises
- Relationship Surprises
- Health Surprises
- Inheritance Surprises
Below let’s look at each of them in detail
Surprise 1: A Comfortable Retirement is not About Investing
Investing is part of retirement planning but it is not entirely what makes retirement planning successful. If it was all working professionals would be successful in retirement. But research shows that over 80% of them are not successful even though this 80% are investing throughout their active career lives. Investing is only the third step in an effective retirement planning process. To have a comfortable life in retirement three things must work for you. These three things are earning high and multiple incomes. Saving a big part of that income. And building a guaranteed passive income flow that you can live off from for the rest of your life. This means that the first focus for retirement planning is income. If your income is low no perfect retirement plan can deliver the kind of retirement life that you desire. What is the use of N50,000 investment that has grown to N70,000 if what you truly need to be comfortable in retirement is N350,000? You would have invested and You would have made investment progress. But your goal of having a comfortable retirement would still be out of reach.
Savings is another critical component of retirement planning because savings is what makes you rich and not income. All income will disappear at some point in your life. And the majority of income is lost through spending. The only income that will be left in retirement is the one you saved. Thus, the less money you save the less money you have to depend on in retirement. And the more your living standard will crash.
Investing your saved income is the third step in a good retirement planning process. Yet not all investing can lead to freedom. Investing that is targeted at earning a certain return rather than achieving a certain goal is bound to fail. The main purpose of investing is to achieve your financial goals and not to earn returns that are woefully inadequate to lift your goals. If your returns do not achieve the right goals for you, you will still struggle in retirement. Thus, the only kind of investing that serves you in retirement is investing that is focused on achieving financial freedom goal. This is because this is the only goal that can give you financial peace of mind and freedom from ongoing work.
The act of shifting retirement planning from earning income and saving income-the accumulation phase to investing and eating investment proceeds before a solid foundation is established is the reason why many people suffer in retirement. To enjoy a comfortable life, you must accumulate first and invest before living off your investments. Thus, a comprehensive retirement plan must include the following…
- A solid income plans
- A big portion, goal-based and fail-proof savings Plan
- Financial freedom investing plan
- Risk Protection Plan
- A Health Care Plan
- A Business and Work Plan
- A legacy plan
Surprise 2: Retirement is Not Resting Time its Growth Time
You take a rest when you have completed an assignment and fulfilled your purpose. Only a few working professionals can say they have reached the point of self-actualization during their active career life. Thus, while it is ok to take a break from stressful work, it is time to pursue work that self-actualizes you in retirement. So, the idea of resting in retirement is a low impact and poverty idea. No one builds their legacy by resting they build it by fulfilling their purpose. Thus, if you have not yet discovered or fulfilled your purpose it is time to do so.
As humans, we are not wired for prolonged rest. Prolonged rest lead to boredom. We are wired for productive work. Thus, you are not entering retirement to rest. You are entering retirement to pursue purposeful work. To do this kind of work. And do it in a way that it is profitable for you. You need new knowledge, new tools, new skills, and new relationships. Purposeful work will require more from your mental energy than physical energy. And you must retool and recharge to embrace the success that awaits you in retirement.
About the author
Grace Agada is the most sought-after Financial Planning expert in the country and is quoted frequently in leading Newspapers, magazines, and blogs. Grace is a Renowned Keynote Speaker, Author, and Column Contributor in Punch Newspaper, This Day Newspaper, Vanguard newspaper, Business Day Newspaper, Leadership Newspaper, The Tribune Newspaper, and Online Platforms like Nairametrics, Proshare, and Bellanaija. Grace is the Founder of “The University of Wealth” The author of “The Financial Freedom MBA Program”, “The Better Life in Retirement Planning Blueprint” and “The Wealthy Business Blueprint”. Grace is on a mission to shrink the middle class and populate the upper class. She has been featured on BBC Africa. Business Day TV. Inspiration FM. and inside Naijatv. And she consults for Numerous Top Organizations, Company Directors, CEOs, Senior Executives, and High-Income Professionals.