Why are people obsessed with getting a pension

Wanderer78

Squozen wrote:

The average retirement age in Australia is 55, in Ireland it's more like 66. The pension is the reason for this and you're a mug if you don't take advantage of it. It's FREE MONEY.

What happens if there's a significant crash in the Australian economy, what happens with the value of your super?

Squozen

Wanderer78 wrote: »

What happens if there's a significant crash in the Australian economy, what happens with the value of your super?

It drops. But as long as you only withdraw 4% of your total you never run out of money. This has been true for as long as the stock markets have been running, even including the Great Depression and the GFC.

Of course, my pension isn’t invested 100% in Australian shares!

And what’s your alternative? Save nothing and hope your government looks after you? Good luck with that.

Wanderer78

Squozen wrote:

And what’s your alternative? Save nothing and hope your government looks after you? Good luck with that.

Oh God no, I'd always recommend some sort of private pension, the only problem is, there's absolutely no garantees with public or private funded pensions, we ve no idea what ll happen in the future, but it certainly doesn't look to good, there's a potentially for many to remain working well into their 70's, and beyond for some

kippy

Wanderer78 wrote: »

Oh God no, I'd always recommend some sort of private pension, the only problem is, there's absolutely no garantees with public or private funded pensions, we ve no idea what ll happen in the future, but it certainly doesn't look to good, there's a potentially for many to remain working well into their 70's, and beyond for some

Stick it under the mattress then but have some sort of savings in place.

Wanderer78

kippy wrote:

Stick it under the mattress then but have some sort of savings in place.

What happens if the value of that money drops over time, there's many external forces at play, in which the individual has little or no power over, but continual saving while working is advisable but not absolutely safe

Squall Leonhart

kippy wrote: »

Stick it under the mattress then but have some sort of savings in place.

I know the mattress suggestion wasn't serious but just in case there are others who would genuinely agree.. Don't do this, or the equivalent of just putting it in a bank, for all sorts of reasons

- you can access it too easily, tempts raids before you retire leaving you with none or little
- growth is likely to be be neutral at best, negative more likely
- you're not building your nest egg at anything near the rate it could balloon without the tax relief on pension contributions
- if your employer matches or contributes anything, you're missing this literally free money

Drumpot

I have never met anybody who at retirement is glad they didnt take out a Pension. It is quite remarkable that people cant or dont grasp how valuable they can be if done right.

If you are invested in an average managed fund in general there will be boom/bust cycles, but once you keep your head you will be fine. Its peoples reactions to downturns that costs them the most. Its funny how people only focus on the bad stories, the pensions levy (that didnt cost that much, was more damaging to pensions promotion) or people who lost money.

Most people did not lose a fortune, you only hear about the horror stories, most people are fine or just happy so stay away from the hyperbole.

To save €1000 in the bank or a savings plan can cost over €2000 of earned Income to some. To make 100% profit of your €1000 you need to make maybe 160% growth (35%-41% tax on gains). So its cost you €2000 of earned income and 160% of growth to have €2000 in a savings plan.

To save €1000 into a Pension for the same person, may only cost €500 (€1000 Gross income, but worth €500 in their hand after tax) and to grow it 100% , it only has to grow 100%. So its cost you €500 and 100% growth to have €2,000 in your pension.

Even without Growth, it costs €500 of Earned Income to put in €1000 into a Pension and €2000 of earned income to get €1000 into your hand.

Part of the snag is of course you only get a percentage (25% or salary/service) of your Pension pot tax free. The rest is taxable as income as you drawdown. But you have already grown so much more from compounded interest , it grows tax free and you only pay tax on what you drawdown.

It really is a no brainer, but people really struggle to understand it and get belligerently stuck on the negative elements, that dont really justify why you wouldn't do a pension.

AndrewJRenko

Wanderer78 wrote: »

Hide it

Great idea. I'm sure the lads in Social Welfare have never thought of that.

Drumpot

Wanderer78 wrote: »

What happens if the value of that money drops over time, there's many external forces at play, in which the individual has little or no power over, but continual saving while working is advisable but not absolutely safe

I always try to explain to people about "loss". Most people think if the value of their savings remains at the same price at least they arent losing something. .

Put €1000 under your mattress and write down what you can buy for €1000 now with that money. In 10 or 20 years time take out your €1000 and see how much it can buy on your list. Retaining your capital value does not mean you have retained its intrinsic value that you imagine.

€1000 over 20 years with an average inflation of 2% would make your €1000 worth only €673 when you pull up your mattress to work out how much you have lost. But people see €1000 in their savings statement and think "well at least I didnt lose anything" .. Anybody who left money in cash before the crash would of been smug, but anybody who had money in medium/high risk managed funds (even if it went down 40%) has probably at least doubled their money since then.

Squozen

....... wrote: »

Whats a good sum to have in your pension pot come retirement?

25 times your annual expenditure. So if you expect you’d be able to live on €20k a year, a €500k (25x20k) pension into an ARF with a good return (~7%) will last you forever.

Don’t forget to take inflation into account - I use this site: https://www.vertex42.com/Calculators/inflation-calculator.html

Wanderer78

AndrewJRenko wrote: »

Great idea. I'm sure the lads in Social Welfare have never thought of that.

saving is all risk!

namenotavailablE

The tax relief on pension contributions together with the potential investment gains makes them by far the easiest way to increase your wealth for most people- 'free money', as was noted above.
If I put €1000 into a pension fund today, it costs me €600 after tax relief. But, I now have a pension asset worth maybe €950 (after possible charges by the pension fund manager). I'm instantly ahead ~€350. If I hadn't made that contribution, the tax man gets the €400 instead.

That pension asset hopefully returns gains over time, enhancing my wealth and making my retirement more enjoyable.

On later taxation of the pension, between tax free lump sums, possible tax exemption/ marginal relief and age related tax credits for older people and how the tax system here generally takes a lower than average amount from incomes below the standard rate cut-off point when compared to internationally, it still seems like a worthwhile investment. No absolute guarantees that it'll all 'go swimmingly'-ask Waterford Crystal staff-but apart from death & taxes(!), what certainties are there?

Squozen

rhubarbcustard wrote: »

My employer contributes to my private pension every month, (approx 14% of my salary) I turn 36 this year.

A few months ago, I payed possibly too much attention to Recession & stock market crash predictions and moved my pension to cash after Winter 2018 losses. So my currently modest pot is now exposed to Zero Risk.

I'm starting to think I should move it back out of cash and select the default Pension option appropriate to my age and just simply accept that markets go up and down and let Compounding offset any Market dips over the next 30 years and try to forget its there?

You actually want the markets to crash when you’re young. Think about it, a share is just a part of a company and if the value drops by (say) 10%, that’s a 10% discount on buying that share. When you actually want to use that money in 30 years time, it’ll be many times higher than it was even before the market dipped.

AndrewJRenko

Wanderer78 wrote: »

saving is all risk!

Thinking that you're smarter than the Social Welfare folks who do this for a living, having been doing it for years, have piles of great technology available to them to help them to do it is a very risky strategy.

Wanderer78

Squozen wrote: »

You actually want the markets to crash when you’re young. Think about it, a share is just a part of a company and if the value drops by (say) 10%, that’s a 10% discount on buying that share. When you actually want to use that money in 30 years time, it’ll be many times higher than it was even before the market dipped.

i was just listening to a podcast which stated, some democrat's actually want an american recession, how disturbing is this thinking, because people losing their jobs is great fun!

Wanderer78

AndrewJRenko wrote: »

Thinking that you're smarter than the Social Welfare folks who do this for a living, having been doing it for years, have piles of great technology available to them to help them to do it is a very risky strategy.

its all risk, i know people who retired just prior to their pension kicking in, because they done the 'right thing', by declaring all their savings, noting they worked all their lives, many decades, they will not receive payment until it falls to the threshold, i.e. doing 'the right' can sometimes lead to immoral outcomes

Squozen

For any interested, this is what my Australian pension has been doing since I left the country in early 2017 and stopped making contributions (I’ve started a separate pension in Ireland).

The years are measured from the end of Australian financial years, so 2017 means July 1 2017. That’s why the 2020 value is lower, it’s only covering July-October of this year.

My pension is about 80% in high growth US ETFs, about 5% in Australian property and the rest in Australian shares.



If I do move back to Australia to retire, all superannuation withdrawals are tax-free. The state pension is means-tested so most Australian pensioners get little or no state benefit (which is the ideal outcome!).

high_king

DSN wrote: »

Incredibly condesending attitude by some towards retired people here.

There's a steady unhealthy trend geared towards promoting more and more ageism in Ireland, and plenty of the usual self defeating half wits are rolling with it. They must think they are never going to be older some day as well.

Squozen

Wanderer78 wrote: »

i was just listening to a podcast which stated, some democrat's actually want an american recession, how disturbing is this thinking, because people losing their jobs is great fun!

True, but a market dip and a recession are not always the same thing. Look at the last 12 months - Trump has crashed the stock market several times with the stupid **** he’s doing with tariffs. A more cynical person might say he’s doing it on purpose to help his mates.

high_king

howamidifferent wrote: »

The reality is that those of us who work for 45 years paying PRSI and USC will end up giving our rights to a state pension to those who never worked, we will be means tested and told "Oh!, you had the foresight to save for your retirement? " Well John & Mary down the road didnt so we are giving your pension to them as you have your own private one!

Squall Leonhart wrote: »

This.. This is just one of those fears I too have. I cannot emphasise how sickened I will be if this happens to people who have had the diligence, foresight and sacrificed all along the way to be able to build their pensions, only to be told by the government of the day "you're sorted, you have your own, none from us", while it's given to those who lived with abandon all along.
The injustice of it would be sickening.

Glad to see at least some people are wise as to what is really going on.
That and any savings and the home you have worked so hard to own will be confiscated using the "fair deal" scheme.
In the long run it doesn't pay to work and save hard in Ireland.

Squozen

high_king wrote: »

Glad to see at least some people are wise as to what is really going on.
That and any savings and the home you have worked so hard to own will be confiscated using the "fair deal" scheme.
In the long run it doesn't pay to work and save hard in Ireland.

If you work and save hard you will do far better with a personal pension than the crappy state pension, IMO.

high_king

Squozen wrote: »

If you work and save hard you will do far better with a personal pension than the crappy state pension, IMO.

In theory, that's the way it should be . . but you've entirely missed the point, in practice in the future there wont be any state pension for those who have any private pension or savings, and what's left of your private money and property will in turn be confiscated by future "fair deal" schemes. While those who spent all their money, or never saved it will have to pay for nothing and will also receive a state pension.

Dodge

There is absolutely ZERO chance of the state pension being removed. Do any of actually live in the real world? The only group not to receive any cuts in the crash were pensioners. A government that suggests removing the prsi based OAP will be committing harikari.

high_king

Dodge wrote: »

There is absolutely ZERO chance of the state pension being removed. Do any of actually live in the real world? The only group not to receive any cuts in the crash were pensioners. A government that suggests removing the prsi based OAP will be committing harikari.

The contributory state pension is gradually going to be phased out by stealth.
In Ireland, it's extremely easy to pull the wool over people's eyes incrementally and this is the first step.

Leaving even more hardship for the trapped squeezed middle that have to pay for and subsidise everyone else from politicians to the mega corporations to the golden circle to the welfare scroungers.

S.M.B.

Is auto enrollment not a necessary step to manage the massive move from Defined Benefit pensions to Defined Contribution pensions as opposed to the first step in a grand plan to means test the state pension?

KyussB

Funding your retirement is entirely an artificial problem, designed to get you to 'buy-in' to the financial industry and all of its ills and lack of ethics - and in this case, the government has been 'captured' badly enough by the finance industry, that they are going to subsidize the finance industry by forcing you to buy-in.

Even though it's artificial, it is a real problem though - the roots of which, are in people not being paid enough money, their costs of living being deliberately hoisted up high in an exploitative rent-seeking economy, and free-market-fetishist ideological governments which can't be trusted to provide the necessary social support of an adequate pension in line with the cost of living (the current policy does not achieve that - it privatizes the issue).

The 'buy-in', is that you typically will be investing in companies through your pension, that engage in an extremely broad/diverse range of ethical violations - fossil fuel industry firms promoting climate change denial and externalizing pollution/costs onto the environment/public, firms utilizing exploitative labour conditions in the developing world, firms which utilize tax havens to exploit all of us and also particularly the developing world - among much more (typically the financial firms involved in the pensions have a long history of fraud).

They (the finance industry) want to lobby politically to make your financial position insecure, and then they want to coax you into buying-in to their exploitative practices, by making (forcing!) you to depend upon them - on funding your retirement through their exploitation.

I'll be alright without, as I earn well - but if I didn't earn well and faced an insecure retirement, then knowing what I know, I'd rather face up to that insecurity and lobby politically for proper state supports and lobby collectively for proper wages, than give a single cent to the cunts.

Buying-in to them, is equivalent to accepting government capture by the finance industry, equivalent to accepting all of the ethical violations of the firms you'll be investing in, and equivalent to giving up fighting for proper state supports and proper wages. People really should be kicking up a massive stink about it.

Midlife crisis man

namenotavailabl wrote: »

The tax relief on pension contributions together with the potential investment gains makes them by far the easiest way to increase your wealth for most people- 'free money', as was noted above.
If I put €1000 into a pension fund today, it costs me €600 after tax relief. But, I now have a pension asset worth maybe €950 (after possible charges by the pension fund manager). I'm instantly ahead ~€350. If I hadn't made that contribution, the tax man gets the €400 instead.

That pension asset hopefully returns gains over time, enhancing my wealth and making my retirement more enjoyable.

On later taxation of the pension, between tax free lump sums, possible tax exemption/ marginal relief and age related tax credits for older people and how the tax system here generally takes a lower than average amount from incomes below the standard rate cut-off point when compared to internationally, it still seems like a worthwhile investment. No absolute guarantees that it'll all 'go swimmingly'-ask Waterford Crystal staff-but apart from death & taxes(!), what certainties are there?

So everybody uses pensions as a tax avoidance scheme? What's wrong with giving the tax man 40%?
It builds our roads and funds our hospitals and I'm happy to pay my taxes for the services I receive in this country

high_king

Midlife crisis man wrote: »

So everybody uses pensions as a tax avoidance scheme? What's wrong with giving the tax man 40%?
It builds our roads and funds our hospitals and I'm happy to pay my taxes for the services I receive in this country

that's some crisis your having

hmmm

Pensions are the last big tax break available to ordinary people, and you can see that the government are eager to remove that tax break. Something has to fund massive increases in public sector salaries.

You'd be foolish not to take advantage of that tax break while it's still there. I don't know how the average private sector worker will ever be able to live a dignified retirement if the tax-break is removed.

high_king

Privatising the contributory state pension . . that's going to work out well for genuine Irish workers . . . not