How Much To Save?

G

grotty

Registered User
Messages
56
Hi Folks,

Apologies if this seems like a silly question, but I don't know how much money I should be saving.

I am on 70k, am single and have no dependents, I have 2 rooms rented out bringing in €800 a month. My mortgage is around €1400 a month.

I put €200 13 times a year into my pension.

I have no car repayments, or loans of any sort. My credit card bill is around 1500 a month, I clear it month by month.

I dont have a specific goal in mind for my savings, but I feel I should be saving, it's just that I'm not sure how much I should be saving.

Could anyone please give me some pointers?
 
A lot more than €200 especially on that salary. If I was you I'd be saving at least a €1000 maybe a bit more.
 
Can you give a breakdown of what the Credit Card bills entail - €1500 per month sounds excessive - do you pay all your bills (gas, electricity, tv), food, entertainment, petrol etc. through CC?

If is all disposable income spending (entertainment, ebay purchases etc), then you seriously need to review it.
 
before anything else.....you should be putting the absolute max into your pension - if you are over 30, this would be 20% i.e. 14k p.a. or about 1,166 p/m

it's tax-free saving, do it! absolute no-brainer

once you've changed to this, start thinking about other forms of saving
 
Kemo_Sabe said:
before anything else.....you should be putting the absolute max into your pension - if you are over 30, this would be 20% i.e. 14k p.a. or about 1,166 p/m

it's tax-free saving, do it! absolute no-brainer

once you've changed to this, start thinking about other forms of saving
Click to expand...

Pensions are not a tax free investment, Pensions are a tax deferred investment i.e. you pay tax on 3/4 of it on realising it. Furthermore you pay fund and admin costs in it, have no access to your cash until you're 60+ and generally they're pigs of investments that trade on people's ignorance and/or indifference to taking a more active role in their financial management. Buyer Beware!
 
Daithi7 said:
Pensions are not a tax free investment, Pensions are a tax deferred investment i.e. you pay tax on 3/4 of it on realising it. Furthermore you pay fund and admin costs in it, have no access to your cash until you're 60+ and generally they're pigs of investments that trade on people's ignorance and/or indifference to taking a more active role in their financial management. Buyer Beware!
Click to expand...

can you please provide a reputable link to back up this claim? Thank you
 
grotty said:
Hi Folks,

Apologies if this seems like a silly question, but I don't know how much money I should be saving.

I am on 70k, am single and have no dependents, I have 2 rooms rented out bringing in €800 a month. My mortgage is around €1400 a month.

I put €200 13 times a year into my pension.

I have no car repayments, or loans of any sort. My credit card bill is around 1500 a month, I clear it month by month.
Click to expand...

Hi Grotty,
As your single, just wondering if your female ?
 
Well said Daithi7. I am sick of hearing ''putting money into pensions is a no-brainer, better than SSIA etc etc.'' I paid into an AVC for several years. I am now retired and over 60. Everytime I draw money out of my AVC I am taxed on it and pay admin and fund management costs. True I got max tax relief while working because I was on the 41% tax rate, nevertheless, I am now paying back some of that. Also, I have to watch the amount I withdraw annually as I could end up in the higher tax bracket. So to say contributing to pensions is a tax free investments is simply not true.
 
Daithi7 said:
Pensions are not a tax free investment, Pensions are a tax deferred investment i.e. you pay tax on 3/4 of it on realising it. Furthermore you pay fund and admin costs in it, have no access to your cash until you're 60+ and generally they're pigs of investments that trade on people's ignorance and/or indifference to taking a more active role in their financial management. Buyer Beware!
Click to expand...

Is this true??:eek:
 
Kemo_Sabe said:
can you please provide a reputable link to back up this claim? Thank you
Click to expand...

Yes, check out revenue.ie and look up pensions.

roughly goes like this, when you invest in a pension you get tax relief at the top rate (assuming you have those type of earnings), and then you build up your pension in an approved fund or funds with no CGT on any gains made. However charges are significant here and often take the gloss off any gains.

Then when you retire you are allowed take 1/4 of fund tax free under current tax legislation and the other 3/4's has to go into an ARF which also incurs admin and management charges as Old Timer points out
, and then you pay tax at the appropriate rate when drawing down from this.

So Pensions are merely 3/4 deferred taxation (with management charges) and to my eye are for suckers!!
 
 
Daithi7 said:
Yes, check out revenue.ie and look up pensions.

roughly goes like this, when you invest in a pension you get tax relief at the top rate (assuming you have those type of earnings), and then you build up your pension in an approved fund or funds with no CGT on any gains made. However charges are significant here and often take the gloss off any gains.

Then when you retire you are allowed take 1/4 of fund tax free under current tax legislation and the other 3/4's has to go into an ARF which also incurs admin and management charges as Old Timer points out
, and then you pay tax at the appropriate rate when drawing down from this.

So Pensions are merely 3/4 deferred taxation (with management charges) and to my eye are for suckers!!
Click to expand...


So what is your alternative to saving for retirement?
Deposit accounts not much use since inflation is eating away at one's savings.
 
Daithi7 said:
Yes, check out revenue.ie and look up pensions.

roughly goes like this, when you invest in a pension you get tax relief at the top rate (assuming you have those type of earnings), and then you build up your pension in an approved fund or funds with no CGT on any gains made. However charges are significant here and often take the gloss off any gains.

Then when you retire you are allowed take 1/4 of fund tax free under current tax legislation and the other 3/4's has to go into an ARF which also incurs admin and management charges as Old Timer points out
, and then you pay tax at the appropriate rate when drawing down from this.

So Pensions are merely 3/4 deferred taxation (with management charges) and to my eye are for suckers!!
Click to expand...

My employer matches the contributions I make which doubles the investment at no extra cost to me. How does this make me a sucker?
 
NavanMan1 - yes I'm Female.

rmelly - Credit card is a mix of descretionary spending and paying bills etc. I don't seem to monitor/manage my spending at all now, when I was on a lower salary I would have.


Also on the topic of pensions - I have a defined benefit pension, so if that is the case does it make sense to put away more, my understanding is that I would just get the same "Defined Benefit" come retirement time?

Kemo_Sabe - I'm under 30

Thanks for your responses so far!
 
It sounds to me as if you are v well provided for - you have a defined benefit pension for your retirement income, your house is being paid for, you have some savings for an emergency or rainyday (possibly you're in the public sector as otherwise DB schemes are rare so you should also pay into an income continuance scheme in case of long term illness). Saving more would only provide a bonanza for your beneficiaries (a long time hence!).

Use your excess money as you wish e.g. if privacy is important to you let the tenants go/if you enjoy art start to buy young artists/have great holidays/contribute to charity etc etc.

Once the fundamentals on security are in place life is for living.
 
Daithi7 said:
Yes, check out revenue.ie and look up pensions.

roughly goes like this, when you invest in a pension you get tax relief at the top rate (assuming you have those type of earnings), and then you build up your pension in an approved fund or funds with no CGT on any gains made. However charges are significant here and often take the gloss off any gains.

Then when you retire you are allowed take 1/4 of fund tax free under current tax legislation and the other 3/4's has to go into an ARF which also incurs admin and management charges as Old Timer points out
, and then you pay tax at the appropriate rate when drawing down from this.

So Pensions are merely 3/4 deferred taxation (with management charges) and to my eye are for suckers!!
Click to expand...

this is total nonsense
 
Daithi7 said:
Yes, check out revenue.ie and look up pensions.

roughly goes like this, when you invest in a pension you get tax relief at the top rate (assuming you have those type of earnings), and then you build up your pension in an approved fund or funds with no CGT on any gains made. However charges are significant here and often take the gloss off any gains.

Then when you retire you are allowed take 1/4 of fund tax free under current tax legislation and the other 3/4's has to go into an ARF which also incurs admin and management charges as Old Timer points out
, and then you pay tax at the appropriate rate when drawing down from this.

So Pensions are merely 3/4 deferred taxation (with management charges) and to my eye are for suckers!!
Click to expand...

You shouldn't be offering advise to people with genuine queries when you haven't got a clue
 
The notion that pensions are not an efficient form of saving has been debated here before. Here's another example.

Let's have a few FACTS: -

  • The majority of people pay 20% tax in retirement. When you build up a pension fund, you get a tax-free lump sum in retirement. Often, this is 25% of the fund. In Occupational Pension Schemes, it might be more. Let's assume it's 25%. So if you get 25% of your fund tax free and the balance is taxed at 20% (less tax credits), let's say your average tax rate on your pension fund withdrawals is therefore 15%. So you get 41% tax relief going in and pay 15% tax coming out. Explain to me why this is for suckers.
  • At present, tax exemption limit for a married couple where one partner is over 65 is €40,000. So if your total pension and other income is €40,000 or less, you pay no tax at all. If this is your situation, you could get 41% tax relief going in and pay no tax coming out. Still think pensions are for suckers?
  • As has been mentioned, a pension fund pays no CGT on gains made on investments.
  • Of course management charges apply. I've never come across a form of investment where the operator works for free. There are countless threads here on Askaboutmoney where you can find examples of where you can invest your pension fund so that the total annual charge is around 1%. With the amount of information that's out there, if you end up paying into a pension that imposes uncompetitive charges, you obviously didn't bother to do your homework.
 
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