Saving for Retirement.....it's your future!!
Retirement planning is all about deciding how much of today's income you want to allocate to your life after you stop working!
For a vast majority of us we see pensions as a very complicated and technical area! Well to change that mindset think of a pension as nothing more than a LONG TERM SAVINGS PLAN i.e. as the title suggests........ saving for your retirement!
So how much should I save now for my retirement?
The key answer this question depends on a number of factors, like
- your age now
- when you'd like to retire
- what kind of lifestyle you'd like to have in retirement
- any pension arrangements you already have in place (from previous or current employers)
- how much you can afford bearing in mind that the current tax relief can effectively cut the cost of your monthly savings by almost half*
Generally, you should be saving about half of your age as a percentage of your income. So to explain, if you are 30 years old, you should be saving 15% of your annual income. For example, someone earning €40,000 that's about €500 a month but could actually only cost you €295 after tax relief.*
In these financially trying times this could seem a lot now but you shouldn't put it off until another day. You can start small and gradually increase your savings when you can afford to. Every little bit adds up, especially when you consider it has a good chance to grow, for 30 years or more.
Pension planning is flexible in that you can usually start and stop pension contributions in line with your affordability. So you shouldn't be afraid to start a pension because it seems like a life long commitment.
Saving even a little now may make a big difference later on. For example, a person aged 30 who saves €145 per month into a pension plan until age 65, could have a pension fund value of €150,000**.
If they delayed saving into their pension until age 45, they would have to save an estimated €392 per month into a pension plan until age 65 to potentially achieve the same pension fund value of €150,000** at age 65.
It's not too late if you haven't started yet so putting aside some savings/earnings now will ensure that you are on the right track to providing yourself with a more comfortable lifestyle in retirement. It is likely that the vast majority of us will be working well into our late 60's early 70's before we can contemplate retiring largely due to, in the main, the economic downturn!
Obviously we can all feel aggrieved with the economic crisis and I know that a vast majority are feeling the pinch finding it difficult to make our hard earned euros stretch further each month. I do not advocate the theory of allowing access to pension funds now to elevate individual debt in the short term. To me this is just kicking the can down the street.
Review your pension investment fund.......
Now is the time to think about protecting that pension 'pot'. 5 key questions to ask yourself
- am I invested in the right pension fund for how I plan to take my benefits at retirement?
- what level of pension and tax free lump sum can I currently expect at retirement?
- people are living longer than ever. Will I have enough money to last me for up to twenty years or longer in retirement?
- do I need to increase my pension savings over the next few years to reach my target retirement income?
- what options are available to me in how I can take my retirement benefits?
Please have a look at the rest of the services we offer or for further financial advice please contact Alasdair at 01 810 1912 or via info@agsfinancial.ie
* Assuming higher rate taxpayer 41%. It is important to note that tax relief is not automatically granted; you must apply to and satisfy Revenue requirements. Revenue terms and conditions apply.
**Warning: These figures are estimates only. They are not a reliable guide to the future performances of this investment.
Example figures in the illustration above provided by New Ireland Assurance.