I'm too young to think about Retirement Planning!!

Cicero · 03-03-2011 12:04am #1

Thought I'd start a thread on the topic of Pensions and retirement planning as it has significance for both young and old alike...the vast majority of young people starting work for the first time couldn't give a fiddlers about their retirement which is quite understandable..

However, when you look into some facts, it becomes a little more scary...

If you start saving for a pension aged 24 by putting aside EUR100 per month, you will obtain "Y" income on retirement

If you wait 7 years to start saving (aged 31), to get the same "Y" income at retirement you will need to save EUR200 per month ...wait until you're 38, and that figure goes to EUR400 per month...
So, starting planning for your retirement early does pay off and limits the risk of a depressed pension fund on retirement if you protect the fund in the final years..

While the figures above are not "totally" exact, they are indicative of the type of increases you would be faced with, if you leave retirement planning on the long finger.

So, how are people going about planning for their retirement and what advice would "older" people have for the younger generation starting out?

Giselle · 03-03-2011 12:47am

I'm 25, and you've scared me! I'm going to be a student for a few more years yet, and although I've a part time job that pays well, I never really thought of putting money into a retirement fund.

I think I'll look into it though, I suppose the sooner I start the less I'll have to make up later.

Queen-Mise · 03-03-2011 3:19am

Isn't there a very rough statistic to work this out - the percentage is your age. If you start of paying your pension at 20 it is 20% of income, 30 its 30%, at 40 40% and so on. It is a lot of money when you think of it like this.

OldGoat · 03-03-2011 10:03am

Queen-Mise wrote: »

Isn't there a very rough statistic to work this out - the percentage is your age. If you start of paying your pension at 20 it is 20% of income, 30 its 30%, at 40 40% and so on. It is a lot of money when you think of it like this.

Thats a handy rule of thumb. My issue is that if you've left it late and then look at the percentage you may feel that it's too late so why bother at all.
Is there any reason to pension plan even if you are in your 40's and have not yet started and can ill afford to pay 40%?

Perhaps this thread should have been posted in Clearasol & Hormones

Beruthiel · 03-03-2011 10:08am

OldGoat wrote: »

Is there any reason to pension plan even if you are in your 40's and have not yet started and can ill afford to pay 40%?

I only started paying a pension a few years ago, so I'd better die a couple of years after I retire or I'm in deep sh!t.

coffee_cake · 03-03-2011 10:11am

OldGoat wrote: »

Is there any reason to pension plan even if you are in your 40's and have not yet started and can ill afford to pay 40%?

Yes! You still have 20 years to save up and you can get tax relief on it!

I set mine up in november to start saving, I felt a bit old then even though I'm not really :eek:

Beruthiel · 03-03-2011 10:22am

bluewolf wrote: »

Yes! You still have 20 years to save up and you can get tax relief on it!

Tax relief. I 'think' our last Governmental Overlords removed that particular relief...

coffee_cake · 03-03-2011 10:24am

Beruthiel wrote: »

Tax relief. I 'think' our last Governmental Overlords removed that particular relief...

They're getting rid of the higher rate of relief gradually but the lower rate still applies. You also won't get relief on PRSI I think so it's overall lower than it was, but it's still a good helpful chunk.
If ever in doubt about the pension, remember the state pension is only about 11k a year :eek:

Bullseye1 · 03-03-2011 10:28am

Retirement will be a thing of the past. We won't have the money to pay the old age pensioners in the future.

the_syco · 03-03-2011 10:31am

Set my up when I was 27 or 28, at €135 a month (which includes the 10% that my employer is paying.

Bullseye1 wrote: »

Retirement will be a thing of the past. We won't have the money to pay the old age pensioners in the future.

I'll go on the dole, then :P

coffee_cake · 03-03-2011 10:34am

the_syco wrote: »

Set my up when I was 27 or 28, at €135 a month (which includes the 10% that my employer is paying.

Cool I think mine is 400 a month including employer, max I can get relief on.
Worked too long in pensions not to save as much as I can :eek:

bullseye wrote:

Retirement will be a thing of the past. We won't have the money to pay the old age pensioners in the future.

We might if certain group of society didn't get escalation on their pensions but I won't get into that here. Still yeah I think we are supposed to be heading for an inverted age pyramid which is bad news for future retirees. We may end up retiring past 65 as well given the longer life expectancies

Stark · 03-03-2011 11:54am

bluewolf wrote: »

They're getting rid of the higher rate of relief gradually but the lower rate still applies. You also won't get relief on PRSI I think so it's overall lower than it was, but it's still a good helpful chunk.
If ever in doubt about the pension, remember the state pension is only about 11k a year :eek:

Not worth it at lower relief imo especially as you're subject to the higher tax rate and PRSI if you earn a sufficient income in retirement. And they scrapped the age related tax credit as well. With only a 20% discount applied to money put into a pension funds, I'd me more inclined to put the money into investment options that give me full control and aren't subject to income tax when I draw down on them.

Fortunately Fine Gael look set to see sense and reverse the tax relief cuts though I'm not sure how viable pension schemes will be with a 0.5% annual levy on your savings.

What galls me about the tax relief cuts is people on defined benefit schemes (hello public servants) still get the full tax relief benefit as a defined benefit scheme is essentially spreading your employment benefits into retirement so you pay tax on that income in the years you're retired instead of the years you're working. Good old Joe PAYE has to pay tax twice if he wants to defer some of his salary till retirement.

coffee_cake · 03-03-2011 12:28pm

Stark wrote: »

Not worth it at lower relief imo especially as you're subject to the higher tax rate and PRSI if you earn a sufficient income in retirement. And they scrapped the age related tax credit as well. With only a 20% discount applied to money put into a pension funds, I'd me more inclined to put the money into investment options that give me full control and aren't subject to income tax when I draw down on them.

Fortunately Fine Gael look set to see sense and reverse the tax relief cuts though I'm not sure how viable pension schemes will be with a 0.5% annual levy on your savings.

What galls me about the tax relief cuts is people on defined benefit schemes (hello public servants) still get the full tax relief benefit as a defined benefit scheme is essentially spreading your employment benefits into retirement so you pay tax on that income in the years you're retired instead of the years you're working. Good old Joe PAYE has to pay tax twice if he wants to defer some of his salary till retirement.

You'd want to be saving a fair fortune if you're on the higher rate in retirement though.
Good news on reversing the relief cuts.
As for investment options, I found I had a good amount of control on mine.
There was a 'default' option of mostly equities which starts moving to bonds/cash closer to retirement which is what I would have picked anyway, but i could specify funds etc

Stark · 03-03-2011 12:43pm

Aye, you can move stuff around within the scheme but if you're stuck for money between now and retirement, say to pay off the mortgage or whatever, then you don't have access to your money. Like if you were to put all your money into a 20 year fixed bond account, you'd expect a much greater return on investment than putting it into a instant access deposit account due to that lack of control on access to your money.

I always feel uneasy with investing everything with the one pension management company as well. If I had €100k in my pocket to invest, I wouldn't be investing it all with the one bank, guarantee scheme or not.

With full marginal relief, the savings definitely outweigh the disadvantages. But at 20% relief with no PRSI relief, I myself would be more inclined to put just enough into the pension account to get my employer matched contribution, and then put the rest of my money into normal savings.

Cicero · 03-03-2011 8:21pm

Not only has the Government reduced tax relief on pension contributions, retirement age has increased and you can bet your bottom dollar that not many years from now, even the state pension that you all worked hard for will be means tested or reduced considerably depending on other income or assets that you may have....I can totally understand why the French resisted and protested the increase in retirement age from 60 to what was it, 62?...
Retirement, and more importantly, retirement benefits, are worth fighting for...only problem is, that many of the people who are losing these benefits, won't realise what they've lost until it's too late..

looksee · 05-03-2011 12:16am

Why is it that you retire at 65 but don't get the state pension till 66. Its probably something obvious...

cml387 · 05-03-2011 12:27am

At work some time ago we had a "guru" speak to us (a kind of motivational speaker to be precise).

He was on about how people work away for so long thinking about retirement and how that they'll then be able to enjoy the fruit of their wageslaving at last.

And how many of them are dead within a year of retirement.

FoxT · 06-03-2011 3:02am

I'm in my mid forties & have been putting money away into various funds for 20 years now.
Overall, the so-called 'defined contribution' system is not a very good deal, ( Yes, you get tax relief BUT - equity -based pension schemes have not kept pace with inflation over the last 10 years or so AND you are somewhat at the mercy of prevailing annuity rates when you retire)
Nevertheless, it is the only deal in town for most people, and if you are a private sector employee I would recommend it. As other posters have said, it really is worthwhile to start early.

Cicero · 06-03-2011 7:14pm

FoxT wrote: »

Overall, the so-called 'defined contribution' system is not a very good deal, ( Yes, you get tax relief BUT - equity -based pension schemes have not kept pace with inflation over the last 10 years or so AND you are somewhat at the mercy of prevailing annuity rates when you retire)

With the latest economic crisis, defined benefit schemes are in a big mess also...where companies with these schemes will find the money to pay the benefits come retirement age of their staff is beyond me....they don't call it the pensions timebomb for nothing....

I'm too young to think about Retirement Planning!!

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