I have read and heard about many cases of real men retiring strong and something happens along the line that makes me learn so much more about retirement and life of a man after the lump sum lands.
Let me start by ‘defining’ what I refer to as the lump sum first so that is clear from the beginning. Lump sum is the bulk amount your PFA (Pension Fund Administration) pays you upon confirmation of retirement from paid employment. This amount is usually around 50% (not fixed) of your retirement savings account (RSA) balance and for many employees, this is the biggest amount they would have handled till this time.
I mean, I had a former senior colleague recently getting 160 million Naira as lump sum payment with 1.4 million Naira as monthly pension payments. This was a regular guy until his retirement this year. Most young employees today (at least from 2004 for most) have an RSA into which they contribute a percentage of their income monthly. Pension reform is one of the most significant achievements of the Obasanjo administration.
The focus of my piece today is what do you or not do before and after you retire and earn this lump sum and what you should do with it. This, as usual, will be blunt and direct and hopefully you and I find something to learn from this piece. Let’s go, shall we?
1. Your SPOUSE? Your GUARDIAN: This is especially important for MEN. We feel this macho status when money lands. From experience, women are better at planning with and managing money and finances. Involve your spouse directly in all your plans. Let her know how much comes in and what each kobo is for and listen to her advise you. Plan together, let her take the lead many times. LISTEN!!!
2. Do not go into any untested BUSINESS: I remember reading about a retired man who (few weeks after retirement lump sum arrived) came back home to tell his family that he would be starting a ‘cold room’ business with 40 million Naira the following month. By then, he had bought land and paid builders and suppliers. This was a man who had never sold ‘pure water’ sachets all his life. He was always an employee. He had never managed a business before. The business lasted 3 years and crumbled. He went from being a ‘rich man’ in 4 years to a ‘rich man’ for the rest of his life. Do not start a business you never had an experience in with bulk amounts. Start SMALL. Learn the ropes, make mistakes. Only invest when you have seen the ‘near full proof’ model that you can scale,
3. You are not Bill Gates YET: I am sure you have experienced this feeling before as I have. When you have 200 thousand Naira and start feeling like going to the Mercedes Benz dealership to take that dream car or buy yourself a family yatch or a private jet. With 200K oooo. Do you feel same sometimes? Yes. Now imagine what you will feel like if you get a credit alert of 200 million Naira from Stanbic IBTC few weeks or months after retirement and they state that you will receive 1.5 million Naira every month. Some of us will ask how much Aso Rock is worth and if the FG is looking for a buyer. Calm down, Sir. It is 200 million Naira not 200 million dollars. You need to keep your head low and your mind sane and healthy,
4. Keep your mouth SHUT: Some of the biggest issues you will have around this time will be related to how you manage information and who knows what. I read a piece of a man who started giving people 5 million Naira today, 3 million Naira tomorrow, starting a business for them, building houses for friends and families after announcing to them the ‘gbemu’ has landed. He became ‘hell’ broke within 3 years and has remained broke for more than 4 years now. Keep your mouth what? SHUT. No one asked you questions. Give information on a ‘need to know’ basis,
5. Go back to WORK: There is no rule that you must retire at 50. You may retire at 50 (to get your hard earned benefits) and return to work for yourself or same employer as a consultant or a different employer with more flexible options. If you retire at 50 and start sleeping and waking up and eating after working for 20/25 years, you will be seriously bored and your health may even deteriorate. Go back and take jobs. Go back and take those contracts,
6. You have earned it. Live HAPPY: Have you always wanted to do social work? Have you wanted to invest in impacting your communities? Have you always wanted to change the lives of people in your local towns and villages? This is the time to do these things and live HAPPY. Trust me, you have earned it,
7. Ensure your children’s education is SECURED: Many retirees at 50/55 usually still have one or more children in school. Some might still even have children in high school at this stage. Now if you spend all the money doing ‘Father Christmas’ how would these children complete high school and university/college education? Take the cash they need and keep that aside in an endowment or education fund account,
8. Keep your LIFE INSURANCE active and intact: Life at this stage needs (perhaps as much as always) some life insurance. You need to ensure that everyone around you especially your spouse and children are well taken care of IN CASE something happens earlier than envisaged. Remember at this time that your group life insurance is no longer active,
9. FIXED incomes are better at this stage: 50M in a fixed income instrument at 15% will give you 7.5M per annum, usually payable upfront and your 50M is guaranteed and safe. Do not take unnecessary risks that can make you lose your capital. I remember those who invested in 20% per return per month businesses and lost both the ‘pot and the water’,
10. Do not FUND POLITICS: Ahhhh. ROTF. This is the time your local people will advise you to become Honourable ooooo. Remember they now know you are retired and have a lot of money (if you didn’t follow my advice to keep your mouth shut). Honourable you couldn’t become at 40, 45. Na now dem remember you? Calm down, Egbon. If you have always been in politics, keep your involvement to be same size. If you want to contest elections, do not use your retirement money to fund an election or sponsor a party. It will always end in tears. Don’t do it,
11. Hire a financial ADVISOR: I will recommend this! You need someone with experience in wealth management who can create a portfolio of investment options that will create a lasting wealth for you and your family. You MUST aspire to leave wealth to your spouse and children and you need to build capacity afterwards,
12. Do not take a new WIFE ooooo: My People! My People! This period is not the time to marry those ‘fine girls’ you have always admired around you. Admire them if you may but RUN back home to family and live your peace-filled life in retirement,
What else would you advise fellow ‘young’ men to do or not do concerning this topic?
Oluyemi Oloyede, is the General Manager at Kerry Taste & Nutrition you can follow him on twitter at @loynox
You surely do not know the situation of Nigerians in Nigeria.
As a Professor in a Federal University, my RSA balance as at today after putting in over 24years as a Lecturer is 10million naira!!!!
Where will the 160M lump sum and 1.4M monthly come from after retirement????