Why leave it until the Eleventh Hour !
A New Year’s resolution is a tradition where a person resolves to change an undesired trait or behaviour, to accomplish a personal goal or otherwise improve their life. This week we look at the reasons why 2019 should be the year you make that “Pension Resolution” and start saving for your retirement in a goal orientated way.
For many people, retirement seems like a long way off so they tend to put it at the back of their minds. As individuals, we all lead a busy life and may not have made the time to start planning for our retirement. However, more than most, you should know that, if you don’t take on the responsibility of planning for your future now, it’s unlikely anyone else will. To enjoy financial security when you retire, it’s important to put money aside during the years you are working.
The following are Three of the Key reasons you need a Pension
You may need an Income for up to 30 years or more after you retire – People are living longer which means you might be retired for up to a third of your life. That’s why it is so important to have a savings plan that ensures the money you can earn during your working life lasts the whole of your life. Your pension plan is one of the most important savings plans you will ever save into. It can provide you with an ongoing income to ensure you have the money you need to enjoy your retirement years.
Your income could drop by almost 70% in retirement – When you retire, you’ll probably assume that you will have the same standard of living. However, unless you put a pension plan in place, your income could drop by almost 70% in retirement. The State Pension (Contributory) from March 2019 will be €12,911 a year (€248.30 per week) for those who meet the full qualifying criteria, but the average wage is €38,594 (Source: CSO, Average earnings in Q1 2018, Earning and Labour Costs May 2018
If you qualify for the State Pension, you could be 68 before you receive it –The age of eligibility for the State Pension (Contributory) has changed and no longer starts at age 65. If you were born after the 1st January 1961 the minimum qualifying State Pension age will be 68. That’s potentially a three year GAP in retirement income, when you qualified for the contributory pension at age 65…..(€38,734 would be the estimated shortfall in retirement income over three years due to the change in the minimum qualifying age).
How do I work out how much I should be Saving?
In an ideal world you should be aiming for an income of at least 50% of your Final Salary. However, we do not live in an ideal world. Everyone’s situation is different and it really depends on the type of lifestyle you want for yourself in retirement, as well as your own specific current circumstances. At Peavoy Financial Planning we will meet with you to discuss your retirement needs and help you put a plan in place designed to help achieve your financial goals based around, what you can afford to save, when you would like to retire and the kind of lifestyle you’d like to live.
The good news is, that the Government has put a range of incentives in place giving you even more reasons to save for your retirement into a pension plan. For example, on any personal contributions you can benefit from generous tax relief of up to 40% on your pension contributions (Assuming you pay income tax at the higher rate).
When should I take out a Pension?
It is important to start planning for tomorrow today. The sooner you start your pension, the longer it has to potentially grow which could make a big difference to the size of your savings at retirement. As already advised personal contributions to a pension plan can benefit from generous tax relief of up to 40%. If the tax relief is not used in any given year, it is lost.
Can I commit to Long Term Savings ?
A pension is very flexible. You can usually stop and start when you need to and increase or decrease your contributions at any time. It is better to start saving into your pension plan now, even if you put in less than you’d like to. Remember you can usually change how much you save to suit your circumstances
So what do you do next?
Have a chat with your Financial Adviser and put a plan in place to to help you achieve the kind of lifestyle you’d like to live in retirement. If you would like to have a chat with me here at Peavoy Financial Planning please do make contact with me and we will work through your current situation with you. I can be contacted on 087-2902206 or alternatively by email on ei.l1553389350aicna1553389350nifyo1553389350vaep@1553389350divad1553389350
David Peavoy BA, QFA, LIAP is the Owner of Peavoy Financial Planning whose practice is based in Office 5b, Portlaoise Enterprise Centre, Clonminam Business Park, Portlaoise, Co Laois.
David Peavoy T/A Peavoy Financial Planning is regulated by the Central Bank of Ireland
Disclaimer: All data and information provided within this blog is for information purposes only. It should not be taken as specific advice for your situation. Peavoy Financial Planning makes no representations as to the accuracy, completeness, or suitability of any information and will not be liable for any errors, omissions or delays in this information or any losses, injuries or damages arising from its use