One common theme among a lot of employees approaching retirement is how fast it came.
To those fresh out of college or having a budding career, thirty years always seems like a long time.
Caught up with the turbulence of life and everyday work life, the years roll by quickly.
It is no surprise that many wake up to the sad realization at the twilight of their careers that they do not have substantial savings or investments to cater for retirement.
Even with the high level of financial literacy in the United States, about 37% of senior employees do not have any savings.
Fortunately, as the saying goes, it is better late than never. The need to have substantial savings and investing plans is a dilemma we face all the time.
For a young employee, losing all or part of your savings or investment may merely mean suffering financially for a few months or years.
The same cannot be said for seniors. Imagine years of hard work and toil eroding right before your eyes. Not surprisingly, according to CNBC, most retirees’ biggest fear is outliving their assets, as such, why investing and saving for those in the twilight of their careers should be conservative and well thought out.
Safe investing opportunities for retirement
As suggested earlier, the style of investing should drastically change with age. Retirement savings should be channelled into investment options that are considerably safer.
Safe investments usually come with lower returns.
For example, in the US since 1926, large stocks have returned an average of 10 % per year; long-term government bonds have returned between 5% and 6%, Risky investments have historically promised more returns than their safer counterparts.
FGN Bonds
FGN bonds are considered one of the safest of all investments in the domestic market because they are backed by the Federal Government.
The security is issued by the Debt Management Office. The FGN 10 yr. bond currently has a 13.3733% yield. You could start investing in FGN bonds for as low as N5,000 with a maximum amount of N30m.
Treasury Bills
Treasury bills are short-term instruments issued by CBN on behalf of the Federal Government at a discount rate. Upon maturity, the amount at par is paid to investors.
Treasury bills typically mature between 91 to 182 days to a maximum of 1 year.
In the period between March and May, the CBN announced an auction of the 91 days, 181 days and one-year treasury bills going for 3%, 3.24%, and 9% discounts respectively.
This means if you participated in the one-year T Bills auction, you could hypothetically purchase N100k worth of T Bills for N91k. Upon maturity in one year, you would get your N100k in full.
Mutual funds
A mutual fund is a financial vehicle that pools assets from shareholders to invest in securities like stocks, bonds, money market instruments, and other asset classes.
Mutual funds are sometimes considered safe investments because they are managed by portfolio experts and properly diversified. Various investment houses in Nigeria offer mutual funds.
It is necessary to point out that this is in no way financial advice or recommendation to invest in these vehicles.
Saving for retirement
Fidelity Investments, a top US financial planning and retirement advisor, recommend at least 10 times your annual salary at retirement. For example, if you earn N200k per month which amounts to N2.4m annually, at retirement you should have a nest egg of around N24m. This is rather logical because it is incredibly difficult to drop your standard of living drastically simply because you have retired.
Here are some tips to save for your retirement:
- Have a retirement plan: You may need to step back from the heat of the present and take a deep retrospection at your current personal finance and draft a savings and retirement plan. One way to make this easier is to speak to a financial or retirement advisor.
- Save at least 10 to 20% of your income: If you make it a habit to save 10% of your annual income, in 10 years you would have saved up your entire annual income. If you did 20%, you should have twice your income saved up.
- Get a side gig or hustle: The reality is that you can’t save because your income after tax is simply not enough. To solve this problem, you may look for a side gig. For example, if you own a vehicle in busy towns like Lagos and work only during the weekdays, you could work as a taxi or Bolt driver during the weekends. Just doing something that brings in a little more money in your pocket could help your savings.
