how much of a pension should you have come retirement age

thebourke

roughly speaking how much should you have saved by the time you come to retire...i am 47 and have 65k in my pension fund so far.....

Steve

I'm 49 and have about the same. We're both fubar unfortunately.

Most financial sites say it should be >300k at this point.

Jim2007

You need to work from the other end... how much of an income will you need in retirement?

Generally speaking the consensus is about 60% - 70% of your current income should be able to keep you more or less in the style you are accustomed to. So a quick rule of thumb would be:

((Current Salary * .65) - Your state pension entitlement)) / 0.03

NIMAN

thebourke wrote: »

roughly speaking how much should you have saved by the time you come to retire...i am 47 and have 65k in my pension fund so far.....

Thats not great tbh.

Mortelaro

If you've 3 kids,all grown up,flown the Coop and are independently working and your mortgage is paid off,why on earth would you need 60 to 70% of your current income?
Inflation compounded might be 10 or 15% by retirement at this stage but your cost of living at retirement versus now will have quartered

Pay close attention to your own circumstances
Budget for that, rather than listen to industry guff

Heebie

The company/bank that manages your pension fund probably has online tools that can show you what to expect for income.
You're about where I was when I see your age. I'm now at about twice that and putting away as much as the law allows (currently 25% of my pay every payday.. 20% contributed by me, and 5% from my employer matching)
Their suggestion is that I'll likely need 32k/annum to live on, including the state pension, so my pension will need to pay around 20,000 of that.

Of course, that's based on the assumption that the state pension will still exist, and will have certain cost of living adjustments, and my level of paying in will remain similar with certain levels of pay-rises assumed etc etc etc...
Because it's all predictive and predicated on things that may or may not really be assumed, it's fairly bollocks anyhow. It's looks like I certainly won't have a glamorous lifestyle when I'm s pensioner.

The younger one starts putting money away, the more it compounds and the better of you'll be.

People who have pension matching available and aren't putting at least as much as their company will match are just throwing money away... so if you have matching available, at least do that much!
The percentage of your income that you are allowed to put away tax-deferred, goes up as you get older, so if you can, it's not a bad idea to do so.

thebourke wrote:

roughly speaking how much should you have saved by the time you come to retire...i am 47 and have 65k in my pension fund so far.....

Liam D Ferguson

Look at your current income. Subtract all the expenses you won't have when you retire, e.g. mortgage, car loan, expenses for children, commuting costs. Then you have a rough guide to how much income you'll need when you retire. Subtract €12,000 for the State Pension. What's left is what you'll need to come up with from your private pension. Very rough rule of thumb - target a fund of 20 or 25 x the annual pension you want.

If you already have a pension fund, then your broker should be able to do this calculation for you, to take into account the existing fund etc.

silent_spark

Liam D Ferguson wrote: »

Look at your current income. Subtract all the expenses you won't have when you retire, e.g. mortgage, car loan, expenses for children, commuting costs. Then you have a rough guide to how much income you'll need when you retire. Subtract €12,000 for the State Pension. What's left is what you'll need to come up with from your private pension. Very rough rule of thumb - target a fund of 20 or 25 x the annual pension you want.

If you already have a pension fund, then your broker should be able to do this calculation for you, to take into account the existing fund etc.

Subtract those costs, but add on the additional costs you’ll have - increased heating costs, extra hours of home-help / cleaner / gardener, additional holidays, lunches and coffees out, tickets for concerts etc.

I’m no where near where I should be, I really wish I had started something in my twenties.

Jim2007

Mortelaro wrote: »

If you've 3 kids,all grown up,flown the Coop and are independently working and your mortgage is paid off,why on earth would you need 60 to 70% of your current income?
Inflation compounded might be 10 or 15% by retirement at this stage but your cost of living at retirement versus now will have quartered

Pay close attention to your own circumstances
Budget for that, rather than listen to industry guff

Well I guess if all you want to do when you retire is sit at home everyday looking out the window, then you be just fine on a very reduced income....

But that industry guff, you dismiss so easily is base on looking on the lifestyles of people in early retirement and most of them are in good health and are likely to be for sometime and they don't want to stay home, they are travelling, taking courses, visiting friends abroad and do things that interest them. They don't stop spending, in fact many spend even more. My father and mother never left the West of Ireland until the day the gave up farming... after that you'd be hard pressed to find them at home for any extended period over the next ten years - they went all over Europe and beyond.... don't assume everyone wants to stay at home and live within a very limited income like you do.

Eggs For Dinner

Mortelaro wrote: »

Pay close attention to your own circumstances
Budget for that, rather than listen to industry guff

Don't forget all the DIY and gardening jobs that you may not be able to do anymore and have to get someone in. Add to that the extra heating bills that are a fact of life for older people. You will also have more leisure time for holidays and clubs.

My kids have also headed out to the world, but in today's Ireland, they still need a bit of help every so often. Bottom line, no way do I want to rely on the State for my income, housing or healthcare

pwurple

Also there are some things which get more expensive. My parents have their mortgage paid off, but they pay 250 euro a month on health insurance, their car insurance has jumped massively at that age and they spend more time at home so their heating costs have gone up. They have a mobile phone each, broadband, sky... and when they retired, they had to buy things for home, that like a laptop (which work had previously provided).

They need glasses now, have more dental costs, need hearing aids, see the GP more.


I’m in my 40’s and pay in the max to my pension fund. It’s tax free. Even if there was no gain whatsoever, tax free money is something I try to take up.

Sleeper12

Eggs For Dinner wrote:

Don't forget all the DIY and gardening jobs that you may not be able to do anymore and have to get someone in. Add to that the extra heating bills that are a fact of life for older people. You will also have more leisure time for holidays and clubs.

You forget that all OAP's get a very generous fuel allowance. The cost of heating drops dramatically, rather than increases, once you become an oap. That's not to suggest that pensions are a bad thing

pwurple

Sleeper12 wrote: »

You forget that all OAP's get a very generous fuel allowance. The cost of heating drops dramatically, rather than increases, once you become an oap. That's not to suggest that pensions are a bad thing

Fuel allowance is means tested. If you have any contributions to a pension you basically don’t qualify.

Heres Johnny

It's a very personal decision and unique to you.
I was an advisor for a good few years and I talked to people about how they see their own retirements.

I have a mortgage and this will be paid off before retirement so that's 1000 a month I won't need like I do now. But ask yourself, what if you are renting all your life?

I will be eligible for state pension of approx 12000 a year so that's 1000 a month.

I'd like another 2000 a month to spend so 24000 a year for 20 years which is a fund of 500k more or less.

I will inherit a house from my parents (well, a half of the house along with my brother ) and I may inherit part of a family business but I'm not sure of this.

So, have a think yourselves about what you want then get a good advisor to put the plan into place. I was lucky my parents drilled the whole pension thing into me as soon as I left college and started working and I've been paying in since early 20s.

It's financial planning, which I always marketed myself as, and I've a feeling the occupation financial advisor is going to be replaced by financial planner in next few years. It's a long term thing

Eggs For Dinner

Sleeper12 wrote: »

You forget that all OAP's get a very generous fuel allowance. The cost of heating drops dramatically, rather than increases, once you become an oap. That's not to suggest that pensions are a bad thing

In my elderly mother's situation, I can assure you the heating allowance doesn't cover much. Her heating, like a lot of elderly people, is on high all day.

The main thing I would caution people against is taking for granted that current state pensions and other allowances will still be around at the same levels when it comes to your turn

NIMAN

Eggs For Dinner wrote: »

In my elderly mother's situation, I can assure you the heating allowance doesn't cover much. Her heating, like a lot of elderly people, is on high all day.

The main thing I would caution people against is taking for granted that current state pensions and other allowances will still be around at the same levels when it comes to your turn

This 100%.

People are just assuming that there will be a generous state pension when they get to that age. I would assume nothing. Living carefree now with the hope that the State will look after them is an approach many are probably taking.

We have a very generous welfare system in Ireland, one that certainly doesn't look sustainable for decades to come.

And remember that when it comes to private pensions, the money you are paying into them now is covering the pensions of current retired people. It will be the workers of the future who will be paying your pension. We can't say for certain that you will definitely get X return on any pension.

thebourke

when you come to retirement age (66.67.68.), are they assuming you will live for 20 years afterwards in those calcualtion?


Say for example you have a pension pot of 250k by retirement age,you don't get that money straight into your hand do you?
Don't you have to pay tax on it?How much?

Jim2007

Eggs For Dinner wrote: »

Don't forget all the DIY and gardening jobs that you may not be able to do anymore and have to get someone in. Add to that the extra heating bills that are a fact of life for older people. You will also have more leisure time for holidays and clubs.

Even if you do own your own home outright, there may well be a need for renovations to make it easier to live in in later life, which would not be covered by healthcare etc...

Jim2007

NIMAN wrote: »

And remember that when it comes to private pensions, the money you are paying into them now is covering the pensions of current retired people. It will be the workers of the future who will be paying your pension. We can't say for certain that you will definitely get X return on any pension.

This is not the case at all. You are thinking of the state scheme which is a pay as you go system. i don't believe there is a single Irish private pension fund that actually manages the pension after maturity - I believe they all switch to some kind of annuity model.

pwurple

thebourke wrote: »

when you come to retirement age (66.67.68.), are they assuming you will live for 20 years afterwards in those calcualtion?


Say for example you have a pension pot of 250k by retirement age,you don't get that money straight into your hand do you?
Don't you have to pay tax on it?How much?

You can take a lump sum of 200k tax free. The rest is taxed as if it were a salary as you draw it down. So you will have your tax credits.

nompere

pwurple wrote: »

You can take a lump sum of 200k tax free. The rest is taxed as if it were a salary as you draw it down. So you will have your tax credits.

You can take a lump sum of the lower of €200,000 or 25% of the fund tax free. So with a fund of €250,000, the maximum lump sum is €62,500.

The rest can be used to buy a taxed annuity, or go into an ARF/AMRF, from which a taxable income may be drawn.

anewme

nompere wrote: »

You can take a lump sum of the lower of €200,000 or 25% of the fund tax free. So with a fund of €250,000, the maximum lump sum is €62,500.

The rest can be used to buy a taxed annuity, or go into an ARF/AMRF, from which a taxable income may be drawn.

Can you take 25% of your fund, irrespective of your salary?

I'm hoping for a fund of 500k, which would give me 125k?.

aristotle25

anewme wrote: »

Can you take 25% of your fund, irrespective of your salary?

I'm hoping for a fund of 500k, which would give me 125k?.

Yes you can.125k is correct in your example.

anewme

Might be an odd and maybe a morbid question.

How do ppl asses how much you need for pension.?

For example, if I take home 3600, but pay out 1000, then when retiring I'd need 2600 to be the same as now.

But if I've also built up cash, then I could use that too. 200k plus 125 k pension lump sum.

Just conscious of not saving too much now, as I'm not willing to leave it to govt when I pass on.

pwurple

anewme wrote: »

Might be an odd and maybe a morbid question.

How do ppl asses how much you need for pension.?

For example, if I take home 3600, but pay out 1000, then when retiring I'd need 2600 to be the same as now.

But if I've also built up cash, then I could use that too. 200k plus 125 k pension lump sum.

Just conscious of not saving too much now, as I'm not willing to leave it to govt when I pass on.

What do you mean by leaving it to the govt... Inheritance tax?

anewme

pwurple wrote: »

What do you mean by leaving it to the govt... Inheritance tax?

Yep. Single, no children.

Jim2007

anewme wrote: »

Just conscious of not saving too much now, as I'm not willing to leave it to govt when I pass on.

So you'd prefer to live in poverty in old age than give it to the government after you die. Well if that's what makes you happy....

I opted to enjoy it will I'm able and how the hell cares what happens afterwards...

silent_spark

anewme wrote: »

Yep. Single, no children.

Or... leave what you don’t spend to friends, a favourite charity, your dog?

daheff

anewme wrote: »

Yep. Single, no children.

As I understand it, if you have an amrf you can leave that to your next of kin (of anything left in it)

anewme

Jim2007 wrote: »

So you'd prefer to live in poverty in old age than give it to the government after you die. Well if that's what makes you happy....

I opted to enjoy it will I'm able and how the hell cares what happens afterwards...

I've absolutely no intention of living in poverty in old age if you read my post.

Sorry for hi jacking OP's post. I'm just interested in end payments.

aristotle25

anewme wrote: »

Just conscious of not saving too much now, as I'm not willing to leave it to govt when I pass on.

Just figure out what you need to save into a pension\savings for you to have a good lifesytle when you retire.

I wouldn't worry about saving too much now, if its a concern of not spending everything you have before you die then there will be plenty of things you can do to avoid that.
When you are older you have no idea what you might need if you have health problems, or if you dont and you want to make sure you dont leave anything after you just go and spend it, donate it, help people out or any number of ways of getting rid of the money.

Geuze

anewme wrote: »

Just conscious of not saving too much now, as I'm not willing to leave it to govt when I pass on.

Why do you think the Govt get your estate?

Your next of kin will inherit your estate.

Mortelaro

Jim2007 wrote: »

Well I guess if all you want to do when you retire is sit at home everyday looking out the window, then you be just fine on a very reduced income....

But that industry guff, you dismiss so easily is base on looking on the lifestyles of people in early retirement and most of them are in good health and are likely to be for sometime and they don't want to stay home, they are travelling, taking courses, visiting friends abroad and do things that interest them. They don't stop spending, in fact many spend even more. My father and mother never left the West of Ireland until the day the gave up farming... after that you'd be hard pressed to find them at home for any extended period over the next ten years - they went all over Europe and beyond.... don't assume everyone wants to stay at home and live within a very limited income like you do.

You're exaggerating
Kids from birth to graduation are very expensive
A mortgage ditto
Staying at home all the time on a very reduced income is exaggeration
What commission led policy sellers want you to believe is exaggerated for their benefit

If you're retired and think you won't have enough to live,love and travel ,you'd be falling for the industry guff which if you've a private pension on top of your state pension of even 10k a year you could do all the travelling you want and socialising
If you need more,for example if your health deteriorates you've the option of an equity release too
It's no use to you when you're dead
You can fly to most European cities most of the year for under a 100 euros btw
Not to mention decently priced package holidays

ANXIOUS

Mortelaro wrote: »

You're exaggerating
Kids from birth to graduation are very expensive
A mortgage ditto
Staying at home all the time on a very reduced income is exaggeration
What commission led policy sellers want you to believe is exaggerated for their benefit

If you're retired and think you won't have enough to live,love and travel ,you'd be falling for the industry guff which if you've a private pension on top of your state pension of even 10k a year you could do all the travelling you want and socialising
If you need more,for example if your health deteriorates you've the option of an equity release too
It's no use to you when you're dead
You can fly to most European cities most of the year for under a 100 euros btw
Not to mention decently priced package holidays

I always find that this topic brings out replies across the full spectrum.

Some people get very defensive of what they think they will need and others get very boastful.

The answer I would give anyone is, sit down and think about the lifestyle that you'd like add it up and the increase for inflation.

To correct this post, an equity release wouldn't be available in retirement.

anewme

Geuze wrote: »

Why do you think the Govt get your estate?

Your next of kin will inherit your estate.

The Govt gets it because of the way single people are penalised due to Inheritance Tax rates.

Someone might be slagging saying leave it to the dog's home. But I am being deadly serious. Would rather a charity gets it than the Govt. I've already paid enough tax on it.

tomwaits48

I'm 34 and have a pot built up of €90k, current projected value if I keep my the current payments of €1,700 per month at 68 is €1.2m. Here's hoping that maintains.

anewme

tomwaits48 wrote: »

I'm 34 and have a pot built up of €90k, current projected value if I keep my the current payments of €1,700 per month at 68 is €1.2m. Here's hoping that maintains.

Fair Play.

Liam D Ferguson

anewme wrote: »

The Govt gets it because of the way single people are penalised due to Inheritance Tax rates.

Someone might be slagging saying leave it to the dog's home. But I am being deadly serious. Would rather a charity gets it than the Govt. I've already paid enough tax on it.

While you're alive you can give €3,000 per year to anyone you like with no Inheritance Tax, as an advance on their inheritance. After you're dead, you can give €32,500 each to any nephews, nieces, siblings, €16,250 each to any other people and the balance to charity.

Like you I wouldn't be keen on more tax being paid after I'm dead on money or assets that I already paid tax when accumulating them.

Salary Negotiator

tomwaits48 wrote: »

I'm 34 and have a pot built up of €90k, current projected value if I keep my the current payments of €1,700 per month at 68 is €1.2m. Here's hoping that maintains.

At those monthly additions your projected value seems quite low.

Heebie

anewme wrote:

Would rather a charity gets it than the Govt. I've already paid enough tax on it.

If it's in a pension, you've paid no tax on it yet.
What you put in your pension is tax deferred. You don't pay tax on it until you take it out.
I pay a lot less in taxes, because of what I'm putting into my pension. When I draw it down from the pension, I should be paying a lower rate of tax on it.

tomwaits48

Salary Negotiator wrote: »

At those monthly additions your projected value seems quite low.

Really? That's what the Irish Life Calculator on my pension plan log in just spat out at me.

Age 58


Total Payments: €549,842
Projected Value @4.40% P.A. : €845,926

Age 63

Total Payments: €651,842
Projected Value @4.40% P.A. : €1,071,020

Age 68

Total Payments: €753,842
Projected Value @4.40% P.A. : €1,266,111

Jim2007

Mortelaro wrote: »

You're exaggerating
Kids from birth to graduation are very expensive
A mortgage ditto
Staying at home all the time on a very reduced income is exaggeration
What commission led policy sellers want you to believe is exaggerated for their benefit

If you're retired and think you won't have enough to live,love and travel ,you'd be falling for the industry guff which if you've a private pension on top of your state pension of even 10k a year you could do all the travelling you want and socialising
If you need more,for example if your health deteriorates you've the option of an equity release too
It's no use to you when you're dead
You can fly to most European cities most of the year for under a 100 euros btw
Not to mention decently priced package holidays

Your finances is not a great place to have a hobby horse....

Unless you are going to retire within the next decade or so, expecting that a state pension will cover you is just not realistic. The demographics and the stats tell us this. Ireland is going to have to go through the exact same pension reform process as is going on all over Europe, there is not escaping that because the pay-as-you system cannot work with an ageing population. That means that the emphasis will fall back on the so called 2nd and 3rd pillars - private pensions and pension savings. Now if you don't want to deal with that and claim it's an exaggeration, that is your choice.

There are plenty of studies out there at suggest that couples need about 60% - 70% of their current income to enjoy retirement and cover any additional costs. And again if you don't want to do the math and dismiss it as an exaggeration, that is your choice.

As you go through life, there are may things that could happen, that will prevent you from follow the typical path to retirement. If you don't want to face up to such possibilities and ensure that you are covered, that is up to you.

At the end of the day it is up to you, how you want to provide for your future, but everything we know now, suggest that relying on the state as major source of financing your retirement is not going to work out very well.

anewme

Heebie wrote: »

If it's in a pension, you've paid no tax on it yet.
What you put in your pension is tax deferred. You don't pay tax on it until you take it out.
I pay a lot less in taxes, because of what I'm putting into my pension. When I draw it down from the pension, I should be paying a lower rate of tax on it.

Sorry if Im confusing things. Im saying how much would you need to live in retirement as well as your pension, for example lump sum and savings.

ixoy

tomwaits48 wrote: »

I'm 34 and have a pot built up of €90k, current projected value if I keep my the current payments of €1,700 per month at 68 is €1.2m. Here's hoping that maintains.

That's a huge amount. Is this in lieu of a standard savings account? Is much of this being matched by your company?

tomwaits48

ixoy wrote: »

That's a huge amount. Is this in lieu of a standard savings account? Is much of this being matched by your company?

Yes, the company pays 50%, so I kick up €850 myself. I keep a modest savings/investment account with Mintos but the majority of any spare cash goes to the pension, the tax incentive is very attractive. I spend the rest I have then each month then guilt free. I am also assuming there will be no state pension when I retire.

Mortelaro

Jim2007 wrote: »

Your finances is not a great place to have a hobby horse....

Unless you are going to retire within the next decade or so, expecting that a state pension will cover you is just not realistic. The demographics and the stats tell us this. Ireland is going to have to go through the exact same pension reform process as is going on all over Europe, there is not escaping that because the pay-as-you system cannot work with an ageing population. That means that the emphasis will fall back on the so called 2nd and 3rd pillars - private pensions and pension savings. Now if you don't want to deal with that and claim it's an exaggeration, that is your choice.

There are plenty of studies out there at suggest that couples need about 60% - 70% of their current income to enjoy retirement and cover any additional costs. And again if you don't want to do the math and dismiss it as an exaggeration, that is your choice.

As you go through life, there are may things that could happen, that will prevent you from follow the typical path to retirement. If you don't want to face up to such possibilities and ensure that you are covered, that is up to you.

At the end of the day it is up to you, how you want to provide for your future, but everything we know now, suggest that relying on the state as major source of financing your retirement is not going to work out very well.

I'm talking about a personal pension fund
Not income protection or sickness policies
I do think everyone should consider adequate cover there
However if you are healthy to retirement, you wont have kids to support or a mortgage
Both are huge drains gone

If you're planning on increasing your lifestyle spend after retirement by 2 or 3 grand a month or more,then by all means go with the industry guff
Otherwise my opinion is save prudently what you'd need as opposed to what people interested in commission who don't know you from Adam think you'll need

Geuze

anewme wrote: »

The Govt gets it because of the way single people are penalised due to Inheritance Tax rates.

Someone might be slagging saying leave it to the dog's home. But I am being deadly serious. Would rather a charity gets it than the Govt. I've already paid enough tax on it.

As you won't be paying any CAT due, why worry about it?

anewme

Geuze wrote: »

As you won't be paying any CAT due, why worry about it?

Because it's mine. My home, my money.

That I've built up over 50 years, by myself.

I've paid enough tax on it already, I want to leave it to someone who can use it.

The Govt. have got enough from me already, and then some. I'd rather blow it in Vegas on Red or Black, if it comes to it, than let them fleece me again. Charity seems the right way to go.

anewme

Liam D Ferguson wrote: »

While you're alive you can give €3,000 per year to anyone you like with no Inheritance Tax, as an advance on their inheritance. After you're dead, you can give €32,500 each to any nephews, nieces, siblings, €16,250 each to any other people and the balance to charity.

Like you I wouldn't be keen on more tax being paid after I'm dead on money or assets that I already paid tax when accumulating them.

Our family circle is small, so most of what I leave will be going to my 2 nieces. So if you take out €32,500 each and the Estate (inc house) in total may be worth €600-€700K, that's a lot of tax to pay.

ixoy

tomwaits48 wrote: »

Yes, the company pays 50%, so I kick up €850 myself.

That's an excellent return. What sort of company does that? I get 11% matched and that's only after turning 40.

I keep a modest savings/investment account with Mintos but the majority of any spare cash goes to the pension, the tax incentive is very attractive.

On the tax incentive.. When drawing down, you'll still pay tax so is this not postponing it merely?

I'm focused I think on paying the mortgage off earlier as it would seem a wiser return for any contribution not being matched.

171170

Liam D Ferguson wrote: »

Look at your current income. Subtract all the expenses you won't have when you retire, e.g. mortgage, car loan, expenses for children, commuting costs. Then you have a rough guide to how much income you'll need when you retire. Subtract €12,000 for the State Pension. What's left is what you'll need to come up with from your private pension. Very rough rule of thumb - target a fund of 20 or 25 x the annual pension you want.

If you already have a pension fund, then your broker should be able to do this calculation for you, to take into account the existing fund etc.

Wouldn't it be wiser to subtract ~€10,000 for the state pension, bearing in mind that it's likely to be taxable for those people who also have a private pension?