There’s a popular misconception that planning for retirement is only for professionals who work traditional 9-5 jobs. This means freelancers, entrepreneurs, and those alike in Nigeria’s informal sector do not need to retire or have pensions.
It is important to note that regardless of your kind of job or its structure, you need to plan for years when you’ll be resting. And without the buffer of a steady paycheck or employer-provided pension plans, it gets trickier to make these plans.
In this article, you’ll find a guide to help you navigate and intentionally plan for retirement even without a traditional 9-5 job.
Start Saving Early and Consistently
The lack of automatic payroll deductions means you must be proactive about your saving for retirement and doing it consistently.
You can open a dedicated savings account for retirement or invest in a personal pension scheme. You could also consider options such as the Micro Pension Plan, specifically tailored for self-employed individuals and entrepreneurs in Nigeria.
Regardless of your choices, do not neglect your savings, no matter how small they may appear. Even small, regular contributions can grow significantly over time when you consistently compound interest.
Set Retirement Goals and Budget
It’s important that you first define and have a clear picture of what you want your retirement to look like. Without goals, there will be nothing to motivate you or plan ahead for.
Estimate how much you’ll need for housing, healthcare, and leisure activities. At what age would you love to retire? Do you want to remain in the busy city or move to a more quiet, remote area? Once you have a clear vision, create a budget and adjust your savings plan to meet those goals.
Do not forget to factor in inflation when calculating how much you’ll need to maintain your desired lifestyle in retirement. Inflation significantly impacts the reality of retirement, especially as the value of your funds changes.
Diversify Your Income Streams
Entrepreneurs and freelancers may have fluctuating incomes, but they equally have the liberty of diversifying income sources.
If you can, branch into multiple income sources and side businesses that match your person. This can be especially beneficial now that you're still actively working and have the vigor to do more.
When you do this, you’re able to save more and ultimately reduce the risk of financial instability during retirement.
Get Health Insurance
Healthcare costs can be a significant burden in retirement, especially if you come down with a major health challenge. Since you do not have the backing of an employer-provided health insurance plan, you should invest in a private plan.
There are many health insurance plans in Nigeria that can cater to your needs and match your budget. Health insurance will protect you from high medical expenses and ensure you have access to quality care in retirement.
Invest
Relying solely on savings may not be enough in retirement. This is why you must look into other long-term investment options that can grow your wealth accumulatively. For example, you can consider real estate investments for passive income or stock market investments for potential high returns.
Investing in mutual funds, fixed-income securities, or certain pensions can also provide steady returns over time. However, we advise that you consult licensed financial advisors or reputable pension administrators to ensure your investments align with your risk tolerance and goals.
Establish an Emergency Fund
Life is unpredictable, and emergencies can overturn any plan, even for individuals with regular 9-5 jobs and guaranteed pensions. This is why everyone needs to establish an emergency fund.
Your emergency fund should cover at least six months' worth of living expenses pre-retirement. This safety net will prevent you from dipping into your retirement savings when you encounter tough times before you fully retire.
Conclusion
Retirement planning without a traditional 9-5 job is entirely achievable, even though it requires maximum intentionality and focus. You can trust Oak Pensions to help you plan your retirement effectively through tailored pension schemes and professional advice.
Contact the Oak Pensions team at 09087448661 or send an email to info@oakpensions.com to learn more about how you can build a retirement plan that works for you.