Is it too late to think about retirement?

Pensions are a bit like sunscreen. We know it’s necessary and we should wear sunscreen all year round to protect ourselves, but it’s not until the sun comes out that we start taking it seriously.

A bit like pensions, it is only when you approach retirement that you begin to take them seriously.

Warning after warning, workers need to start thinking about retirement once they start working, which for many is in their 20s.

However, there are a lot more important things to worry about in your twenties, like that trip to Machu Picchu. Then comes our 30s and we save for homes, weddings and children.

When the 40s roll around, we’ll start to take life a little more seriously, but is that like forgetting about sunscreen — then is it too late to start thinking about that retirement?

Experts say it’s never too late to think about retirement. If you think you might be in the minority and left too late to start, a survey by the Competition and Consumer Protection Commission (CCPC) found that a quarter of Irish consumers between the ages of 55 and 64 do not have a pension in place.

Currently, the state pays a pension of up to €253.30 per week to pensioners over the age of 66. There are other old-age assistance benefits, but they are means-tested. If you think that €253.30 will not be enough to cover your retirement needs, you need a private pension to cover the shortfall.

Most workplaces will help set up a pension for you, but if they don’t or you’re self-employed, many brokers will be happy to help. If you decide to put part of your salary into a pension, the amount will be deducted from your gross salary, tax-free. The great thing about pensions is that your contributions are exempt from income tax.

Mark Reilly, head of pensions proposals at Royal London Ireland, said ideally people should join a pension scheme using money from their very first paycheque.

Good in theory, but in reality it could be difficult when you have other things to save up for.

“The government wants to encourage everyone to put money aside for retirement, so there are valuable tax breaks for savers whether they have their own pension plan or participate in a retirement plan. company.”

“Tax relief for pensions is probably the government’s least appreciated gift.

“When you put money into a retirement plan, the taxman reimburses you part of your contributions, either 20% or 40%, depending on your highest tax rate. »

Despite the advantages of starting early, it’s never too late to start your retirement plan. As a rough guide, experts say you should aim for a pension that’s worth at least twice the value of the house when you retire. $500,000 might seem like a big fund, but will only net you a little over $1,400 a month if you live to be 40 after retiring at 60.

Glenn Gaughran, business development manager, Independent Trustee Company, said your pension will work when you reach retirement age, you usually have the option of getting a monthly pension for life or having all your accumulated contributions transferred to a retirement fund. , which you can draw as you go.

“While the option of securing a secure income may seem enticing, you should beware that the pension you receive may be of poor value. €000 accrued in retirement, so it’s no surprise that many people choose to put the €100,000 into a retirement fund instead,” he said.

Gaughran points out that opting for a retirement fund comes with its own risks, such as the risk of running out of money.

“To avoid this, we see retirees buying rental property with the pension fund, then living off the rental income. This way, with a little careful planning, you can get $5,000 to $6,000 or more for every $100,000 invested. And you keep the value of the property, which can be sold in case you need money to cover health care costs or nursing home costs.

Mr Reilly said that when we are younger we can afford to take more investment risk with our plans.

“In your 30s your pension fund is still relatively small and with such a long period of investing ahead you can probably afford to take calculated investment risk to give yourself the best chance of a good return. on your savings.

One thing you will also need to consider with your retirement plan is the level of risk you want to take. Experts say avoiding all risk when it comes to investments, especially away from retirement, won’t suit you later.

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