Have you ever felt the need to quit your job, retire early, and just bask in the serenity of slow mornings and peaceful evenings? Everyone, at some point, dreams of an easier life where stress is minimal and they spend time doing what they love.
While the idea of early retirement is enticing, how you approach it determines whether you will enjoy it or not. The reality is that retiring early requires careful planning, financial discipline, and a clear understanding of what you truly want from this new phase of life. In this article, we will show you how to approach it with ease.
Can I Retire Early?
Many people fantasize about early retirement but a good number of people typically do not stop working early. On the contrary, they want to keep working even beyond the retirement age benchmark. In Nigeria, the standard retirement age is 60 years for public sector employees, but you can retire in your 40s or 50s, depending on your financial situation and career trajectory.
If you retire at 40 or 50, you could have several decades ahead of you—possibly 30 to 40 years—without a steady income from traditional employment. The average life expectancy in Nigeria is about 56 years, but many people live into their 70s and 80s.
This is enough reason to wonder whether the funds in your pension pot can carry you for the rest of your life. What if unexpected health issues arise or your living expenses increase due to inflation or other factors?
The Best Approach to Early Retirement
There are many advantages of early retirement, but it's crucial to do it right without jeopardizing your comfort in the future. Here’s how to retire early with peace of mind:
Be Sure it's What You Want
Are you sure you want to retire early? And if you really want to retire early, do you want to stop working altogether or withdraw partially from the active work life?
If you're not ready to fully retire, you can consider part-time work or some profitable business. This can provide the buffer and extra income you need while keeping you engaged in meaningful activities as you relax.
Save Up Aggressively
We do not advise you to just up and stop working; you must first determine how much money you'll need to cover your living expenses. According to reports, you’ll need at least 10 to 12 times your income to live a comfortable life in retirement. Now, imagine how much you ought to have saved up if you wanted to retire earlier than the benchmark age of 65.
Like it or not, you’ll need money for many things when you retire, and your pension pot may not be sufficient to provide that support. During your active work years, you can also put in extra efforts to bulk up your pensions and make large sum deposits via voluntary contributions.
Venture into Investments
Truth be told, relying solely on your pension might not be enough to sustain your lifestyle in early retirement. It is therefore important to diversify into passive income, like investing in stocks, bonds, mutual funds, and real estate.
These investments can help your wealth grow over time, offsetting the financial impact of retiring early. However, investments come with risks, so it's important to seek professional advice and ensure your investment portfolio aligns with your risk tolerance and long-term goals.
Plan Accordingly
Much like a lifetime itinerary, plan what you want to do for the rest of your life when you retire earlier. Remember to factor in leisure, travel, health necessities, and family.
When you plan accordingly, you can also develop a realistic budget that reflects your expected retirement lifestyle. This will help you understand how much you'll need each month and whether your savings will be sufficient.
What Happens to Your Pensions When You Retire Early?
Leaving the job market earlier than usual means your pension becomes a crucial source of income. However, you can only begin to make withdrawals six months after you officially retire from your job. You must also conduct all due diligence with your pension fund administrator before your funds can be released.
Conclusion
In the end, early retirement is the goal for many people. This is largely because it affords you time to do more things you enjoy, helps you control your personal life, and increases your chances of healthy living.
However, not everyone will be able to actualize this dream. Notwithstanding, you can begin to prepare for retirement now by following the steps we have outlined in this article.
For more guidance, let Oak Pensions hold your hands and guide you through this phase of your life. Contact the Oak Pensions team at info@oakpensions.com or call 09087448661 to get started right away.
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