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Planning your Pension

Building Retirement Readiness with FitzGerald Flynn

March 7, 2022

In 2021 there were approximately 740,000 people living in the Republic of Ireland over the age of 65 - a figure which is expected to grow to near 1 million by 2028. However, the idea of building retirement readiness is still intimidating for many. Successfully planning for your future is imperative to ensure that you secure the retirement lifestyle you desire. It also protects those dearest to you as much as possible. This can all be achieved with the proper retirement plan.  

One of the key aspects of planning for your retirement is ensuring that you have taken the right steps to ensure financial comfort in your golden years. The main ways to do this are through savings, pension plans and savvy investments made earlier in life which lead to strong returns down the line. Expenses and spending tend to decrease in retirement. Starting to plan earlier gives your money more time to grow. Setting yourself up to afford the lifestyle you want should be carefully considered and working with an experienced financial planner is the best way to do this. Working with our clients to secure a future with careful considerations and effective action is at the heart of what we do here at FitzGerald Flynn.

In the following blog, we will cover some vital topics that address concerns like:

  • When to start planning for your retirement 
  • When to start your pension
  • What you need to know before starting a pension
  • The best retirement plan for your financial circumstances
  • Long-term investment options for you
  • Who to consider when planning your retirement 
  • The importance of speaking to a financial advisor

Saving early and with consistency is the key to building successful retirement readiness. "Keeping a close eye on your progress and setting distinct financial targets is vital to maximizing the amount you can save". So, let's get right to it. 

When to Start Planning Retirement

Retirement planning happens best when it happens early in your working life. Retirement might seem a long way off now, but knowing how much you will have to live on when the time comes and how much you need to save to get there is vital. For one, compound interest on current savings means that the money you save today has a much more significant impact later down the line.

Setting yourself up for retirement does not have to be a grand plan, it should support your goals and plans for your golden years. Recognising how many years you have from now until your expected retirement age is the first step in creating a successful retirement strategy. The more time between when you start planning and when you retire, the better chance you have of enjoying a comfortable and worry-free retirement. Moreover, whether you are looking to build savings with a high return or generate an income you can live off from future returns on investments, it is best to lay out your plan of action as soon as you start to earn an income.

A higher return on investment or a more robust return on savings can allow careful planning to turn into comfortable living well into retirement. Making consistent contributions to a pension is ideal, even if it is not a lump sum. Consequently, a pension plan that allows high visibility into your savings will let you track your progress and adapt to changes in your income as time goes on. Saving more as you earn more is a general principle that should be followed. 

When to Start a Pension Plan

A pension plan is a long-term saving plan that works with your future in mind. Pension plans allow you to invest into a retirement fund on a consistent or even once off, lump sum, basis. Pensions are not just something that older people in the twilight of their careers should consider. If you have not already started one, start as early as possible. Any contribution to your future on a consistent basis, no matter how small, is better than no contribution at all. The financial security you can expect at retirement will be easier to build and more significant if you start sooner.

The current minimum retirement age in Ireland is 66 years of age - applicable to those who joined the Irish public service after January 1st, 2013. Additionally, the mandatory retirement age in Ireland is 70 years of age - provided you can prove that you are still suited for your role and are in good enough health. For the private sector under specific arrangements, early retirement can be possible. Retirement benefits can not be accessed until you are 60 years of age. This means for the most part, people have a defined timeline from where they are now, to where they need to plan towards. 

What You Need to Know Before Starting a Pension

How you would like to spend your retirement years is a crucial element to consider. Establishing the standard of living you would like to enjoy in your retirement is an essential step in building towards your retirement readiness. Taking time to calculate your income and your expenses in retirement is critical to assess before you start planning for a pension. While this can be a complex and arduous task, working alongside expert financial planners is a great way to reduce this workload.

In Ireland, there are a number of different types of pension plans that are available. From state, to personal, to occupational pensions, there are many options available to those looking to build retirement readiness. Before opting for a specific plan, there are a number of factors that must be considered, from employment status and employment type, to whether you are an experienced investor or a first timer. Read on to learn more about the different pension plans available to you and which best suits your situation, or alternatively, speak to one of our expert advisors here at FitzGerald Flynn now. 

In contrast to your regular savings account, money invested into your pension will benefit from crucial tax breaks. The size of these tax breaks depend on a multitude of factors from your earnings over the course of your professional life, to the amount and frequency of your pension contributions. Speak to one of our experts to find out what tax benefits are available to you. 

Income can change depending on the value of investments, so carefully planning your investments around your goals and the timeline of your retirement plan is critical. For instance, if you are on the younger side and have over 30 years from now until your expected retirement age, focusing on riskier investments with a high level of reward, such as stocks, could be advantageous. This is because, generally speaking, stocks have a better return on investment than other types of security over a long period of time - a long period of time being at the very least, 10 years. However, if you are closer to your retirement age, it might be safer to invest in less volatile and more secure forms of investment such as bonds. The closer you are to retirement, the more important preserving your accrued wealth becomes.  You can talk with a planner who will either receive a consultant's fee or work under some remuneration plan with your employer. 

The Best Retirement Plan for Your Financial Circumstances

The best retirement plan for you is one that suits your circumstances and will work to improve your situation into your retirement years. A financial planner or retirement specialist, such as what we have here at FitzGerald Flynn, can help  form a flexible plan to suit your hobbies, your lifestyle and your investment goals. 

A professional broker or advisor can help you understand the full scope of the options available to you in terms of the various pension plans on offer and whether that income will satisfy your needs. The Irish state pension is just one type of pension or long-term investment for retirement. This pension provides a basic income level in retirement to those who qualify - €13,172 per annum for those who apply for the full, contributory state pension. In addition to state pensions, individuals can opt for private pensions that fill a financial gap that state pensions may not meet.

For those who are employed, you may also be entitled to an employer-sponsored occupational pension or a relevant public sector occupational pension. Occupational pensions, often referred to as company pensions, are pensions set up by employers that give retirees a tax-free lump sum payout at the point of retirement along with their pension.

Pensions for the self-employed can vary between Personal Pensions and PRSA’s for sole traders, to Executive Pensions and Occupational Pensions for Limited Companies.

Get in touch with us today to speak to one of our specialists and find out what pension schemes will work best for you.

Long-Term Investment

As previously mentioned, long-term investments can be a great way to accrue wealth for later down the line and set you up for your retirement. Investment accounts can be managed similarly to a pension account. Pensions are only accessible to investors after retirement while investment accounts can be drawn upon at any time. However, investment accounts do not enjoy the same tax reliefs pensions do and can be subject to a gross roll up tax every eight years of 41% or Capital Gains Tax of 33% on profits realised.  Despite this, both are viable considerations. What your current financial circumstances are is a vital aspect to consider when deciding whether long-term investments outside of pensions are suitable for you.

Who to Consider When Planning Your Retirement

Your family and dependents must be at the forefront of considerations when planning for your retirement. Determining who will be financially dependent on you once you’ve called it a day with your professional life is imperative to calculating how much your retirement could cost. If you have a spouse, kids, and other dependents, your plan should clearly articulate how you intend to support them during your retirement. 

Organizing a life insurance or life assurance policy must be part of the conversation when building retirement readiness. Taking out a life insurance or assurance policy means that your family will be financially covered in the event of your passing. Sit down and talk with those closest to you about your plans for the future. Ensure there are some common threads for your vision and all relevant plans are in place to ensure their financial security.

The Importance of Speaking To Expert Advisors When Planning Your Retirement

Consider talking with a professional advisor or broker about your retirement plans. Reviewing your income and expenses, assessing your savings and investments, and recognising your desired retirement lifestyle are critical to setting yourself up for your golden years. The plan has to fit YOU, and that is where FitzGerald Flynn comes in, to tailor an approach for you and your circumstances.

Retirement readiness is all about understanding what needs to be done now to set yourself up in the future. And while the journey that must be taken to secure your future may seem daunting now, we are here to guide you each step of the way. And remember, intelligent planning leads to freedom in retirement.

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