Steven Barrett
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What index do they track? You could be tracking a bond fund.
How much 'should' you have in a pension at age 50?
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Steven Barrett
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How did you go from having €180k in pension and cash to €1m in 3 years? What is a small inheritance in your eyes? €800k?
100% global equities.
€680k to €1.5m in 3 years. What was it that made the increase happen?
No the small inheritance nearly covered the €350k of debtHow did you go from having €180k in pension and cash to €1m in 3 years? What is a small inheritance in your eyes? €800k?
It was the second house that we sold, we got lucky on two fronts
One, we had two people bidding on the house and both really wanted it and both had very deep pockets
Two, unbeknown to us at the time but the way the house was acquired and setup resulted in no CGT so the full proceeds of the sale went to us
@Cervelo
Are you saying that you retired with net assets (excluding your PPR) of €1.5m and have spent an average of €38.5k per annum since retiring?
I certainly wouldn’t be worrying about running out of money if that’s the case but €1.5m is a massive figure for most folks to accumulate while still in your 40s (even allowing for the inheritance).
Apologies if I have misunderstood the numbers.
Are you saying that you retired with net assets (excluding your PPR) of €1.5m and have spent an average of €38.5k per annum since retiring?
I certainly wouldn’t be worrying about running out of money if that’s the case but €1.5m is a massive figure for most folks to accumulate while still in your 40s (even allowing for the inheritance).
Apologies if I have misunderstood the numbers.
Directing comments towards those who have "anxiety about retirement or even the idea of early retirement" and then talking about your own retirement on "money that other posters think wouldn't be enough" isn't likely to help those who are anxious when you later reveal that this figure is €1,500,000.
We shouldn't scare people off investing into a pension but, at the same time, we should encourage realistic expectations. The average pension pot in Ireland is €104,000 but I can't find figures split by age. In the UK, the average for those in the 55-64 range is quoted as £189,700 (about €222,300). With some additional contributions and growth, that should lead to a relatively comfortable retirement at state pension age for most when the income produced is added to the state pension.
However, many in their twenties or thirties may believe that if they were to contribute double the average, they will easily retire at 55. This is most certainly not the case unless they're happy to live on about half the median income in Ireland.
Using the above (UK) figure, double the average pot of a 55-64 year old would be €445,200. Let's assume a person with this pot wasn't going to use any of the tax free lump sum for home improvements, car purchases, etc. and were to solely use it to cover the years from 55 until state pension age. Having retired early, these funds are likely to be invested somewhere that barely keeps up with inflation. It would also be very risky to go beyond a 4% withdrawal rate on the funds that remain in the ARF at such a young age. The €111,300 tax free lump sum would be €9,275 per year for 12 years until SP age which would be added to the €13,356 ARF withdrawal (4% of the remaining pot) to give an income of €22,631 until the pension kicks in.
I suspect most who would look at the above figures as they approach 55 would likely decide to reassess at 60.
We shouldn't scare people off investing into a pension but, at the same time, we should encourage realistic expectations. The average pension pot in Ireland is €104,000 but I can't find figures split by age. In the UK, the average for those in the 55-64 range is quoted as £189,700 (about €222,300). With some additional contributions and growth, that should lead to a relatively comfortable retirement at state pension age for most when the income produced is added to the state pension.
However, many in their twenties or thirties may believe that if they were to contribute double the average, they will easily retire at 55. This is most certainly not the case unless they're happy to live on about half the median income in Ireland.
Using the above (UK) figure, double the average pot of a 55-64 year old would be €445,200. Let's assume a person with this pot wasn't going to use any of the tax free lump sum for home improvements, car purchases, etc. and were to solely use it to cover the years from 55 until state pension age. Having retired early, these funds are likely to be invested somewhere that barely keeps up with inflation. It would also be very risky to go beyond a 4% withdrawal rate on the funds that remain in the ARF at such a young age. The €111,300 tax free lump sum would be €9,275 per year for 12 years until SP age which would be added to the €13,356 ARF withdrawal (4% of the remaining pot) to give an income of €22,631 until the pension kicks in.
I suspect most who would look at the above figures as they approach 55 would likely decide to reassess at 60.
Dr Strangelove
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And on the cost side no children makes a huge difference.
I just don’t think you can generalise from @Cervelo ’s experience.
I think this is a great point.
If you've been getting killed paying 52% tax (PAYE+PRSI+USC) as a higher rate earner during your working life, why on earth would you want to replicate that in your pension years?
Surely, for an Irish person, the trick would be to have an optimal mix of (a) pensions to (b) other assets. If your draw your taxable income from (a) and can run down (b) over the course of your retirement in a tax-optimised way, isn't that the most tax-efficient strategy?
For argument's sake (and I am simplifying):
(a) I have a 1 million pension pot ARF - 4% withdrawal rate p.a. and,
(b) non-pension savings of 500k, let's say as long-term CDs. I take 20k from this every year. Compounding will replenish to some extent.
I then have a retirement income of 60k p.a. - only 40k of which is taxable under income taxes and results in a reasonably minimal deduction @20%.
No, If you read it again I said
"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"
And yes to the €38.5K
Just on the yearly spending I have the last 19 years of our spending on an excel spreadsheet '05 to today and if I add a notional figure for '24
of €32k it brings our spending for the last 20 years to €750K which is €37.5K average
note that that figure doesn't include any loan or debt repayments is just a cost of living summary
I think you've missed the point of my posts by focusing on the €1.5 million
Yes I'm very privileged to be in the position that I'm in and will admit that universe has played a big part in us arriving at where we are today and I make no apologies for that but the point I'm making is not how much money you should have in your pension pot but rather how much you need based on my experience of been an early retiree
If I was 66 and we both are entitled to the state pension how much of a pension fund would I need to bridge the gap to have a yearly income of €40K, I'm guessing it's a lot lower then the figures been expressed here and in other threads
Yes If we had decided to have kids I very much doubt I would be where I am now
And yes you can't really generalise my experience, it's not a one size fits all which is why when talking about these things on here I usually include other details like the area I live in, the type of house I have and what I like to do with my time so as to give some perspective to my posts
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Gordon Gekko
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Shades of Trump here…
“I retired early and so can you. All it took was hard work and a small €350,000 inheritance”
“I retired early and so can you. All it took was hard work and a small €350,000 inheritance”
I have been thinking about the same scenario also but I think variability in market return will catch you out here. If the market goes up 20%, your €1m is now worth €1.2m and your 4% minimum withdrawal is now €48k and you are paying higher rate tax. Given that markets can often have a few successive good years and the few successive bad ones, you can't be sure to avoid higher rate tax in the scenario you mentioned.
Unless of course you put your ARF all in cash, but then you lose a lot of potential return.
Could you give some more data? How much have you paid in over the 20 years?
AMC charges %? Your salary if less than 115k, employer contribution and your contribution?
As a case study someone who has been paying into a global equities pension fund while maxing their AVCs in many recent years should be looking at a decent pot? Why not?
Absolutely. Although the scenario above is definitely of the Good Problem variety!
I work with people who probably earn in the range of 120-200k and, on the odd occasion when the topic of retirement comes up, I've been flabbergasted by the (very large) retirement incomes that people assume they will need. Typically they seem to think they'll need 60-80% of their current salary.
Which strikes me as totally unrealistic (in terms of the size of pot needed) and also fails to take account of life progression - you will presumably be debt free, kids educated etc.
Why on earth anyone would need 120k retirement income (on which you'll be taxed punitively) is beyond me...
Kilkenny06
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If you assume 4% is reasonably safe to withdraw, and every extra 100,000 generates 4,000 of income, the flipside of the above is that it will often be easier to keep your spending under control than it is to accumulate more. Spend 1,000 a year less, you need 25,000 less in your pension.
I would assume that most Irish people would be able to live a very comfortable life on 42,000 a year, taxed at the lower rate, assuming no mortgage, no kids etc. Throw in 1270 capital gains for a small bit extra. You won't be changing the car every year, but that leaves a healthy 34,000 a year net to live on. A couple would need more, but not double that.
Once you reach that 42,000 level, every extra 100,000 you save in your pension only gives you an extra 2,000 a year due to the punitive higher rate tax. It's doubtful whether it's worth the extra effort and stress.
To answer the original question, I'd work back from my desired retirement age, desired spending, assume a 4% withdrawal rate and that money I invest in equities will double roughly every 10 years.
I would assume that most Irish people would be able to live a very comfortable life on 42,000 a year, taxed at the lower rate, assuming no mortgage, no kids etc. Throw in 1270 capital gains for a small bit extra. You won't be changing the car every year, but that leaves a healthy 34,000 a year net to live on. A couple would need more, but not double that.
Once you reach that 42,000 level, every extra 100,000 you save in your pension only gives you an extra 2,000 a year due to the punitive higher rate tax. It's doubtful whether it's worth the extra effort and stress.
To answer the original question, I'd work back from my desired retirement age, desired spending, assume a 4% withdrawal rate and that money I invest in equities will double roughly every 10 years.
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Not sure exactly how much I have paid in however rough figures.
Started pension at 24 (currently 48), put in 6% and company matches. Due to saving for a house, weddings, kids etc have never managed to increase that, yet. Pensionable salary is circa €75K.
Have 2 PRB and my current company pension. TER is between 0.4% & 0.6%. Pot across the 3 is currently about €400K, 100% global equities.
Wife & I have always worked so will have 2 full contributory state pensions. Wife has pension pot of circa €150K.
Would love to retire at 63- so 15 years to get mortgage paid off and kids educated!
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Dr Strangelove
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I agree in principle but got a young person it’s hard to know what the tax regime will be in a few decades.
When you’re a decade off retirement it could make sense to take the foot off the throttle to avoid too much retirement income at the higher rate.
Gordon Gekko
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What about the extra €100,000 of capital, outside of the €2,000?!
That seems a decent pot/return for what was put in but maybe those with more pension knowledge can comment.
I know it's not terrible. I just go through periods of thinking it should/needs to be much more.