Why are people obsessed with getting a pension

MLC_biker

After 50 you can take 25% of the pension as a tax free lump sum, so I'd encourage anyone who has a bit left over every month to start a pension, especially if the company tops it up and you can spare it prior to mortgage kids etc..

Padre_Pio

Heres Johnny wrote: »

2 grandfather's went to 81 and 84, grandmother's 94 and 99. Both parents now 66 and healthy as I am. All aunts and uncles still alive and healthy, most in 70s now. Only 1 of my close circle of friends has lost a father and 1 a mother. Rest still alive and healthy.

Will you go away with your dying at 65 crap you'll be very poor in retirement. If you really feel you'll die at 65 pump it all into a life insurance policy so.

Average life right now is 78 for a man and 82 for a woman. That's 15 years of retirement if you get to the average. I'm 30, my grandparents are in their 90s. Chances are I'll hit 100 and still have a decent quality of life.

Heres Johnny

MLC_biker wrote: »

After 50 you can take 25% of the pension as a tax free lump sum, so I'd encourage anyone who has a bit left over every month to start a pension, especially if the company tops it up and you can spare it prior to mortgage kids etc..

You do have to be retired though.... And this only applies to occupational pensions and not personal pensions so it's not really a common thing to do at all.

Das Reich

Augeo wrote: »

260 weeks of prsi won't get the 260/week contributory pension..... It sounds like he's going to apply for disability rather then the state pension.

Yes you are right, he is applying for disability, and have very few weeks to reach 260 weeks. But is because he is diabetic and unfit for work, but goes to gym many days a week and very fit.

2 grandfather's went to 81 and 84, grandmother's 94 and 99. Both parents now 66 and healthy as I am. All aunts and uncles still alive and healthy, most in 70s now. Only 1 of my close circle of friends has lost a father and 1 a mother. Rest still alive and healthy.

Will you go away with your dying at 65 crap you'll be very poor in retirement. If you really feel you'll die at 65 pump it all into a life insurance policy so.

Most of my family died after 80 in a country with life expectancy about 10 years less than Ireland. But it does't mean anything, its like a lottery, if you are unlucky and die before 65 its a profit for the state. And guess what happens when life expectancy goes up? Yes, the retirement age will also be increased to about 10 or 15 years less than life expectancy.

Dodge

Stop getting pissed off about the guy you ‘know’ on Christmas Day.

It’s up to you what you do about your income during your retirement.

AndrewJRenko

Heres Johnny wrote: »

You do have to be retired though.... .

Not really. I 'retired' to get cash out of one AVC fund some years back, though I'm still in full employment.

Heres Johnny

AndrewJRenko wrote: »

Not really. I 'retired' to get cash out of one AVC fund some years back, though I'm still in full employment.

Did you retire from the job the avc was attached to?

Padre_Pio

Das Reich wrote: »

Most of my family died after 80 in a country with life expectancy about 10 years less than Ireland. But it does't mean anything, its like a lottery, if you are unlucky and die before 65 its a profit for the state. And guess what happens when life expectancy goes up? Yes, the retirement age will also be increased to about 10 or 15 years less than life expectancy.

It's not lottery. It's averages. It would be very unusual to die before 65 in Ireland. The majority should expect to live to late 70s and plan accordingly.

You're correct that the retirement age will increase, but life expectancy may also increase. Plus, you can retire early if you plan it. Both my parents retired in their late 50s.

It would be foolish not to plan for a life beyond 65.

AndrewJRenko

Heres Johnny wrote: »

Did you retire from the job the avc was attached to?

I had left that employment long, long ago - left, not retired.

Eggs For Dinner

I retired with a full pension at 36 years of age.

Jim2007

Heres Johnny wrote: »

Property investing, like any investing, can be damaging but buying your own home is prudent.

Property investing is not like any other investing because it involves a much higher degree or risk and products a much lower return.

Who is it prudent to:
- Borrow a large sum of money to invest (rule of investing, out the window)
- Fail to diversify (rule of investing, out the window)
- Invest in a high risk asset class (rule of investing, out the window)
- Invest in an illiquid asset (rule of investing, out the window)
- accept in a low rate of return (rule of investing, out the window)
- maintain a property that for the most of your life will be more than your needs
- restrict your mobility in recessionary times when jobs are scare etc..

Hopefully, Irish people will eventually realise that a national housing policy based on people taking on huge debts or relying on social services to put a roof over their heads does not work, it never has.

Jim2007

Das Reich wrote: »

Most of my family died after 80 in a country with life expectancy about 10 years less than Ireland. But it does't mean anything, its like a lottery, if you are unlucky and die before 65 its a profit for the state. And guess what happens when life expectancy goes up? Yes, the retirement age will also be increased to about 10 or 15 years less than life expectancy.

Yes it is true that no one knows when they will die, but that does not mean that you should not make some plans based on life expectancy, just in case...

The state pension is a pay as you go system, so should you die early it is not profit for the state by any stretch of the imagination. It simply means that the current tax payers might not have to make additional contributions or rates might not have to go up etc... should a large percentage of population die early.

Likewise, pension funds and instance companies are not going to make a big profit out of your death either, because profits are based on commissions, fees and returns on holdings. Pension products are constructed on the basis of life expectancy figures etc... and are priced on the assumption that a certain percentage of the insured will die early and are priced on that basis. The assumption being that funds that might have been paid to the people who die early will cover that funding of those that survive.

pwurple

pwurple wrote: »

I don't know if home ownership is everything people in Ireland think it is cracked up to be. The tax regime on home ownership is as likely to change as anything else. Renting may be the more tax efficient option long term.

Take certain states in the US for example. A house in new jersey can be liable for 1200 to 2000 dollars a month property tax. Even with a mortgage paid off, that's a lot to have to sustain in your old age. Some retirees sell their home and rent to avoid maintenance and overheads. Who wants to be clearing gutters in their 80's? There is a lot to be said for rental at that age. We need to build that sector up to a good level in my opinion.


I understand what you're saying about flexibility and opting in and out. I had to cut pension contributions to zero before I went on maternity leave, as my employer at the time did not 'top up' the govt benefit, and I needed to eat and feed my kids while on that leave.


However, I don't agree in general that a mortgage deposit is something to cut your pension for.

I’ve done just that, stopped by pension payments completely in order to save more towards a deposit. Now I didn’t go out and do it proactively but rather I changed jobs from one with a compulsory pension and large employer contribution to one with no pension scheme and no employer contribution and so weighing things up and the amount I would need to contribute I decided that maintaining savings was more important (earning more but have a number of other increased outgoings also at the moment).

To me having owning your own home is absolutely vital in retirement and having a lower pension because of it is well well worth it. Renting even early in life is a massive burden never mind in later life, couldn’t imagine it even in old age as I’ve never personally seen anyone not owning their home when old.

Not a chance will we ever have property taxes etc like the ones described in the US, they should never have been introduced in the first place here as it’s disgraceful but people will be on the streets if they start to make them any more expensive they are.

Squozen

Das Reich wrote: »

Most of my family died after 80 in a country with life expectancy about 10 years less than Ireland. But it does't mean anything, its like a lottery, if you are unlucky and die before 65 its a profit for the state. And guess what happens when life expectancy goes up? Yes, the retirement age will also be increased to about 10 or 15 years less than life expectancy.

What is this nonsense? If you die before 65, your spouse or kids get the money, not the state. It’s a PERSONAL PENSION. It’s YOUR MONEY.

I swear, the amount of ignorance about pensions in this country.

Klonker

Squozen wrote: »

What is this nonsense? If you die before 65, your spouse or kids get the money, not the state. It’s a PERSONAL PENSION. It’s YOUR MONEY.

I swear, the amount of ignorance about pensions in this country.

Yeah they might be getting confused with if they purchase an annuity on retirement. This way you get pay for a guaranteed amount of money every year until you die, even if you dies in first year none of the annuity is left in will.

Though ARFs/AMRFs are much more popular at the moment because annuity rates are so low. This is where you have more control over your pension pot and can reinvest but need to withdraw 4‰ a year minimum, anything left is passed on in will. Risk is though that if you live very long you may run out of money.

Jim2007

Klonker wrote: »

Yeah they might be getting confused with if they purchase an annuity on retirement. This way you get pay for a guaranteed amount of money every year until you die, even if you dies in first year none of the annuity is left in will.

There is an option for a spousal pension on the death of the main holder, at least here in Switzerland. And I'd be more concerned about ensures myself and my wife can live comfortably will alive than what happens after I die.

Klonker wrote: »

Though ARFs/AMRFs are much more popular at the moment because annuity rates are so low. This is where you have more control over your pension pot and can reinvest but need to withdraw 4‰ a year minimum, anything left is passed on in will. Risk is though that if you live very long you may run out of money.

The 4% is starting to be a problem and people are starting to realise there is a gap...

Becks610

Jim2007 wrote: »

There is an option for a spousal pension on the death of the main holder, at least here in Switzerland. And I'd be more concerned about ensures myself and my wife can live comfortably will alive than what happens after I die.



The 4% is starting to be a problem and people are starting to realise there is a gap...

Is what way is the 4% a problem? I assume in people don’t have enough saved so 4% each year is not enough to live on.

Jim2007

Becks610 wrote: »

Is what way is the 4% a problem? I assume in people don’t have enough saved so 4% each year is not enough to live on.

The basic assumptions underlying this theory are not panning out in terms of the assumed annual return.

Becks610

Jim2007 wrote: »

The basic assumptions underlying this theory are not panning out in terms of the assumed annual return.

Yes I do worry about these things. I am early 30s and am contributing to a pension, each year I get a statement showing projections etc and I have read a lot re return on equities on average over the last 100 years etc. I do wonder and worry tho about the projected returns- I believe the next 100 years are going to be very different than the last 100- we are advancing so much and have advanced so much in technology etc surely eventually growth can’t keep going. I am probably a pessimistic and a conservative person but I put as much money into my pension as I can afford and will continue to do so cos the state pension in Ireland won’t be the same when I get to 70. Also we won’t have all the extra benefits that they do now.

Jim2007

Becks610 wrote: »

Yes I do worry about these things. I am early 30s and am contributing to a pension, each year I get a statement showing projections etc and I have read a lot re return on equities on average over the last 100 years etc. I do wonder and worry tho about the projected returns- I believe the next 100 years are going to be very different than the last 100- we are advancing so much and have advanced so much in technology etc surely eventually growth can’t keep going. I am probably a pessimistic and a conservative person but I put as much money into my pension as I can afford and will continue to do so cos the state pension in Ireland won’t be the same when I get to 70. Also we won’t have all the extra benefits that they do now.

We are talking about two different things, I'm taking about the short term, while you are talking about the long term..

I talking about the current situation for people already retired. On retirement they made a choice between an annuity, giving them a certain pension indefinitely and the possibility of a spousal pension should they die prematurely or drawing down a certain amount of capital each year on the assumption that the replenishment rate would be such that the capital would be sufficient to cover them until death. And this last option is not working out.

You on the other hand are talking about the long term and generally speaking the out look is good. Yes there will be periods of little growth, there always have been but it should work out OK in the end. I will not be around to see it, but I expect sometime in the near future Ireland will adapt the typical three pillar system and this will result in higher pension savings and employers contributions. And also most likely universal income with be adapted as well. You can expect to outsource for every and that people will still be able to be consumer so even industry will be pushing for a universal income...

Saudades

Das Reich wrote: »

Most of my family died after 80 in a country with life expectancy about 10 years less than Ireland. But it does't mean anything, its like a lottery, if you are unlucky and die before 65 its a profit for the state. And guess what happens when life expectancy goes up? Yes, the retirement age will also be increased to about 10 or 15 years less than life expectancy.

Squozen wrote: »

What is this nonsense? If you die before 65, your spouse or kids get the money, not the state. It’s a PERSONAL PENSION. It’s YOUR MONEY.

He was talking about the state pension.
I think he's saying that if you die before reaching the state pension retirement age, it's a profit for the state as your state pension isn't passed on to spouse or kids, even if you had paid the maximum PRSI contributions.

Padre_Pio

Saudades wrote: »

He was talking about the state pension.
I think he's saying that if you die before reaching the state pension retirement age, it's a profit for the state as your state pension isn't passed on to spouse or kids, even if you had paid the maximum PRSI contributions.

While he's factually correct, odds are the majority will live well into retirement age.

It's rare enough for people to die before they're 65, provided theyve looked after themselves.

Geuze

Saudades wrote: »

He was talking about the state pension.
I think he's saying that if you die before reaching the state pension retirement age, it's a profit for the state as your state pension isn't passed on to spouse or kids, even if you had paid the maximum PRSI contributions.

If you die while working, before pension age, your spouse will get a pension.

Spouse gets Survivors/ widows pension.

metricspaces

Jim2007 wrote: »

Property investing is not like any other investing because it involves a much higher degree or risk and products a much lower return.

Who is it prudent to:
- Borrow a large sum of money to invest (rule of investing, out the window)
-.

Name another way your average Joe can get €100,000's from a bank to invest?

With a buy to let you can get 70% of property value from a bank and tenant pays off the mortgage.

No investment with any significant return is risk free. But no other investment vehicle will your average Joe get €100,000s of someone else's money to play with.

What are you basing your assumption on that property investment has a lower return? And a lower return in comparison to what? Can you provide reference to analysis that backs this up?

With property investment you have both appreciation in the assets value and once mortgage is paid off you've a continuous source of income. Invest in shares and they'll appreciate also but dividends would be nowhere near rental income.

Jim2007

Padre_Pio wrote: »

While he's factually correct, odds are the majority will live well into retirement age.

The state pension is a 'pay as you go' system, so not factually correct, it just means there is less to pay out in a given periods.

Jim2007

metricspaces wrote: »

What are you basing your assumption on that property investment has a lower return? And a lower return in comparison to what? Can you provide reference to analysis that backs this up?

I'm basing it on 30+ years spent providing performance and attribution analysis on investment portfolios in mainland Europe. In an average year I used to review between 800 and 1000 investment decisions. And on top of that there is plenty of research papers on portfolio construction out there that confirms this.

If you borrow money and sink into property, do not be surprised if it goes horribly wrong.

Dodge

Jim2007 wrote: »

The state pension is a 'pay as you go' system, so not factually correct, it just means there is less to pay out in a given periods.

The SI system isn’t just about pensions either (illness benefit, maternity/paternity, jobseekers etc etc). Seeing PRSI ‘wasted’ on the state is a poor way of looking at it

AndrewJRenko

metricspaces wrote: »

Name another way your average Joe can get €100,000's from a bank to invest?

With a buy to let you can get 70% of property value from a bank and tenant pays off the mortgage.

No investment with any significant return is risk free. But no other investment vehicle will your average Joe get €100,000s of someone else's money to play with.

You seem to be ignoring the fact that by leveraging your investment, you dramatically increase your risk. If you have say €100k of your money, and your are borrowing say €300k to buy one property, you are x4 the impact of losses as well as gains. So a 25% loss in the property market can wipe out your full investment, your entire equity. Lots of people learned this lesson the hard way last time round.

metricspaces wrote: »

With property investment you have both appreciation in the assets value and once mortgage is paid off you've a continuous source of income.

Again, just to be clear, your appreciate in assets and your continuous source of income depends on the property market. You could end up with no appreciation in value of assets, which are costing you money to maintain.

Don't go into any investment without understanding the downside.

metricspaces

Jim2007 wrote: »

If you borrow money and sink into property, do not be surprised if it goes horribly wrong.

What % of people who borrow for buy- to-let does it go horribly wrong for? Risk and perceived risk are two completely different things.

And to my original question to you. Name another way your average Joe can get €100,000's from a bank to invest?

metricspaces

AndrewJRenko wrote: »

Lots of people learned this lesson the hard way last time round..

Equally lots of people managed to hold on to their buy-to-lets during the downturn.