Here’s a practical guide to help you plan for retirement:

1. Start Early

The earlier you begin planning, the more time you have to build your retirement savings. Even small amounts set aside regularly can grow significantly over time due to compounding interest.

Action: Set a target retirement age (e.g., 60–65 years old) and calculate how many years you have until then.

Tip: Don’t wait for a better-paying job to start saving; consistency is key.

2. Create a Budget and Track Expenses

The first step to saving is knowing where your money goes. Creating a budget helps you identify non-essential expenses that can be cut to free up money for savings.

Action: Track your monthly income and categorize your expenses (food, transport, rent, utilities, etc.).

Tip: Use budgeting apps or a simple notebook to keep track of your spending and ensure you’re sticking to the plan.

3. Cut Non-Essential Expenses

After tracking your expenses, cut out any non-essentials or reduce discretionary spending. This frees up more funds to save for retirement.

Action: Reduce luxury purchases, entertainment costs, or daily expenditures on items like fast food, unnecessary gadgets, etc.

Tip: Look for cheaper alternatives for essentials (e.g., buying in bulk, carpooling, etc.).

4. Set Up an Emergency Fund

An emergency fund protects you from dipping into your retirement savings when unexpected expenses occur (e.g., medical bills, repairs, etc.).

Action: Aim to save at least 3 to 6 months’ worth of living expenses in a savings account.

Tip: Start small, even ₦5,000 a month, and gradually increase contributions as your income allows.

5. Open a Retirement Savings Account (RSA)

Under Nigeria’s Pension Reform Act, employers are required to contribute 10% of your salary to a Retirement Savings Account (RSA), while employees contribute 8%. Even if you are self-employed or in informal employment, you can participate through the Micro Pension Plan.

Action: Open an RSA with a Pension Fund Administrator (PFA) or sign up for the Micro Pension Plan through a PFA if self-employed.

Tip: Ensure your employer is making their required contributions, or if you’re self-employed, set aside a portion of your income for your pension.

6. Diversify Your Savings

Relying solely on your pension contributions may not be enough. Explore other savings and investment options to grow your wealth.

Savings Options:

Savings Accounts: Choose one with a high-interest rate.

Fixed Deposits: Earn better interest rates by locking your money away for a fixed period.

Insurance Savings: These offer higher interest on savings than traditional banks.

Investment Options:

Mutual Funds: Low-risk investments pooled with other investors.

Government Bonds: Safe investments backed by the Nigerian government.

Insurance Plans: Long-term savings/investment plans with life insurance coverage.

Real Estate: Consider small-scale real estate investments such as land in developing areas.

Action: Research and invest in low-risk, long-term savings or investment products that fit your financial situation.

Tip: Speak to financial advisors to better understand the best options for you.

7. Avoid Unnecessary Debt

Debt can derail your retirement savings, especially if it comes with high-interest rates. Avoid taking loans for non-essential purchases and focus on debt reduction.

Action: Prioritize paying off existing debts, especially high-interest loans or credit cards.

Tip: If you must borrow, use low-interest loan facilities or cooperative societies and avoid predatory lenders.

8. Build Multiple Income Streams

To supplement your low-paying job, look for ways to increase your income through side businesses, part-time work, or passive income sources.

Side Hustles: Offer skills like hairdressing, tutoring, freelance writing, or selling items online.

Investments: Use any extra income to invest in small businesses, agricultural ventures, or other low-capital opportunities.

Action: Research opportunities that fit your skills and resources. Start small and grow over time.

Tip: Ensure that your side business or income streams do not interfere with your main job’s productivity.

9. Plan for Healthcare

Healthcare costs can deplete your retirement savings quickly. Consider enrolling in National Health Insurance Scheme (NHIS) or look for affordable health insurance options.

Action: If your employer doesn’t provide health insurance, consider private health insurance to avoid hefty medical bills.

Tip: Stay healthy by prioritizing preventive healthcare, proper nutrition, and regular check-ups.

10. Consider Joining Cooperative Societies

Cooperative societies can help you pool resources with others to save money or take low-interest loans when necessary. Many cooperatives also allow members to invest in joint ventures.

Action: Join a cooperative society related to your industry or community.

Tip: Contribute consistently to the cooperative, as they often offer dividends or opportunities for joint investments.

11. Monitor and Review Your Plan Regularly

Your financial situation and needs will change over time, so it’s important to review your retirement plan regularly and make adjustments as needed.

Action: Every six months or annually, assess your progress toward your savings and investment goals.

Tip: If you receive a salary increase, make sure to increase your contributions to savings and investments proportionately.

Conclusion

While retirement planning with a low-paying job in Nigeria is challenging, it’s possible with the right approach. Focus on saving consistently, cutting unnecessary expenses, diversifying your income, and investing wisely. By starting early and making incremental changes, you can build a secure retirement even with limited income.