Why are people obsessed with getting a pension

Sheep Shagger

Squozen wrote: »

46, €153k (dropped fairly significantly due to covid-19!), putting in €687/month between myself and my employer (would love to put in more, but I can't until I can find a house to buy) and working on an average gain of 9% per annum.

Fair play having that amount built up at 46 when (in your own words) you were on a poor salary upto only a decade ago.

bilbot79

Squozen wrote: »

46, €153k (dropped fairly significantly due to covid-19!), putting in €687/month between myself and my employer (would love to put in more, but I can't until I can find a house to buy) and working on an average gain of 9% per annum.

My employer doesn't do matching but does pay decent. I put 1643 and they put in 526 so 2169 per month in total.

I'm 40 and the pot currently has 90k however when I fire my figures into th New Ireland Assurance calculator I get a fund of 870 by 65. That seems at odds with your 1.1 mil for 687 per month.

Do you use an online calculator to predict that?

Squozen

bilbot79 wrote: »

My employer doesn't do matching but does pay decent. I put 1643 and they put in 526 so 2169 per month in total.

I'm 40 and the pot currently has 90k however when I fire my figures into th New Ireland Assurance calculator I get a fund of 870 by 65. That seems at odds with your 1.1 mil for 687 per month.

Do you use an online calculator to predict that?

Yes, I use a compound calculator. The €1.1m is in future dollars, the calculator you're looking at most likely accounts for inflation. I figure the amount in today's money is more like €787k. You're putting in an exceptional amount, you'll be doing sigificantly better than me by the time you reach retirement. I make it €3.75m in future dollars, €2.29m in current. That does need you to keep everything in equities and most funds in Ireland are significantly more conservative than that.

Squozen

Sheep Shagger wrote: »

Fair play having that amount built up at 46 when (in your own words) you were on a poor salary upto only a decade ago.

I realised I was a long way behind and started putting in as much as I could on top of the 9% employers have to pay in Australia. The reason I harp on about it over here is that you don't have as good a system as Australia enjoys, so you need to get started early. Too many people absolutely refuse to, and I don't understand why.

S.M.B.

Squozen wrote: »

If you go for a fund that is very high on equities and low on fees, 9% is historically lower than the S&P 500 has made over time. My Australian fund gained 11.29% in 2018 and 12.47% in 2019, but it allows me to put my money directly into the stock market rather than charging active management fees. Those kinds of funds have been hard for me to find in Ireland.

Ah, I see you are not catering for inflation in your calculations so there wouldn't be much difference in our assumptions.

bilbot79, an online calculator would usually be less ambitious in terms of returns and take inflation into account. It should say what rate of return its based on.

Hard to know if they are overly cautious or not.

Squozen

S.M.B. wrote: »

bilbot79, an online calculator would usually be less ambitious in terms of returns and take inflation into account. It should say what rate of return its based on.

Hard to know if they are overly cautious or not.

Given the current state of the world they're probably being optimistic.

Bass Reeves

Padre_Pio wrote: »

I'm in my mid 30s. I don't know what the retirement age will be in 30 years, but equally I don't know what the expected life will be in 30 years.

People dying at the average life expectancy of 82 were born when Mr. Hitler was annexing Austria. When they were my age the life expectancy was 68.

It's silly to plan future events based on current state of affairs. We could all be living to 100 in 30 or 40 years time.

The average person that is alive at 60 will live to 84 at present. If you add in socio-economic factors, i means at present people that are in the better socio economic groups can expect to live into there late 80's. It is likly that this age will increase over time. Average life expectancy in the 1970's was around 70 for men and 72 for womenn I think

Bass Reeves

maestroamado wrote: »

The original poster said did not want invest on private pension and thats his choice.
I was pointing that to have a life today you need have no debt, house paid.
I said an individual need minimum €150 + €250 state = €400 pw = €1700+ to have any kind of life. I do not think the OP was thinking of cruises like everyone else here.

I expect things will change when this compulsory pension they are talking about and the larger portion will come from private pension.
I am not aware if there are any pensions in private funds that are guaranteed by Government.
If its to work something need be done in this area, i know a few people who got caught in last financial crisis.


There is no freebee here if we get the tax concession at the front end we pay tax when we draw out, that's the way it is. We can get 25% of the cash tax free.
Thats my understanding of how it works...

First off when you retire you can take a lump sum out of your pension pot of 1.5 years salary (average of best 3 of last 10 years before retirement) subject to putting the rest into an anunity straight away or 25% of your fund if the rest is going into an ARF subject to a lump sum limit of 200K in both cases.

Depending on the amount in your pension you can decide the best option for yourself. Today people that retire can be quite active into there late 70's it is likely that this age will increase as years go by.

Bass Reeves

Squozen wrote: »

Yes, I use a compound calculator. The €1.1m is in future dollars, the calculator you're looking at most likely accounts for inflation. I figure the amount in today's money is more like €787k. You're putting in an exceptional amount, you'll be doing sigificantly better than me by the time you reach retirement. I make it €3.75m in future dollars, €2.29m in current. That does need you to keep everything in equities and most funds in Ireland are significantly more conservative than that.

When you get much above 800K in a pension fund(in todays terms) unless an employers is matching funds you have to question if you really need to be funding your pension to that extent unless you intend your children to inherit it or intend to retire in your 50's.

Taking 200K from an 800K pot leaves 600K for pension income distribution. If going into an ARF and withdrawing 4%/year or taking an anunity you are hitting the higher tax bracket if you are drawing a state pension . Unless my employer was funding part of the pension I be inclined to invest outside the pension scheme. If you factor in changes to taxation and maybe reduction in state pensions a 1 million max fund will cater for most retirements.

maestroamado

Bass Reeves wrote: »

First off when you retire you can take a lump sum out of your pension pot of 1.5 years salary (average of best 3 of last 10 years before retirement) subject to putting the rest into an anunity straight away or 25% of your fund if the rest is going into an ARF subject to a lump sum limit of 200K in both cases.

Depending on the amount in your pension you can decide the best option for yourself. Today people that retire can be quite active into there late 70's it is likely that this age will increase as years go by.

I am thinking that people in certain jobs will be allowed retire at 66 as is now,
i would not be surprised if this was even brought back to 65.
There is some manual work like building/roofing that people need be out of it at this time. I think the less manual work will push up to maybe 70.


Just on the subject of pensions.
I had an interesting experience going with my father-in law (deceased)
I brought him to the local office and he had all the forms filled out.
Anyway after a while he came out confused that he only got one of the pensions so i went in with him, at this stage the official was being a bit difficult until i said to him.
Jimmy xxxxx was born on 09/09/9999 in xxxx town.
Nelly yyyyy was born on 09/09/9999 in yyyy town.
He was astounded that two people born the same actual day were a couple and applying for pension together.

bilbot79

Bass Reeves wrote: »

When you get much above 800K in a pension fund(in todays terms) unless an employers is matching funds you have to question if you really need to be funding your pension to that extent unless you intend your children to inherit it or intend to retire in your 50's.

Taking 200K from an 800K pot leaves 600K for pension income distribution. If going into an ARF and withdrawing 4%/year or taking an anunity you are hitting the higher tax bracket if you are drawing a state pension . Unless my employer was funding part of the pension I be inclined to invest outside the pension scheme. If you factor in changes to taxation and maybe reduction in state pensions a 1 million max fund will cater for most retirements.

This is a major consideration. I have no children but if by some miracle of IVF I do, they will turn 20 when I hit on a nice sum and probably inherit when I pop my clogs. If no children I will at least have an awesome few years in the sun

anewme

Jaysus, all these 1m funds are scary. I will be lucky to get a pot of 500k.

maestroamado

anewme wrote: »

Jaysus, all these 1m funds are scary. I will be lucky to get a pot of 500k.

Yes we have kinda lost the direction from OP who was thinking of not having a pension.
I wonder if any of these guys with Millions are short on relatives, saying that i am likely older and unlikely to be able to spend all the money they leave me.
Bed soon dreaming of "playas, senoras y dinero"

Jim2007

maestroamado wrote: »

Yes we have kinda lost the direction from OP who was thinking of not having a pension.

Not really, it highlights just how far of not saving for retirement is from the reality of what it takes.

Everyone's circumstances are different and we can't all save as much as we'd like, but it should be clear that doing nothing and expecting it to turn out OK is a loosing strategy.

retalivity

Question - Can i retroactively contribute to my pension for prior years in one-off payments to obtain the tax relief?
For example, I am 35, earned 100k last year (2019) but only contributed 14k to my pension. For my age, I can contribute up to 20k tax-free, so can i now pay 6k to cover the difference, and get tax relief for this year?

bilbot79

retalivity wrote: »

Question - Can i retroactively contribute to my pension for prior years in one-off payments to obtain the tax relief?
For example, I am 35, earned 100k last year (2019) but only contributed 14k to my pension. For my age, I can contribute up to 20k tax-free, so can i now pay 6k to cover the difference, and get tax relief for this year?

I don't think so. I think it's only for the year that's in it

bilbot79

Squozen wrote: »

Yes, I use a compound calculator. The €1.1m is in future dollars, the calculator you're looking at most likely accounts for inflation. I figure the amount in today's money is more like €787k. You're putting in an exceptional amount, you'll be doing sigificantly better than me by the time you reach retirement. I make it €3.75m in future dollars, €2.29m in current. That does need you to keep everything in equities and most funds in Ireland are significantly more conservative than that.

Now I get it!

Yes my contributions are good as circumstances permit (no kids, bought house in the bust etc)

Jim2007

anewme wrote: »

Jaysus, all these 1m funds are scary. I will be lucky to get a pot of 500k.

The thing is that by doing the math and revising your plan on a regular basis it will not come as a shock to you on retirement day... and you can make plans accordingly.

Here in Switzerland the last generation got caught out badly on the pension side, that is why we are so much further on in pension reform. But there are in fact a lot of poor old people in Switzerland. The ones that were a ware of the issue made better plans:

- Many bought cheap apartments in Portugal, where they spend the winter months: it's much cheaper, they avoid the bad winters in Switzerland and it is a major tax saving because they are exempt for taxes there.

- Some moved to cheaper parts of the country immediately on retirement, so they had a chance to build up a social network there.

- More just dramatically down sized and move to an apartment in a large town or city: it reduced their costs, got rid of the burden involved in the upkeep of a property and they were also closer to doctors etc... which is a consideration in old age too

There is no point in just ignoring the thing, better to have some idea of what is to come and be in a position to make some plans as best you can.

maestroamado

Jim2007 wrote: »

Not really, it highlights just how far of not saving for retirement is from the reality of what it takes.

Everyone's circumstances are different and we can't all save as much as we'd like, but it should be clear that doing nothing and expecting it to turn out OK is a loosing strategy.

That was more or less what i meant by the comment and doing nothing not an option.
Also to highlight the fact that some people have modest needs and feel that not need a pension and others need € Million.
I would not like to be retiring in 20 years without top-up to whatever state provide.


I just noticed in the last few days, 20 years ago the focus was property investment, ie second property let out to pay mortgage which was the route i took, i only got into pension by accident as that was the norm in what i was doing.
Why has property gone off this agenda, is it that it is too expensive?
is it because it is not tax efficient?

Bass Reeves

retalivity wrote: »

Question - Can i retroactively contribute to my pension for prior years in one-off payments to obtain the tax relief?
For example, I am 35, earned 100k last year (2019) but only contributed 14k to my pension. For my age, I can contribute up to 20k tax-free, so can i now pay 6k to cover the difference, and get tax relief for this year?

You can make a pension contribution for 2019 and claim the tax back until October this year. Talk to your pension provider

Bass Reeves

retalivity wrote: »

Question - Can i retroactively contribute to my pension for prior years in one-off payments to obtain the tax relief?
For example, I am 35, earned 100k last year (2019) but only contributed 14k to my pension. For my age, I can contribute up to 20k tax-free, so can i now pay 6k to cover the difference, and get tax relief for this year?

maestroamado wrote: »

That was more or less what i meant by the comment and doing nothing not an option.
Also to highlight the fact that some people have modest needs and feel that not need a pension and others need € Million.
I would not like to be retiring in 20 years without top-up to whatever state provide.


I just noticed in the last few days, 20 years ago the focus was property investment, ie second property let out to pay mortgage which was the route i took, i only got into pension by accident as that was the norm in what i was doing.
Why has property gone off this agenda, is it that it is too expensive?
is it because it is not tax efficient?

Property is usually the preserve of the self employed. However if your pension i fairly well funded you could consider. But you would need to get a 10+ rental return for it to be a significent part of your investment plan. Hard to come across such properties and usually they are lower value and require a bit of management.

anewme

maestroamado wrote: »

That was more or less what i meant by the comment and doing nothing not an option.
Also to highlight the fact that some people have modest needs and feel that not need a pension and others need € Million.
I would not like to be retiring in 20 years without top-up to whatever state provide.

Thats also the point I'm making.

No way will I get near 1m pot now, I started too late - 35. Advice to would be to start as early as you can, though with people saving for mortgages that has not been possible for many people.

And even at this point, I can review all I want - we have a good online projector, there needs to be a balance between living now and enjoying life now and living then.

Also, it is important to only build up what you will use....for example a pot of 500k, I could take 100k and have 400k. That could give 14 - 15k a year, plus state would bring you to 27k.

If I look at my earnings now, take out mortgage, loans and pension, I'm probably left with around 2.5k per month.

So if you had 2.5k per month, ( I know I'm not factoring in inflation) plus your 100k lump, plus another 200-300k you've picked up along the way, surely that's enough. I don't want to be stockpiling cash or assets to leave to the taxman.

Anyone see any fault in how im calculating or give any advice?

Squozen

maestroamado wrote: »

Why has property gone off this agenda, is it that it is too expensive?
is it because it is not tax efficient?

For me the issue with property is that it's a massive investment that's fixed in one location and takes a lot of time and money to buy or sell. I can buy some shares with €100 and sell them to anybody across the planet within a few minutes, I can't do that with a house. I also think it's pretty shady to be owning multiple houses in a country with a housing crisis, but I understand a lot of people don't think that way and that's fine.

Squozen

anewme wrote: »

Also, it is important to only build up what you will use....for example a pot of 500k, I could take 100k and have 400k. That could give 14 - 15k a year, plus state would bring you to 27k.

If I look at my earnings now, take out mortgage, loans and pension, I'm probably left with around 2.5k per month.

So if you had 2.5k per month, ( I know I'm not factoring in inflation) plus your 100k lump, plus another 200-300k you've picked up along the way, surely that's enough. I don't want to be stockpiling cash or assets to leave to the taxman.

Anyone see any fault in how im calculating or give any advice?

The only thing I would suggest is to assume that the state pension will either come later or be less than it is now - make sure your own savings plan will cover you regardless of what the government impose.

anewme

Squozen wrote: »

The only thing I would suggest is to assume that the state pension will either come later or be less than it is now - make sure your own savings plan will cover you regardless of what the government impose.

I'm in the 68 group. But they will still have to bridge it.

S.M.B.

I think there's a real stigma attached to a 1 million pension pot. People assume that anyone (on target to be) sitting on such a pot is/will be rolling in cash. The reality is that compared to defined benefit pensions it's not THAT much. Reaching retirement with such a sum would probably result in an annuity paying out similar to what an average teacher in Ireland would be getting. That's after 40 years of deciding how much in contributions to make, micro managing your funds and worrying about the markets.

I don't own a house, I don't have a mortgage but I also don't have my head in the sand and want to ensure I have some sort of financial independence when I turn ~60. For me I am directing a substantial amount of my money into a pension as it's the most tax efficient way to do so but people will hear 1 million pension pot and think I'll be jetting off to some private island every winter.

maestroamado

Squozen wrote: »

For me the issue with property is that it's a massive investment that's fixed in one location and takes a lot of time and money to buy or sell. I can buy some shares with €100 and sell them to anybody across the planet within a few minutes, I can't do that with a house. I also think it's pretty shady to be owning multiple houses in a country with a housing crisis, but I understand a lot of people don't think that way and that's fine.

I agree with you, i was making the statement as to what was there before.
Your point on responsibility of owning the property is correct, i have a property now and i am not sure if i own the property or it owns me, if i go away i have to be mindful of it.
I am all for people having access to buying homes and i have a serious dislike for these International funds buying developments in especially in Dublin in recent years, i would have mentioned it here on posts.
There is a rental market and that also has to be provided for.
The people who were doing what i am saying have now being replaced by Cuckoo funds where people have shares like what you mention, your correct they are very shady and pay little or no tax.

anewme

S.M.B. wrote: »

I think there's a real stigma attached to a 1 million pension pot. People assume that anyone (on target to be) sitting on such a pot is/will be rolling in cash. The reality is that compared to defined benefit pensions it's not THAT much. Reaching retirement with such a sum would probably result in an annuity paying out similar to what an average teacher in Ireland would be getting. That's after 40 years of deciding how much in contributions to make, micro managing your funds and worrying about the markets.

I don't own a house, I don't have a mortgage but I also don't have my head in the sand and want to ensure I have some sort of financial independence when I turn ~60. For me I am directing a substantial amount of my money into a pension as it's the most tax efficient way to do so but people will hear 1 million pension pot and think I'll be jetting off to some private island every winter.

Not sure there is a stigma attached.

To get there, you'd want to start early early. Many people can't and will never catch up especially if they buy their home.

I don't think anyone is begrudging either, fair play.

I do hope to have a decent lifestyle on 500K though, similar to how I live now. There are many people better off, many worse off, once you do your own sums you will be ok.

S.M.B.

anewme wrote: »

Not sure there is a stigma attached.

To get there, you'd want to start early early. Many people can't and will never catch up especially if they buy their home.

I don't think anyone is begrudging either, fair play.

I do hope to have a decent lifestyle on 500K though, similar to how I live now. There are many people better off, many worse off, once you do your own sums you will be ok.

Fair enough, maybe I'm overly sensitive. I do think when someones expected wealth at retirement age is assessed it is important to consider more than just the size of their private pension pot though, whether they are a homeowner or not would be just as significant, and defined benefit pensions don't sound as lucrative as they can be.

I started very late in the day when it comes to my pension, it was auto-enrolment in the UK which actually kick started my engagement. A big reason why I'm able to contribute so much right now is that catching up on payments is a bigger priority than trying to get on the property ladder. This could easily change in the coming years though.

Squozen

S.M.B. wrote: »

I started very late in the day when it comes to my pension, it was auto-enrolment in the UK which actually kick started my engagement. A big reason why I'm able to contribute so much right now is that catching up on payments is a bigger priority than trying to get on the property ladder. This could easily change in the coming years though.

I'm in a similar situation, I have ~€90k sitting in investments that was supposed to be our house deposit. The house purchase fell through (dodgy seller) and then the pandemic happened so I have to rent for another year. The longer we rent the further behind I get on saving for the future, but it is what it is.