John Gbesan, the 54 years old head of e-business in a Lagos financial institution, resumed work as usual on Monday morning, at about 7:45am. After exchanging pleasantries with colleagues and settling in at his desk, he attempted to log into his system and found that he could not. After a few attempts, he contacted personnel in the IT department, who referred him to HR manager for clarification. He was then told by the HR manager that he had been relieved of his duties due to compulsory cost cuts approved by the management. He was given a severance package and two weeks’ notice to vacate his official residence. He had the option to retain his official car (an SUV which was bought less than a year ago) at a give-away price of six million naira and this amount is deductible from his severance allowance.
Now, he is without a job and a total severance package worth five million naira. He has two daughters studying in Canada and has only recently taken a loan of ten million naira to expand his wife’s catering business. Suddenly, he is faced with a host of decisions, to make as quickly as possible, and come up with an effective plan to ensure his savings and severance package sustain him and his family over the next 25 years or more of his life after this unexpected retirement, while maintaining their current lifestyle.
When people realise that they must retire earlier than anticipated due to several factors including job loss, illness, disability, or other factors, several questions come to mind:
• What happens next?
• Can I still get another job?
• How will I sort out my obligations as they crystalise?
• What do I do with my severance package?
Premature retirees must address these financial questions, not different from those asked by anyone entering retirement but because unlike planned retirement, theirs came suddenly creating an urgency to find answers. This urgency may lead to quick but ultimately inappropriate decisions with dire consequences.
The reality is that people sometimes have unconventional retirement plans’ such as their children taking care of them after they retire or starting up a business they perceive as thriving. These plans sometimes fall through but more often than not, are executed with inadequate knowledge and poor preparation leading to an unattainable post-retirement lifestyles.
The most important advice when you are faced with a sudden decision to retire early is to “switch off the panic button.”
•Take stock of your assets (volume & value, income stream and sustainability, currency in which they are denominated etc
•Determine your current and future obligations, existing liabilities and lifestyle maintenance expenses. Source: Meristem Wealth Management
