Intuitively, there are three notable phases of the human life. The first phase could be considered as the Period of Education. Learning prepares us for the challenges ahead as we grow and take on responsibilities.

Then the second phase comes, which is the Working period. This phase is where we work and earn income from our labor. The use of this income is very important because it separates the rich from the poor. The final phase is what we can call the Resting period.

The Resting Period is very crucial because it is where even though educated and have all the necessary skill sets, you are not able to keep up to work. In most cases, your physical strength may not allow you to work. In other cases, the law will force you to take a rest.

The point really is that your strength wanes with time and though weaknesses set in, at that point, you need a lot of income to survive old age along with its accompanying responsibilities. In fact, for most people, this is the stage at which their health demands maximum attention and one may need enough money to take care of himself or herself.

Unfortunately, the Resting Period is the phase many people in Ghana and most parts of Africa take for granted and therefore fail to plan. Sadly, many people from our part of the world believe that their children are their retirement plan. They are investing in their education so they can take care of them in the future.

The truth is, your children are not your investment or retirement plan! Educating your children by putting them through the academic curriculum is an obligation of the parent, and it cannot be mistaken for an investment plan.

One may ask what retirement is really about, and why should anyone plan for it. According to a dictionary definition, retirement is “the action or fact of leaving one's job and ceasing to work.”

In other words, Retirement refers to a certain time in the life of a person when he or she chooses to permanently leave the workforce, or when he is required by law to exit his professional working life at a certain age.

Either way, there is a need to plan for it. As a matter of fact, we shall all retire someday whether voluntarily or involuntarily.

Retirement planning, therefore, refers to the process of setting financial goals and creating a strategy to accumulate sufficient funds in order to support a comfortable lifestyle during retirement. It involves estimating future expenses, assessing potential sources of income, and implementing investment strategies to build a retirement nest egg, which will support you during the period of retirement.

One of the key strategies to successful retirement planning is starting to invest in retirement early. This step is crucial for several reasons:

Power of Compounding: The power of compounding allows investments to grow exponentially over time. By starting early, you give your investments more time to compound. The earlier you begin investing, the longer the time your money has to grow, potentially generating significant returns over the long term to cover all your retirement expenses.

Long-Term Investment Horizon: Retirement planning typically involves a long-term investment horizon, spanning several decades. Starting to invest early gives you the advantage of time, allowing you to weather market volatility and take advantage of potential market upswings over the years.

Building Sufficient Savings: Starting to invest early enables you to build a more substantial retirement savings cushion. By consistently investing over a longer period, you have the opportunity to accumulate a larger retirement fund, which can provide financial security and independence in your later years.

Flexibility and Risk Management: Starting early provides more flexibility in managing investment risk. You can afford to take a long-term perspective and potentially tolerate short-term market fluctuations without panicking. Starting late may require taking on higher levels of risk to catch up, which can be more challenging to manage all the related risks associated with the various asset classes.

Retirement Lifestyle Aspirations: Early retirement planning allows you to have a clearer understanding of your retirement lifestyle goals and the financial resources needed to achieve them. It gives you time to save and invest according to your desired retirement standard of living, ensuring you are better prepared to meet your needs and desires during retirement.

Retirement Income Gap: In many cases, relying solely on government pensions or employer-provided retirement benefits may not be sufficient to maintain your desired lifestyle during retirement.

Starting to invest early and building your retirement savings can help bridge the income gap and provide additional financial security in your retirement years. Don’t forget that your retirement years could be very long so prepare wisely.

Flexibility in Investment Choices: Starting to invest early allows you to have a more aggressive investment approach if desired, as you have time to ride out short-term market fluctuations as seen especially in the equity markets. You can potentially take advantage of higher-risk, higher-reward investment opportunities to grow your retirement savings much faster.

It's important to note that retirement planning is a personalized process, and the right approach will depend on individual circumstances, risk tolerance, and financial goals. As an investment advisor, I edge you to seek professional financial advice because this can help you develop a customized retirement plan based on your specific needs and objectives.

In summary, starting to invest toward retirement early provides you the advantage of compounding, a longer investment horizon, and the ability to accumulate a more significant retirement fund. It allows you to align your investments with your retirement goals, manage investment risk effectively, and increase the likelihood of a comfortable and financially secure retirement year.

For more information on how to prepare a personalized retirement plan contact EcoCapital Investment Management Ltd., on +233(0)50 155 3502.

EcoCapital Investment Management Limited (EIML) is a company incorporated in Ghana and licensed by the Securities and Exchange Commission (SEC) as an Investment Management firm, and by the National Pensions Regulatory Authority (NPRA) as Fund Manager of both second and third tiers of the national pension scheme.

The corporate mandate of the firm is to provide premium financial solutions and investment management services to both retail and institutional investors in Ghana.

Services on offer at EcoCapital include Wealth Creation and Management, Investment Portfolio Management, Pension Fund Management, Mutual Funds, Retirement Planning, Investment Research, and Advisory. The firm has three mutual fund products to its credit, namely; Prime Fund, Nordea Income Growth Fund, and the Weston Oil and Gas fund.