Blackrock1
Registered User
- Messages
- 1,489
thanks, its two different pictures of if include the PPR or not! but i have diverted a large amount of funds to paying down the mortgage.
How much 'should' you have in a pension at age 50?
- Thread starter spicyone
- Start date
Steven Barrett
Registered User
- Messages
- 5,128
I believe you should include the net worth for that exact reason. But then, people shouldn't be fixated on net worth but on whether they have enough money to maintain the lifestyle that they want. The whole idea of The Number is wrong as you will continue to generate income through profits, rent and pensions throughout life. It doesn't stop when you have X amount.
thanks for the information Steven
I think you would need at least €1.2m (30X projected expenses).
Well, the State pension isn't payable until 66.
I suppose you could say something like €40k x 16 = €640k; plus €12k x 20 = €240, or €880k in total. However, that ignores taxes on drawdowns/benefits.
I would just use a 30X number for simplicity.
Steven Barrett
Registered User
- Messages
- 5,128
That's why it's never that straight forward. The State pension is payable from 66...but if your retire at 50, will you have enough contributions to get the full pension? Or do you need to start drawing an income from your ARF to pay stamps? Then there is a pension lump sum, how much income will that replace?
And of course, if you are 50 years of age and retired, you are going to spend more on travel and going out doing things. The 80 year old you eats little, no longer drives and doesn't spend anything on holidays. But depending on health, medical bills could be a big cost. Good luck predicting 30 years into the future, that's like an 18 year old me trying to predict what my life is like now!!
Without running through the figures, I would say that €800,000 in a pension wouldn't be enough for a 50 year old to retire.
Steven
www.bluewaterfp.ie
Thanks Steven and @Sarenco for yoyr replies.
If i told you id be entitled to a full UK and Irish state pension (assumption). Woukd that make a big difference? Anyway, either way, I hear ya - hard to predict these things etc.
Steven Barrett
Registered User
- Messages
- 5,128
Have you taken all expenditures into account in that €40k? Replacing cars? How often and how much? Will you give kids any money in the future for property/ weddings? What about the house? Will it need any work over the next 40 years (probably!). There's a lot of additional expenditures.
At 47, I have been contributing to pension for the last 20 years (max avc last number of years) and it's still not six times my current salary. Pension plan shows retirement age as 60, and the projection is for it be under 1m. My kids are still primary/secondary school. This thread scares me.
Me too. I thought I was 'Ok' however now not so sure.......
The figures above are just guidelines.
On retiring at 66 or younger, a person later in receipt of full Irish state pension gets €14,419.60 (€277.30 * 52) annually. Of course, many are forced to get by on just the state pension without any private provision - not a nice thought.
There are lots of assumptions to be made in retirement planning and everyones income requirements will be different. However, of interest to me is what is the max target in order to pay no 40% tax in retirement.
A single person will pay 40% tax on earnings above €42,000. With mortgage cleared, I believe that to be in excess of what many need so it's arguable that it's not worth busting your ass to save further if it's only going to be taxed at the higher rate when income is taken.
If using an ARF, after 70 you will be withdrawing 5% annually. That means an ARF of €551,608 will have you withdrawing €27,580.40 annually; bringing you right up to the 40% band when added to the state pension.
Of course, the funds in the ARF will vary - depleting on years where it's investments do poorly and rising by beyond what was withdrawn on years where it performs well. The 40% tax threshold will also change over time. For the purposes of this baseline calculation, I'm ignoring these factors. Some might add a buffer to the base figure to take these factors into consideration.
To end up with an ARF of €551,608 after taking the 25% tax free lump sum would require retirement savings of €735,477. This is a figure that is significantly in excess of what the majority will ever have saved for retirement. It also assumes the need for a €42,000 retirement income.
If someone were to decide €28,210 was more than enough retirement income, for example, the shortfall between state pension and required income would be halved and the person would require retirement savings of €367,744 - from which they'd also take the 25% tax free lump sum.
On retiring at 66 or younger, a person later in receipt of full Irish state pension gets €14,419.60 (€277.30 * 52) annually. Of course, many are forced to get by on just the state pension without any private provision - not a nice thought.
There are lots of assumptions to be made in retirement planning and everyones income requirements will be different. However, of interest to me is what is the max target in order to pay no 40% tax in retirement.
A single person will pay 40% tax on earnings above €42,000. With mortgage cleared, I believe that to be in excess of what many need so it's arguable that it's not worth busting your ass to save further if it's only going to be taxed at the higher rate when income is taken.
If using an ARF, after 70 you will be withdrawing 5% annually. That means an ARF of €551,608 will have you withdrawing €27,580.40 annually; bringing you right up to the 40% band when added to the state pension.
Of course, the funds in the ARF will vary - depleting on years where it's investments do poorly and rising by beyond what was withdrawn on years where it performs well. The 40% tax threshold will also change over time. For the purposes of this baseline calculation, I'm ignoring these factors. Some might add a buffer to the base figure to take these factors into consideration.
To end up with an ARF of €551,608 after taking the 25% tax free lump sum would require retirement savings of €735,477. This is a figure that is significantly in excess of what the majority will ever have saved for retirement. It also assumes the need for a €42,000 retirement income.
If someone were to decide €28,210 was more than enough retirement income, for example, the shortfall between state pension and required income would be halved and the person would require retirement savings of €367,744 - from which they'd also take the 25% tax free lump sum.
I've been playing around on Excel tonight and the only conclusion I've drawn is that early retirement is extremely difficult unless:
- Your target retirement income is such that the state pension isn't a significant portion of your post-state pension age income. In such cases, your private pension will be high enough that the tax free lump sum will cover quite a few years of that extra income needed before you hit state pension age; or
- In most cases, the state pension will represent a significant proportion of the overall retirement income and it will be difficult to cover it, and the intended top-up, for more than a few years of early retirement with the 25% tax free lump sum. Therefore, additional investments outside the pension wrapper are likely necessary
For those of you with anxiety about retirement or even the idea of early retirement should think about the above quote
Run the numbers and see where that leaves you and I think you'll be surprised where you end up
I'm 57 this year and thirteen years retired on money that other posters think wouldn't be enough
And yet I'm happier then ever and totally stress free about the longevity of my retirement fund
Steven Barrett
Registered User
- Messages
- 5,128
Early retirement takes a lot of work. Going at 60 instead of 65 means 5 years less salary, 5 years less pension contributions, 5 years less compounding and probably 5 years more spending (no limits on annual leave). It won't just happen on its own and you have to seriously work at it to be in a position where you are able to stop working earlier than normal. That means spending less and investing more and being intentional about it.
Aristotle, if I have a euro for every person who complained that "pensions are crap, the don't make any money", I'd have enough money to bring my wife out for a fancy meal
. So often people are invested in low volatility, low return funds. If you have had a high bond content fund for the last 10 years, you will have missed out on so much growth. Irish Life Maps 2 returned 1.90% pa over the last 10 years. Maps 3 returns 3.60%. A Global Stock index returned 11.39%.If you contributed €500 a month for 10 years (€60,000 total), you'd have now:
- Maps 2 - €66,021
- Maps 3 - €72,093
- Global Stock Index - €110,987
Steven
www.bluewaterfp.ie
Dr Strangelove
Registered User
- Messages
- 652
Good for you!
But this is a pseudonymous financial forum and you’re providing no numbers
If you feel comfortable giving € amounts it would be great if you could share.
For me the big anxiety of giving up work in mid 40s would be unforeseen financial trouble and not being able to earn my way out of it.
What kind of numbers would you like, there's lots of my posts on here where I've indicated my wealth and my spending habitsBut this is a pseudonymous financial forum and you’re providing no numbers
If you feel comfortable giving € amounts it would be great if you could share.
But a very quick breakdown of my wealth over the period '12 till now is as follows
In 2012 we had two houses one €500K and my PPR €350K and a PRSA fund of €120K and about €60k in cash but also €350K of debt
By 2015 we had sold the second property, cleared the debt from a small inheritance on Mrs C side and were worth about €1.5 million
with a rough break down of a million in cash stocks and PRSA and €500k for the PPR
Roll on to toady and this is the bit I'm quite amazed at is that we're still worth roughly €1.5 million
But now its very much a 50/50 split between PPR and funds
The reason why I so confident about our future is simple, I know exactly where I'm spending our money
The difference between essential and non essential spending and been able to stop the non essential should we need to
and also been comfortable with risk and decumulation of our wealth
What we spend per year depends on what we do in a busy year like 2018 where I spent 4 months in Spain and a two week road trip home with herself and the a months road trip in the USA came in around €50k but the last two years '22 and '23 we've only spent €26K per year
From another thread I've posted in
Thinking of retiring or downsizing my career in my 50’s. Would appreciate a 2nd opinion.
First off, thank you so much to AAM and all the regular contributors here who share their expertise so generously. I am genuinely very grateful. Personal details Age: 53 Spouse’s/Partner's age: 54 Number and age of children: No children Income and expenditure Annual gross income from...
www.askaboutmoney.com
"While I can't speak for Odea or indeed what anybody else would need financially to live on each year as it will differ from each couple to couple
I can give you a rough breakdown of what we, a couple with no kids but a cat in our mid fifties have spent over the last six years to end of 2022
Overall we've spent a total of €231K which equates to an average of €38.5K a year
When I break down the figures and remove travel €58K and then what I've spent on cycling €40k
The average now comes in around €22K a year
€22K a year might sound to some people as been too little to live on but from our prospective it's more than enough
Everything is included in that from all our utility and grocery shopping bills, the running cost of two old cars a 131 and an 07,
two Laya Control 300 Create heath policy's, repair and upkeep of our house, all our socializing and takeaways etc etc.
I often hear here and in other places that a couple who are relying on two state pension as their main source of income in retirement will have a somewhat bleak existence, well going on my figures and the life we're living, if you have a small private pension of a few hundred thousand to go with the state pensions you'll have nothing to worry about (per se) except how you're going to spend all that free time you now have access to."
Yes that is one of the downsides I guess after 13 years of not working I'd say I'm unemployable
Last edited:
Low cost, passive index trackers.