Retirement in Nigeria 2025: Proven Ways to Achieve Financial Freedom After Work

Retirement in Nigeria, I must say the topic is mostly suitable for civil servants and those recruited into the Nigerian Arm Forces. Nobody works forever, even business owners have a point in their lives that they must allow others to take charge of their businesses. Footballers also retire from playing professional football, so also is any other athletics and even politics.

We must attain that stage where our strength cannot permit us to do the hard labor, professional jobs and any other form of service. Even though retirement comes after many years of service, it must surely come one day. Those in service must plan for their retirement before it comes.

In this article, I will try to cover retirement advice to those who are in active civil service especially in Nigeria where I’m from.

What Is Retirement?

Retirement is the total or partial withdrawal from active professional service and this could be as a result of age, health condition or limit of years in service as set by the government and backed with the constitution and in rare cases financial readiness.

A sick person wouldn’t be permitted to continue on his job because it may add more stress to his existing condition. Other people do not wish to retire just at the set age but the constitution constrained them into doing so.

The Importance of Early Retirement Planning

There are so many importance of one planning for his or her retirement in Nigeria early in his or her career. You probably have many more years of service and still young in age, therefore, planning to retire in more than thirty years of service or sixty five as the case in Nigeria may help you in the following ways:

• Reduction in financial pressure: you may just be a young graduate who probably got a job and yet to marry and sometimes you may still be living with your parents, so you are not paying rent yet, you don’t have kids to cater for and not much responsibility at all, you may not have any financial pressure at this time so if you start saving for retirement you will achieve more before you begin to have responsibilities which may put more financial pressure on you.
• Compound interest: Yes, compound interest is what you will benefit if you begin your journey for retirement early in your career. For instance, if you are saving twenty naira monthly, in a fixed deposit account at the end of every year you will receive say 13% interest, the following year both the interest and the initial contribution will collectively start yielding double interest for you.
• Higher ROI on real Estate Investment: Investing early in your career for example landed properties must have been cheaper than after many years in your service. For instance, those who got jobs in Abuja in the early 90s and started planning for their retirement early when they got those jobs could have gotten properties in strategic places at cheaper rates in Abuja today compared to the same people who got employed during the same period but began planning for retirement twenty years later when Abuja had already become a big city. According to real estate experts, landed properties appreciates in value as they get older because their location may have expanded and developed with time making it sit in the heart of a developed area.
• Increased flexibility: planning early for retirement allows you to have more time to save and even diversify your investment. You have investments in real estate, shares in companies’ investment in hospitals and you are still saving more because you started early.

Understanding Pension and Scheme

When I was growing up our parents in those days would tell us that working in the private sector is not good because, the company owner would decide and sack you at any time and without pension and gratuity. They said government jobs were good and preferable because after retirement one is still paid pension on monthly basis.

So I thought pension was another way government used to appreciate civil servants for their 35 years of service rendered. Not until I grew up to realize my thoughts were not totally right.

What Is Pension?

Pension is a kind of income that a retired worker receives regularly and often on monthly basis ultimately to support them in their old age when they do not have strength again. That is, the amount of money most time deducted from the employee’s salary and saved so that the incomes will be paid to the employee after he or she retires from work.

Types of Pension

There are many types of pension schemes in other countries but in Nigeria there are mainly two:

Defined Contribution: This is where a certain specified amount of money is being contributed either by the employer or the employee or both and which amount to be paid to the employee after retirement is not specified.

Defined Benefits: under this pension scheme, a specified amount is paid or contributed regularly by the employer which the amount to be paid to the employee after he or she has retired from work.

Calculating Your Future Needs

According to ChatGPT, when talking about future needs in retirement we are referring to financial, health, education and even lifestyle requirements.

Now, to calculate your future needs, you first of all need to know your present value. Calculating future needs can be simply done by using the formula below:

Future Value (FV) = Present Value (PV)* (1+r)^n

Where FV- Future Value, PV – Present Value, r- Annual interest rate, for n- number of years the money is invested.

It is important to calculate your future needs as this will help you most especially when it is yet time to say goodbye to your work. For instance, if I desire a bed and the current bed I’m sleeping on is worth N300,000 and because after retirement I may not have a huge paid package apart from my pension, I will be planning to reduce my bed budget by instead getting a N120,000 bed and I would want to let go of the N180,000.

Let’s assume I’m paying N2,000,000 as rent annually and I have to work for 20 years, then I know I’m going to marry when I stayed 10 years on my job, then I will have to calculate or simply multiply the two million by the 10 years and because I have to cut down my spending I will have to do away with let’s say N300,000 then multiply N1,700,000 for the remaining years and add the outcomes together. This will definitely helps in taking proactive measures against any unexpected pressure.

Investment Options for Retirees

So after retirement from say civil service you may want to invest in a good and profitable business, this is actually a good idea that can keep you financially stable and even more comfortable than you were when you were still working for a monthly pay.

There are many investment options for a retiree that are very lucrative and highly profitable and these include:

1. Rental property: This is a kind of real estate investment where properties can be bought and rented out either annually, monthly or even weekly. A retiree can buy such property if his or her finances can guarantee that, he or she may  invest in this option and see his or her money appreciate in value while also collecting annual rent.
2. Fixed deposit: Under this option, a retiree can opt to save his money in a fixed deposit account where it will accrue interest mostly on an annual term though there are options for one, three, or six months respectively
3. Annuities: this investment option for retiree has a form of guaranteed minimum interest which in this case you are absolutely sure that your funds must grow over time and for as long as the investment lasts.
4. Mutual funds: this is a kind of financial tool that has its focus on shareholders assets to invest in securities such as bonds, stocks, money market and so on.
5. Bonds: Bonds when compared with stocks are low-risks, however their value may decline especially when interest rate is hiked. A retiree can buy bonds either directly from an organization or from bond fund which are actually pools of investor money that buys plenty diverse bonds.
6. Staff thrift savings: this is done for either uniformed say police or correctional service and federal employees which actually have a defined contributory retirement plan.

Building Additional Income Sources

It is not a bad idea that as you are about to retire from work and you have decided to consider building other sources of income. There are so many other sources of income that can be considered investing into as a potential retiree or as one who is planning for retirement and these could be:

Educational center or child care

Educational Centers like schools can be good investments that as you are planning for retirement should consider venturing into, let’s say a nursery school where parents can enroll their children or wards to acquire early formal knowledge.

Content Creation

Even in old age one can still become a content creator even if you are only giving young employees advises on YouTube or Tiktok and even Facebook and Instagram, you can be making extra money. Nowadays, content creation has even become a fulltime job for some people especially young adults.

Publish E-books

As one who has had experience working in organizations and government establishments, you can write a book about your experiences and people are eager to read about such experiences to reshape their thought about such jobs. You will then upload the e-books on Amazon or other e-books platform and make money when copies are sold out.

Mini export business

As part of ways to generate more income after retirement from work, starting a mini export business is a good idea because the profit margin is widely enough to cover the huge expenses and still save. You can read more on this here.

Mistakes Most Nigerians Make About Retirement

Just as I was saying in the preamble of this article, so many people may make mistakes about retirement but as you are reading this post guarantees you won’t do such mistakes especially if you are just starting newly in your work.

The following are the common mistakes that people often make about retirement, please bookmark this post and always refer back to it to refresh your memory, these mistakes are as follows:

• Late planning: Of course if you fail to plan for your retirement early, you will regret it when you retire. This is because you will start saving for your retirement late when you only have few years to retire and at this time the money you have saved may not be enough to cover your family expenses.
• Investing unwisely: if you had done an unwise investment as you were or are planning for retirement then you shall meet your biggest regret when you retire.
• Cashing out Savings: if you cash-out your savings when you are not yet retired from work then you are also making a mistake. Allowing savings to run for many years will keep accumulating high compound interest which may be more beneficial to you at retirement.
• Overlooking estate investment: in the preamble or introductory part of this article, I said something about over looking estate opportunities. Properties appreciate value as they get older and that is because their location becomes more developed over time so if you over look estate planning when you finally do the value might have appreciated and you may be compelled to pay very costly or you may not have had enough resources to pay for it.
• Failing to plan for your retirement: if you forgot completely to plan for your retirement you may end up going back to the stage you were before you started working. So to avoid this, the day you got employed the next thing you should consider first after settling down should be to start planning for your retirement. Let retirement not meet you unprepared because it can be so frustrating and devastating as well.
• Retiring too early: if you retire too early from work you will not be able to save enough money to be able to invest into the things you desire to invest into. So retiring too early shouldn’t be an option except when it has to do with your health or other compelling issues.
• Ignoring inflation: as you know, when there is inflation the purchasing power of savings depreciates a lot. When planning for retirement it is not advisable to neglect putting inflation in to consideration. Get a strategy for such circumstances before they come.
• Neglecting tax implication: when you start planning about retirement, consider putting into account how your retirement savings will be taxed. Having this kind of knowledge beforehand helps you to keep your money more guaranteed and safe to meet expected goal.

Achieving Peace of Mind after retirement in Nigeria

Let’s just say you are fully retired from work now already, the next thing now left for you to do which many others are also struggling to achieve is “peace of mind” having your peace of mind now should be your top priority as you have passed through so many stress such as waking up early and returning home late.

There are ways by which you can achieve your peace of mind and these include setting boundaries of what you should do and what you shouldn’t , where you should go and where you shouldn’t go.

At this point you need to avoid unnecessary loans which may still keep you under obligation and pressure especially short-term loans. Having leisure time and playing at those times can also help you a lot. As a married person have more time with your family and play with your kids, you can also hang out with friends and maybe take a walk down the street too. You are a retired person so taking mortgages is also a bad idea and make sure to avoid that too.

Unlike other countries where retirement is easy, retirement in Nigeria most times can be very challenging such that when you finally do peace of mind should a priority.