It is said that “the best way to predict your future is to create it”.
And that "there are two ways we learn; (1) by our own personal experiences and (2) by the experiences of other people. The best way to learn quickly to save time and resources is learning by the experiences of others."
Frequently Asked Questions About Retirement Planning.
What is Retirement Planning?
Retirement planning is the process of determining income goals and life plans as well as decisions to achieve these goals and plans before retirement. It involves identifying and creating income sources, managing assets and achieving life plans to guarantee a financially independent and fulfilling life after retirement.
Why is retirement planning necessary?
- Retirement planning helps individuals to avoid running out of money after retirement like most pension dependent retirees are prone to.
- Retirement planning allows retirees to be financially independent, live comfortable and fulfilling lives after their retirement.
Types of Retirement Planning.
From my research, Retirement plans (as it relates to finance) are of two main types namely:
- 1. The poor retirement plans
- 2. The retirement plans of the Rich
(1). THE POOR RETIREMENT PLAN.
The pension retirement plan is the most common poor retirement plan. Employees and their employers whether government or private institutions are responsible for contributing to this plan during the working years of the employees that is before their retirement. It is coordinated by national pension commission PenCom. Unfortunately even though it is the most common, it is regarded by rich people as a poor retirement plan.
Let's look at the Reasons why rich people regard pension retirement plan as a poor retirement plan.
(i) You have very little to no control over your money in the retirement account before or even after retirement. For instance you cannot just walk into your pension fund administrator’s (PFA) office straight up and withdraw any amount you want from your retirement savings account (RSA), like you do with your savings in a commercial bank. Until they feel like they are ready ‘financially'-most times your money is not available it has to be sourced for, because while you were busy working hard to make those retirement contributions to your pension account. This wicked corrupt officials were busy embezzling your hard earned money for the enjoyment of themselves, their families and friends. This could cause serious delay which means suffering for you the retiree.Please note PFA is the pension organization managing your retirement savings account) refer to the accompanying document to this write up with the title frequently asked questions about pension from National Pension Commission, PenCom. To get detailed understanding of what is meant by Pension Fund Administrator, PFA.
(ii) Even when you are lucky to start receiving your monthly pension payment, the money is very small compared to your last monthly salary before retirement, which means a painful drop in your standard of living. Hence it is incapable of financing your retirement goals and dreams like philanthropical causes and charity. Because the pension received monthly is not even enough to cater for your basic needs of food, clothing and shelter. So the question is why would any reasonable person depend on or settle for a plan that drags you into a lower standard of living? When others are forcefully increasing their standard of living by increasing their income streams. The only logical reason for this problem is ignorance, simply people think pension retirement plan is the only retirement plan there is and that it’s capable of taking care of them after retirement. After all everyone has one, it must definitely be the best and the government even has a commission the National Pension Commission (PenCom) dedicated solely to coordinating it.
Please note: I am not against Nigeria's Pension Scheme or National Pension Commission. The Federal Government has good plans for its citizens which is why Pension Scheme and PenCom were established but they are too many corrupt officials in the system which is why it is not effective in achieving its main objective ensuring prompt payment of retiree’s pension.
(iii) Also when retirees start receiving their pension they cannot really do much with it because inflation has greatly eaten the purchasing power of the money, just as is the case with money in savings accounts in commercial banks. For instance between 9 to 11 years ago (2011 or 2012) a bag of foreign rice costs between 8,000 to 9,000 Naira. That means a person who has 100,000 Naira at that time can afford to buy ten (10) to eleven (11) bags of rice but today a bag of foreign rice is between 50,000 to 60,000 Naira and so a person having 100,000 Naira today can only buy 1 or 2 bags at most. Now imagine how much food items will cost when you and I retire (say 30 years from now) and we have very little pension stipends to depend on. How would we cope by then?.
(iv) Another reason is that the retiree still pays income tax on the pension received monthly from his/her retirement savings account.
So you will agree with me that every one having a pension plan must invest the time, efforts and resources in the direction of creating income streams or investments that are inflation proof, that also appreciate over time and you have control over. Which now leads us to the second type of retirement plan;
(2). RETIREMENT PLANS OF THE RICH.
This refers to all investment strategies that a person develops himself or herself and which is under the person’s direct control. It’s not in the hand of another person or institution. Anytime this person wants to use resources or money from the investment, he or she has direct access to it. No need meeting say whether PenCom, PFA or any other entity for that matter to get access to the funds or money from such investments.
This is the most important part of this work. I wish to advice that we focus on developing or building our own investments that we can control and access anytime we like; not like pension’s plans that we have to be at the mercy of PenCom or any Pension Fund Administrator or Custodian to access. But before we can be able to create our own personal investments effectively, we must acquire financial education which would teach us how to do that. Ensure to get and read the books in the books recommendations section.
Here are simple steps employees can take right now to prepare for retirement the rich peoples way:
(i) First start with cultivating the habit of saving or holding money tight. The first step for building wealth is found in the discipline of holding money, before investing there has to be something in your hand. This step helps to ensure you have something in hand which gives confidence. A good start is by opening a special savings account where you save say 10 to 20% depending on your financial situation. This effectively achieved by simply setting up an auto-transfer system with your bank, that automatically transferring the 10 to 20% of all your earnings out of your salary account into the new savings account every month. Then you can place the accumulated fund into:
(ii) Real estate investments. Here you buy land(s) and build residential houses for rent. This fetches you rent during your working years and after. But professional guidance from those working in lands office needs to be sought because of fraudsters and 419, four- one- niners selling lands with fake land documents for multiple buyers.
(iii) Investments in agriculture or farming. This involves the following:
- Poultry farming which includes rearing chicken, turkey etc.
- Egg production
- Fish farming
- Animal husbandry or production
- Storage of Crops
(iv) Low risk investment at intervals and allow compounding interest to grow your fund. E.g. buying stocks with a strong Public Limited Company PLC.
Please Note: I am aware that what I’m encouraging you to do is not an easy task but be reminded that the top of the ladder of success is not crowded and nothing good comes easy. Creating a rich peoples retirement plan will really cost you but the rewards outweighs the cost by far like the distance between the earth and the stars
Sources of Capital for Investing in Building Retirement Investments of the rich
- First is systematic savings of 10-20% of your monthly salary we identified earlier.
- Contributions/Thrift (commonly called Adashi) with colleagues who have integrity at your office or place of work
- Cooperative societies
- Agricultural business loans or grants.
- Loans from commercial banks
- Loans from mortgage banks
RECOMMENDED BOOKS ON FINANCIAL EDUCATION
Books on Financial Education by Robert Kiyosaki (Rich Dad Company)
- Rich Dad Poor Dad.
- Cash-flow Quadrant.
- Financial IQ.
- Retire Rich, Retire Young.
- Rich Dad Guide to Investing.
- Rich Dad Conspiracy of the Rich.
Go to www.PDFdrive.com to download soft copies of these books
Read the above listed books to learn about financial management because the most important thing you need to plan your retirement is financial intelligence gotten from financial education.
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