Start Saving for Retirement at 16 to Enjoy Old Age

A regular reader (Remi Emeka Njoku) on this blog sent in this article. I have decided to publish it to encourage feedbacks on what you really think is feasible for your kids within the Nigerian context.

Saving for retirement, a recent survey has revealed, is not on the minds of most Nigerian adults. This perhaps explains why among other reasons most Nigerians experience miserable old age, and often pose great burden and liabilities to their children and other caring relations. Pension management experts are of the view that with the recent introduction of the contributory pension scheme, the problem of miserable retirement life may soon be a thing of the past. Then, that is for people in the formal sector which is the only sector covered by the contributory pension scheme. For people in the informal sector, the situation may remain the same for a long time. This situation is even worsened by the level of job insecurity, high level of unemployment, and drastically low level income among many the working group in both the formal and informal sector in the country.

Pension experts thus, suggest that one way of accumulating enough savings for retirement is by starting savings at teen age. Sixteen is the prescribed age.
But, saving for retirement most likely is not on the minds of most 16-year olds, more especially in a country like Nigeria where most teenagers earn nothing.
One way of achieving this is by taking advantage of some of the special financial products for children being introduced by banks. This could be funded by a parent or grandparent, as long as the parent or grand parent has earned income that is at least as much as the contribution.
In its simplest form, growing money has three main ingredients: money, growth rate or rate of return, and time.
When you are 16, you have time on your side.

Take for instance, if you decide to take the Intercontinental Bank Happy Saver Millionaire Target account, if you save N2,000 per annum, in 28 years you will have saved N1,053,779.97. If you decide to save N5,000 per annum, you will accumulate N1,004,933.95 in 14 years. If you move the annual savings a bit higher to N10,000 it will amount to N1,086,182.55 in eight years. At N15,000 and N20,000 per annum it will amount to N1,184,645.03 in six years and N1,021,170.73 in four years, respectively.
Take a look at this calculator that I have created and you’ll see what I mean:

The Power of Starting Young

Amount Expected Inflation Account
Age Saved Balance ROR Rate Value
16 252,000 252,000


252,000 504,000


252,000 769,104


252,00 1,062,180

After 4 years, you quit contributing
and let the account grow…

Age Value
29 2,200,968
30 2,355,066
35 3,303,090
40 4,632,768
45 6,497,694
50 9,113,328
55 12,781,818
60 17,927,154
65 25,143,804

This calculator assumes that you invest N252,000 per year in your early retirement scheme for four years starting at age 16. So, by the time you are twenty, you can stop contributing. The second part of the calculator shows you how much that nest egg could be worth at different points in your life.

Keep in mind that these amounts are adjusted for inflation. So, although the amounts may not seem that big, they have been adjusted for inflation. I made it such that you can change the contribution amounts and the expected rate of return and the inflation rate. Even better, withdrawals from this account at retirement will be tax-free if you choose a good institution.
Pretty cool, eh? It is truly amazing the how such a relatively small amount of money can grow to a significant sum of money given enough years. If you are a 16-year old, you might want to get started on this right away. If you are a parent or grandparent of a 16-year old, have them read this post and consider helping them get started by either giving them the contribution amount or matching whatever they are able to save. It could be the best gift you could give them.
Try this calculation for a lifetime, and you will be amazed at how much you can save over a lifetime.

Please do not be deceived. This is a great idea in theory, but how many kids will be able to keep their hands off this money until retirement? There is no penalty assessed for yanking money out of a retirement savings scheme for education expenses or a first home. Few children these days have any concept of delayed gratification. They want the nicest cars, homes, toys, etc. and they want them now. My guess is that a majority of retirement savings schemes started by parents for their teenage children won’t last ten years before the money is withdrawn for an immediate want.
Another startling revelation by the BusibessDay survey is that women tend to lag behind men when it comes to retirement planning. Surveys show they start saving too late, which means they have to work longer.

Financial advisors say too many women make the mistake of not thinking ahead. “Women, we’re born with this imbedded thing that says we should not worry about it because we are going to get married and the husband will take care of it. That is not the case. We are not that type of woman anymore,” financial advisor Anna Ibrahim said.
In addition to starting late, there are other pitfalls for women. Experts say that often times women stop saving for retirement and switch their money to a education or house keeping fund when they have children, something they do not recommend.
Financial advisors also suggest women buy homes instead of things like expensive cars.
That’s what Oluremi Adekoya did 14 years ago after her divorce, and it’s going to pay off.
“Because my house in Aboru, in the Ikpaja area of Lagos has quadrupled in value, that’s my retirement money essentially,” Adekoja said.

Experts also recommend looking to buy disability insurance and long term insurance sooner, rather than later. Ibrahim said buy it when you’re 40.
“Lock in now with a lower rate. When you are in your 50s and your friends are all running around looking for good care, you are covered. You already have it,” she said.
She says the bottom line when planning for retirement is look to the future.
“Stop being emotional. Do not worry about yesterday. Let us start thinking about tomorrow and start saving today,” she said.
What’s the right age to begin planning for retirement? Are you too young or too old to start? Regardless of your age, the answer is a resounding “No”.

Nobody is too young to start saving for retirement. As soon as you are making money, you should be saving money! Still in school and only working part time? No problem. Sock away a few Naira from each paycheck. The power of compounding is magnified the earlier you start saving. Consider this. If you save just N1260 per month starting at age 16 until age 65, you’ll accumulate over N10,332,000 at 6.5% interest. Waiting until you’re 26 years old would require N4,914 per month to reach N10,332,000. Assuming you increase your monthly savings as your pay increases, you can build a substantial retirement nest egg. The longer you wait, the higher the penalty.

One more important issue to note is that nobody is too old, either. As long as you’re making money, you should still be saving money! Take for instance, if the average life expectancy in Nigeria is 75.5 years, you might live longer. In fact, mathematically half of the population will live longer than the average! So if you are 55 years old and still working, you still have 20 + years to enjoy life. It’s likely you won’t work all those years, so save as much as you can afford to now. Saving N12,600 per month starting at age 55 would give you another N2,142,000 for retirement. And remember, your savings will continue to grow after you stop working, as long as you only withdraw what you need for immediate expenses.


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