Are you thinking about starting a pension?Make retirement planning a priority so you won’t outlive your money…
For many people, retirement seems like a long way off so they tend to put it to the back of their minds. You probably don’t plan on reducing your standard of living when you retire, but have you thought about how you are going to pay for it when you’re no longer working? Developments in relation to pensions in recent times make it very clear that the responsibility for funding your retirement ultimately lies with you.
Three reasons you need a pension
1)You may need an income for up to 30 years or more after you retire
People are living longer which means you may be retired for up to a third of your life. Therefore it is very important to have a savings plan that ensures that the money you earn during your working life lasts your whole life. Your pension plan is one of the most important savings plans you will ever save into. It can provide you with an ongoing income to ensure that you have the money you need to enjoy your retirement years.
2)Your income could drop by over 70% in retirement
When you retire, you’ll probably assume that you will have the same standard of living. However, unless you put a pension plan in place, your income could drop by over 70% in retirement. The State Pension (Contributory) is currently €12,391 a year (€238.30 a week), but the average salary in Ireland is €45,611. You need to start saving for your retirement to help avoid a big drop in income, and the impact this would have on the lifestyle you have become accustomed to.
3)If you qualify for the State Pension, you could be 68 before you receive it
The age of eligibility for the State Pension (Contributory) has changed and no longer starts at age 65. If you were born on or after 1 January 1961 the minimum qualifying State Pension age will be 68. That’s potentially a three year gap in retirement income.
I don’t have a pension! How do I work out how much I should be saving?
As a general rule of thumb you should be aiming for an income of between 50% and 66% of your final salary. However, everyone’s situation is different and it really depends on the type of lifestyle that you want for yourself in retirement, as well as on your own specific circumstances. Our financial advisor Ciarán here in Gateway can meet with you to discuss your retirement needs and help you put a plan in place designed to achieve your financial goals based on:
• your current age
• when you would like to retire
• the kind of lifestyle you’d like
• what you can afford to save
When should I take out a pension?
It is important to start planning for tomorrow, today! The sooner you start your pension, the longer it has to potentially grow which could make a huge difference to the size of your savings at retirement
Am I too old to start a pension?
It’s never too late to start saving for your future. The amount of income that you can save into your pension and get tax relief on actually increases as you get older. Depending on your age, you can save up to 40% of your income into your pension and claim back tax relief at your marginal rate. So even if you’re starting your pension late it’s definately worth it.
I’m not sure if I can commit to long term savings?
A pension plan is very flexible. You can usually stop and start when you need to, and increase or decrease your contributions at any time. It is better to start saving into your pension plan now, even if you put in less than you’d like to. Remember you can usually change how much you save to suit your changing circumstances.
For as little as €5 a day… If you are aged 25 contributing until you are 65, you could have a retirement fund of €244,075 for your retirement. These figures are for illustration purposes only and based on an assumed growth rate of 5% p.a. premium increases at 2.5% p.a., a 5% premium charge and 1% annual fund management charge. The value of the fund can fall as well as rise and growth rates may be lower or higher than assumed.
Take the first step and meet an Advisor today! You won’t regret it.
Call to our office on Magazine Rd, Athlone, ring Ciarán on 090 6421677 or email [email protected].