Planning for your retirement is essential in future proofing your financial well-being. We have all heard of the rainy day fund, putting money aside for unforeseen events, securing your financial future etc. - but what does that truly mean, when that day finally comes?
Due to increased advances and improvements in healthcare, technology etc., we as a population and community are all living longer. In 2019 the average life expectancy in Ireland was 82.3 years and is still increasing but not as fast. That in itself is naturally not a bad thing, but it does mean that we have to consider our pension and retirement savings. As we are spending longer times in the retirement age bracket than ever before, future proofing your retirement affairs will be vital to securing peace of mind in your golden years.
In the following blog, we will discuss how to retire effectively in Ireland and how giving yourself ample time can allow you to future proof your financial affairs.
The Irish retirement landscape is ever-changing. In the last two decades, there have been six different retirement ages introduced (60, 65, 66, 67, 68 and 70) in order to qualify for the State Pension, with the current age set at 66. While there exists a statutory retirement age in some jobs (i.e An Garda Siochana, The Irish Defence Forces etc.), in general the Irish retirement age is set out in your contract of employment.
Putting your pension and retirement plans on the long finger is not encouraged and definitely should not be neglected. It seems obvious, but the simple truth is that the sooner you begin saving, the more funds that will be available to you in your final pension pot. Preparing for retirement allows you to:
• Ensure your financial stability and independence
• Meet the financial needs of both yourself and those dependent on you
• Fulfil your future goals and objectives in retirement
• Experience less financial stress
When it comes to retirement planning, there is no one size fits all solution. It is important to tailor your retirement plan to suit your individual needs and circumstances. With this in mind, it is important to determine your desired income upon retirement, and the actions and objectives that are required in order to achieve that retirement financial stability. Thorough retirement planning takes into account all eventualities, including but not limited to:
• Market changes
• Family circumstances
• Future identified income and expenses
With these factors being taken into consideration and with particular focus on the fact that we are living longer, it is probably most important to note what standard of living you may want to work toward. Additional Voluntary Contributions (“AVCs”) may be a good starting point if you are looking to swell your pension pot beyond the necessary employment pension plans and are looking for a comfortable retirement life.
AVCs are further contributions on top of the general retirement fund/pension contributions made by your employer. AVCs are a relatively easy future proof pension product, as it grows your pension pot with extra contributions. It is a flexible and smart solution that is also tax efficient. But most importantly, the contribution is set out on your terms and conditions - meaning it is adjustable.
If however, you wish to make a more modest pension decision, there is always the option of taking the Irish State Pension, provided by the Irish State when all required conditions have been met. The Irish State Pension is a payment made by the government to eligible citizens aged 66 and over. To qualify for the full state pension, there are a number of criteria, namely identified under the Total Contributions Approach. To qualify under the TCA, you need to have made an average of 48 annual contributions over your working life. 520 stamps are needed at a minimum to get any part of the pension at all. There are currently 19 different ways to calculate your state pension, Your social welfare office has all your information and can inform you what your estimated state pension will be.
Outlined above are just two pension options at either end of the scale. But the reality is that planning for retirement is a long and complex process, with many different pension options across a wide spectrum available to you. By doing your research and seeking professional advice, such as what we offer at FitzGerald Flynn, you can ensure that you are on track to a comfortable retirement and that you choose the right pension for you. Remember, retirement planning is an ongoing process - so review your plans regularly and make adjustments as needed.
One of the main benefits of retirement planning is that it can help to reduce financial stress further down the line. It can also give you the peace of mind knowing that you have enough money to support yourself and your loved ones as you live out the remainder of your days.
Another benefit of retirement planning is that it can help you to stay independent. Financial independence is often overlooked as a given, but financial independence means having the ability and means to pay for your own accommodation, transportation, healthcare and other living expenses. That financial security is something that can be invaluable in reducing anxiety and worry when what you should be doing is relaxing and benefitting from your working contribution to society.
Retirement planning can also help you to achieve your future goals and objectives. For example, if you would like to travel or take up a new hobby in retirement, retirement planning can give you the financial freedom to do so.
As outlined above, there is no magic number or defined amount that underlines how much you would need to retire in Ireland. It depends entirely on a number of personal factors, including your desired retirement lifestyle, retirement income and retirement age.
If you want to maintain your current standard of living in retirement, then you will need to have a retirement income that is sufficient to cover your living expenses. This includes accommodation costs, transportation costs, healthcare costs and other day-to-day expenses.
Your retirement age will also play a role in how much money you need to retire early. The earlier you retire, the longer you will need your retirement savings to last. As such, it is important to make sure that your retirement savings are invested wisely.
There are many necessary steps to arriving at the optimal retirement and pension solution. However, our recommendation would be to take the following steps.
Making a precise and detailed overview of your financial situation, with all necessary information - such as planned income sources, future income projections, expenses, investments and so on and so forth can make for a very informative exercise. It allows you to have a detailed overview of your financial situation in a clear and concise manner, while also allows you to identify where there is room for pension and retirement planning.
We would love to hear from you. We at FitzGerald Flynn have years of informed experience in financial planning, with a particular expertise in pension and retirement planning. We want you to have a stress free retirement and we want you to maximise your retirement and financial future. Working in close cooperation with us, we can develop a plan that is explicitly tailored to your needs and objectives.
There are a number of Irish agencies that promote active and healthy retirement processes, such as Active Retirement Ireland (ARI) and Age and Opportunity. Retirement is far from the end of the world - there is still plenty of space to live an active and engaged lifestyle upon completion of your employment in Ireland. We will be on hand to guide you every step of the way to secure your financial future, but we want to be there to support you throughout your retirement and point you in the right retirement direction.
Last but not least, don’t forget to review your retirement plans regularly. This is important as it allows you to make any necessary adjustments to your plans. For example, if you experience a change in income or an unexpected expense, you may need to revise your retirement savings goals.
FitzGerald Flynn offers retirement planning services that can help you to achieve your retirement goals. Our retirement planners are experienced and qualified professionals who can provide you with expert advice on how to plan for retirement. Now that you know how to retire early in Ireland, what are you waiting for? Start retirement planning today!
Over the years we have gained some experience. Every month we like to share them with you. Check in with our blog.