Tag Archives: retirement

Getting some peace of mind in your 40’s

So you’re in your 40s, the decade when you are likely to pass from the first to the second half of your working life.

Retirement is still a long way away – but you’ve earned for long enough to appreciate the peace of mind that getting on top of your pension offers – even if you haven’t necessarily found the time to sit down and find the plan that works best for you.

As the generation that has worked through Ireland’s boom and crash – you know that life can be unpredictable, and that it’s not pleasant to be in a situation where you feel like your personal finances are out of your control.

Investing in your retirement offers both assurance and highly attractive tax benefits.

Households around Ireland are missing out on hundreds of euros in potential tax benefits by not being on top of their pensions.

As the generation that has worked through Ireland’s boom and crash – you know that life can be unpredictable

Take for example someone in their 40s who is earning €48,000 per year. They can get tax breaks on saving up to 25% of their monthly income.

So, in this case – if they aim to hit the 25% threshold – that means putting away €1,000 per month.

This might seem like a lot – and you already struggle to control and keep track of your monthly outgoings – but this saving gets income tax relief of 40%, meaning that only €600 is taken out of your monthly income to save €1,000.

And unlike other outgoings – this isn’t a sunk cost – it’s not even a cost at all. You are saving this money to fund your life after your working days are done.

Take for example someone in their 40s who is earning €48,000 per year. They can get tax breaks on saving up to 25% of their monthly income.

More and more people are intending to rely on the State pension when they stop working – although in studies the same people also say that they do not feel that the current state pension would be able to fund the retirement that they want. The single State Pension (Contributory) is a grand total of €11,975 a year at the moment.

These payments are drawn from the Government’s current tax income in any given year – and Ireland’s population trends mean that then today’s 40 somethings get to retirement age, because we have an aging population, there will be more people getting these payments – and less tax payers putting money into the kitty, meaning that the State is facing a pension time-bomb.

To make matters more complicated – most people in their 40s now will retire at 65 – but they will not be able to claim the State pension until they are 68 – meaning that they face a scenario where they will have a gap of three years to cover by themselves if they do not have a private pension.

Recent research carried out by Irish Life found that almost one third of people admitted that they don’t really understand pensions – this is part of the problem.

Getting started doesn’t have to be a scary process – you are only a few clicks, or taps away from Irish Life’s easy-to-use pension calculator on any device. We have found this to be a good first step in mapping-out a pension plan.

Once you’ve got a feel for the numbers you can sit down with a financial advisor or broker and decide what type of plan will work best for you.

Check out the Irish Life easy-to-use pension calculator here.

Looking after your “Future Self”

“Time is the only luxury, it’s the only thing that you can’t get back” – so said rapper and self-styled visionary Kanye West when lecturing at Oxford University earlier in this year.

While Mr West can be a divisive character, he has a point here – time is a luxury which is often taken for granted.

Most people spend their 20s and 30s grafting, thinking about getting the right job, the right house, the right car, the right partner – not their pension payments.

These are the things that dominate their day-to-day existence, it can be hard to think much further ahead than your next mortgage payment, or city break – but there can be big pay-offs when you do.

The working population think people should start planning for their retirement at age 36, but retired people say it should be at age 30.

Today’s young(ish) 9-to-5ers imagine themselves living relaxed, leisurely lives in their post-working years, but many are not taking the basic first steps to make that future a reality.

The state pension is currently just €230 per week, and if you are in your 30s now, it will only be payable to you from the age of 68.

When people are asked why they haven’t started a pension – one of the reasons that they often give is that the idea of starting a pension is intimidating, and that it seems overly-complicated.

The upsides of starting your pension in your 20s or 30s are pretty uncomplicated, the sooner you start saving, the more time that you have to build up a fund that will keep you comfortable when you reach retirement age.

The upsides of starting your pension in your 20s or 30s are pretty uncomplicated, the sooner you start saving, the more time that you have to build up a fund

Think of it as lending to your ‘future self’ at a discounted rate. There’s always something else to spend your money on today – but what a lot of people don’t realise are the tax benefits which starting a pension offers.

For example, if you are an average worker in your 30s and in the lower income tax band – for every €100 of your monthly pay that you put into a pension, you get €20 back in income tax relief – meaning that you only pay €80 to save €100. Some workers can get this relief on 15% of their monthly income.

And if you are paying the higher tax rate, then for every €100 paid into your pension most people will get €40 back in tax relief – meaning that the €100 that you save for ‘future you’ only costs €60 today out of your pay cheque.

Tax Relief examples

Pension Tax Relief

Getting started doesn’t have to be a scary process – you are only a few clicks, or taps away from Irish Life’s easy-to-use pension calculator. We have found this to be a good first step in mapping-out a pension plan.

Once you’ve got a feel for the numbers, you can sit down with a financial advisor or broker and decide what type of plan will work best for you.

When you stop putting it off you’ll realise how easy it is to get up and running.

Your ‘future self’ will thank you sometime.

We have a whole section on our website with information about pensions for people in their 30’s