Embracing Your Life's Golden Phase

We have interesting retirement insights for your consideration. Sit back and relax as we share essential retirement and pension information to support your decision-making. Empower yourself with knowledge!

A Cautionary Reflection 1

In March 2023, I had the privilege of meeting with a retired Deputy Comptroller of Customs through a mutual friend. Our casual conversation quickly turned to the challenges faced by Nigerian retirees regarding their pensions.

He shared his personal experience as a pensioner who retired in 2021. Despite the significant delay in receiving his pension, he expressed deep frustration over the inadequacy of his monthly pension, which was a fraction of his monthly earnings. Transitioning from a monthly income in the millions during his career to a few hundred thousand post-retirement was a challenging adjustment that greatly impacted his lifestyle. Upon inquiry, I discovered that he relied solely on the government-mandated Contributory Pension Scheme (CPS) and had neglected to establish a Personal Retirement Plan. When I asked why he overlooked such critical planning, he admitted he was unaware of its existence.

While he had other investments, they too presented challenges. He was astonished to find himself in a precarious financial situation, despite believing he was secure prior to retirement. This scenario is not unique to him; it affects retirees across various sectors, including law enforcement, private sector and civil service.

Key Insights:

1. The compulsory Contributory Pension Scheme (CPS) established by the Nigerian Government is designed to provide basic survival support post-retirement and is unlikely to cover even a fraction of your lifestyle while in active service.

2. While you may have other investments, it’s crucial to understand that all investments carry risks; there are no guarantees of safety but risk management. Only Insurance that is designed to manage investors' risks.

What You Should Do Without Delay

1. Establish a personal pension plan that aligns with your desired lifestyle. This is your personal responsibility and should be initiated while you are still in active service. There are easy steps to get it done.

2. A well-structured Personal Retirement Plan serves as a vital safety net, and can also provide a base for you to effectively manage your investment portfolios and secure your financial future.

A Cautionary Reflection 2

“I never imagined I would find myself in such a situation,” Waldo began, reflecting on a pivotal moment in his life. As a respected Professor of Law at one of the nation’s premier universities, Waldo was not only esteemed for his academic prowess but also for his dedication to research and continuous learning in his field. With a loving wife and two children, a comfortable home, and a reliable car, he enjoyed a stable, albeit modest, lifestyle. His position in society afforded him the opportunity to engage with a network of intellectually stimulating individuals.

During a recent visit to the Law Faculty, I had the chance encounter with Professor Waldo, where our conversation shifted to the topic of financial investments. It was then that he candidly shared a personal experience that would serve as a cautionary tale for us all. Waldo recounted how, a few years ago, he had invested a significant sum in the stocks of a prominent blue-chip company, prompted by a tip from a friend. At that time, the company was thriving, and its stocks were often referred to as the “unstoppable ascent.”

However, the landscape shifted dramatically when scandals and economic turmoil struck the stock market. Prices plummeted, leading to a national recession that wreaked havoc on countless investments. When Waldo eventually needed to liquidate his stocks, he faced the harsh reality of an 80% loss on his initial investment. A subsequent review of his trading history revealed a classic misstep: he had purchased near the peak and sold near the trough - a common pitfall for inexperienced investors.

This narrative extends beyond stocks. Mutual funds, bonds, treasury bills, and real estate investments are not immune to these kinds of similar challenges.

Key Takeaways from Waldo's Experience:

While the uncertainties inherent in investing can be daunting, they should not deter one from engaging in investment activities altogether. Rather, consider the following insights:

Embrace Market Volatility: Understand that investment values can fluctuate unpredictably. Prepare yourself mentally for the possibility of both gains and losses.

Commit to Continuous Learning: The investment landscape is complex and ever-changing. It is crucial to learn, unlearn, and relearn the principles of investing. And the best risk management knowledge one can acquire here is by experience, not just by reading financial information. It is important to note that money one cannot afford to loose shouldn’t be used for this education. It takes both time and money to acquire it.

Understand Your Fund Manager's Approach: Know that the fund manager you engage to manage your funds e.g. mutual fund etc, may not manage it as effectively as you would have, had you the necessary knowledge, money, and time needed for your investment.

Acknowledge the Potential for Wealth Creation: Genuine wealth is often created through strategic investments.

Develop a “Robust Personal Retirement Plan”: Establishing a solid retirement plan provides a reliable source of funds for acquiring investment knowledge and building wealth:

I) This plan is resistant to economic downturns, ensuring consistent supply of income as long as you live.

II) Furthermore, should the policyholder pass away within the first 10 years, their beneficiaries - typically a spouse or child - will continue to receive the monthly pension for the remaining part of the period.

III) Also, when the policyholder pass on, the insurance company pays the family what is called “Death Benefits”. Here the policyholder’s monthly pension is multiplied by 12 months. The resulting amount is then multiplied by 5 years. This large funds amounting to millions is then paid to the policyholder’s family.

In conclusion, while investing carries inherent risks, it also offers the potential for substantial rewards. By adopting a proactive mindset, committing to ongoing education, and developing a comprehensive financial strategy such as a robust Personal Retirement Plan, individuals can navigate the complexities of the investment world and work towards securing their financial future.

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