Plan your future now – don’t wait until it’s too late

posted on 18th Jul 2018

The topic that nobody wants to talk about

One issue that frequently raises my blood pressure is how little thought most people put into planning for their retirement. It is important for everybody to be aware that the maximum state pension is currently €243.30 per week which for most people will only cover the basic living essentials. This is most likely to reduce in real terms as the country’s average population starts to grow older.

Own your own home but at the right price

Buying your own home is a significant step in the right direction. Once you are mortgage free the cost of accommodation is something you will be able to take out of your weekly budget. You may be able to factor in selling or renting out your home when you head for the airport. However, I wouldn’t advocate anybody stretching themselves way beyond what they can afford now or in the future. Location isn’t everything. Also, please keep in mind your home isn’t going to pay your food and energy bills for you when you retire.

Start Now. Don’t Dilly Dally.

It doesn’t really matter what age you are – the earlier you start the less noticeable the monthly outgoing will be. It will also be a significant weight off your mind that you are going to have extra income when you retire to go scale the Himalayas or sit on the beach sipping caipirinhas. Another reason to start sooner rather than later is that you will be a position to retire earlier.

For example, an investment of €100 per month in a fund which returns 5% per annum will grow as follows:

10 Years          €15,758

20 years          €41,375

30 years          €83,673

40 years          €153,338

Tax savings on contributions

There are significant tax savings for making contributions to a state-approved pension fund.  For example, for somebody paying tax at the current marginal rate of 40% a pension contribution of €100 will only hit their monthly pay packet by €60. Tax-free contributions are capped as follows:

Under 30 years 15% of net relevant earnings

30 to 39 years   20%

40 to 49 years   25%

50 to 54 years   30%

55 to 59 years   35%

60 and over      40%

Conclusion

Please don’t put off setting up your pension. If you are already making contributions, consider whether you need to increase.

Links

Personal Pension advice on citizensinformation.ie

pensionsauthority.ie

Rob Madigan FCA CTC BCOMM, Financial Controller
Rob, a chartered accountant, is the FC for Neworld, a creative branding agency with over 30 years’ experience developing brands to position them for future growth. He has worked with Neworld since September 2008 and guided the company through interesting waters. Rob admires greatly his colleagues’ creativity, energy, and enthusiasm for their work and is happy to be a little part of the show. He previously worked in accountancy with PWC and Madigan + Co and in hedge fund administration with Citco Fund Services Dublin.