Retirement is not for old people

'Retirement is for old people.' A young graduate said this to me recently, and I realised how deeply this belief is embedded in the minds of many young professionals. He had just started working officially, so I took my time to explain why retirement planning should not be treated as something that begins when retirement is approaching. The irony is that retirement planning is often easiest when retirement seems far away. Most professionals postpone the conversation because they believe there is still plenty of time. They believe their salaries will continue to come. They believe they will start saving seriously when they are older. Some business owners make the same mistake for a different reason. They believe retirement is only for employees because nobody can fire them from their own businesses. But the ability to continue working is not the same thing as financial independence. At some point, you may want to stop working. You may need to stop. Your health may change. Your business may change. The economy may change. Your priorities may change. The question is not whether you intend to work forever. The question is whether you will have a choice when the time comes. One of the biggest mistakes professionals make is assuming that their future income will solve their future problems. Unfortunately, the closer they get to retirement, the more they discover that time is an asset they can no longer buy back. Someone who starts planning in their 20s has something a 50-year-old does not have in the same quantity: time for compounding. Starting early can mean contributing less money over a longer period while allowing investment growth to do part of the heavy lifting. So how much is enough? There is no single figure that applies to everyone because retirement needs depend on lifestyle, age, expected retirement date, inflation, investment returns, healthcare needs, family responsibilities and other sources of income. However, credible retirement-planning frameworks can provide useful starting points. For example, Fidelity's retirement guidelines suggest aiming to accumulate roughly 10 times your income by age 67, while also suggesting saving around 15 per cent of income annually as a broad guideline. It also uses a 4 to 5 per cent annual withdrawal rate as a starting point for estimating how much a retirement portfolio might sustainably provide. These are guidelines, not guarantees, and individual circumstances can produce very different numbers. For someone trying to estimate their own retirement requirement, I would begin with a more personal question: What kind of life do you want to live when you stop working? Start with your expected annual retirement expenses. Related News If you believe you will need ₦6 million a year in today's money, for example, you cannot simply assume that ₦6 million will be enough 20 or 30 years from now. Inflation will affect the purchasing power of that money. Next, consider the income you expect to receive from other sources, such as pensions, investments, rental income or a business. Then determine the gap. That gap is what your retirement portfolio must eventually help to fund. This is why retirement planning is not simply about putting money into a pension account. It is about building a financial ecosystem that can continue supporting you when your salary stops. Your retirement plan should consider investments, pension arrangements, insurance, emergency reserves and other income-producing assets appropriate to your circumstances. And the earlier you begin, the more manageable the journey can become. Consider two people who both want to build a retirement portfolio. One starts at 25 and contributes consistently. The other waits until 45 and decides to 'catch up.' The second person may have to contribute significantly more because they have lost two decades of compounding and now have a shorter runway. This is why retirement planning should begin with the first meaningful paycheque, not the last few years of employment. I recently spoke with a woman in her 30s who had already started planning for retirement. She was also thinking about how to fund her child's education and wanted advice on how to structure both goals. She is not waiting for the problem to become urgent before planning for it. That is what financial planning should look like. You do not wait for your child to gain admission before asking how you will pay the school fees. You do not wait until retirement is five years away before asking how much you need. You plan while there is still time to adjust. The goal of retirement planning is not simply to retire. It is to reach the point where work becomes a choice rather than your only source of survival. The best time to start planning for that freedom is not when retirement is close. It is while retirement still feels very far away. Join BusinessDay whatsapp Channel, to stay up to date Open In Whatsapp