Moneymakeover Retiring next year

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Tempo66

Registered User
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Personal details

Your age: 61
Your spouse's age: 68
Number and age of children: 2 grown up children

Income and expenditure
Annual gross income from employment or profession: 58k
Annual gross income of spouse/partner: 10k state pension

Monthly take-home pay: c. 3.5k

Type of employment – Employee.
Employer type: Private employer
Max 40% into pension.

Summary of Assets and Liabilities
Family home value: 525k
Mortgage on family home: none
Emergency Cash: 10k

Other borrowings – car loans/personal loans etc
None

Pension information
Value of pension fund: 445k

Other savings and investments:
200k – in fairly conservative savings plans

What specific question do you have or what issues are of concern to you?

Have decided to retire by summer 2026. I’ll be 62 ½. We have a modest lifestyle, enjoy travel and would like to use the time well.

I reckon pension pot will be about €480k or so. With savings of 200k, no mortgage and tax free lump sum of 120k we have no great concerns about resources, it’s more a question of what best to do with them. I’ll get a nearly full Irish state pension at 66 if I continue to contribute PRSI, and a full UK pension at 67, so it is question of managing the period from retirement to those pensions.

I have two questions.

1) On retirement I’m thinking of putting 400k in an ARF and drawing 5% pa = 20k. Can reduce this to 4% when I get state pensions. This income would be supplemented by my wife’s pension (10k) and some income from savings invested. I also have £10k in a UK pension pot. Not sure what to do with it. Might it be tax efficient to cash it in after I retire and when our annual income is lower? Does that sound like a fair plan?

2) I have a question about qualifying for the interim payment at 65. It would help in the transition period before state pensions. As I understand it I can qualify via 26 qualifying payments the year I am 62 (2026) plus 26 qualifying payments when 63 (2027, the ‘governing year’). 2026 will be OK, it is 2027 I am wondering about. Is it right that I can gain fully reckonable class S contributions via income from the ARF if over 5k pa? And these would help me qualify for the interim payment? Or would I have to do some paid work in 2027 to get the required 26 weeks PRSI?

Hope that makes sense. Suggestions welcome. Thanks.
 
Tempo66 said:
I reckon pension pot will be about €480k or so. With savings of 200k, no mortgage and tax free lump sum of 120k we have no great concerns about resources,
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Tempo66 said:
On retirement I’m thinking of putting 400k in an ARF
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I don't get this. How will it be €400K into the ARF if the pot at retirement is €480K and you take the maximum 25% tax free lump sum of €120K leaving €360K?
 
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Do you have a target income in mind? You’re currently spending 3.5k per month with no mortgage or kids to support - is that the target, or a bit more to cover additional travel?
 
Good point @conor_mc. In this situation it's always advisable to figure out what the essential household expenditure/budget is in order to assist with forward retirement planning. E.g.:

Moneymakeover - Household Budgeting Comparisons?

Not sure if the correct place... Life has been in (financial) flux for the last 4 years (house purchased, wedding, new baby, mat leave) but 2025 has brought some stability so I have had a look at our income and expenses. I track both pretty well. We both have decent incomes, don't live...
www.askaboutmoney.com
 
Tempo66 said:
I’ll get a nearly full Irish state pension at 66 if I continue to contribute PRSI, and a full UK pension at 67
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So we’re talking a bit less than 15k from the Irish state pension, say 13k, and about 14k EUR (12k GBP) from the full UK state pension? In addition to your partner’s 10k Irish pension. 38k in total.

Assuming you’re targeting 3.5k a month (42k pa), you’ll still need a bit of ARF/savings drawdown after age 67. But if you pre-decease your partner, she will need to fill in a fairly sizeable gap in income, right? Notwithstanding your age difference and relative life expectancies, it’s an unlikely situation but not one you would like to leave her in, I’m sure.

Is there the potential of a widow’s pension from your UK pension? Should you consider an annuity that will continue to pay out if you pre-decease your wife? Or would setting by savings be the better course for you (ie will kids be able to help your wife manage that as an income?).
 
Tempo66 said:
have a question about qualifying for the interim payment at 65. It would help in the transition period before state pensions
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Be careful if you are planning on using your class S Prsi contributions in order to qualify.

You can only use these if you have actually ceased a self employment after age 63.

You might manage to qualify if you set up 2 ARFs and fully drawdown one of these between age 63 and 65. This would be classed as having ceased a self employment.

Otherwise because you will have at least 13 paid class A contribions in the calendar year of your 62nd birthday, you only then need a minimum of 39 Jobseekers credits in the calendar year of your 63rd birthday.

When you retire claim Jobseekers benefit and continue to sign on for Jobseekers credits after the payments end, up to the end of the calendar year of your 63rd birthday.

You are allowed to claim Jobseekers credits alongside class S contributions from your ARF.

Read this thread

Can a retired PAYE worker use class S contributions to qualify for Benefit Payment 65.

The following is based on my reading of the rules of BP65SE, so it may or may not be possible. If a PAYE worker has taken early retirement and has ARF drawdowns over 5k per year they will get 52 class S contributions per year. If this person doesn't meet the class A rules in their governing...
www.askaboutmoney.com


From reading one of your previous threads.

When you start your COAP you should claim an increase for a qualified adult for your wife. This might be higher than the reduced pension she is currently receiving.

You have nothing to lose in trying.
 
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Tempo66 said:
I reckon pension pot will be about €480k or so. With savings of 200k, no mortgage and tax free lump sum of 120k
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Tempo66 said:
On retirement I’m thinking of putting 400k in an ARF and drawing 5% pa = 20k.
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A minor point but if your TFLS is €120k, your ARF will be €360k.

It never makes sense to leave tax free money in a taxable product like an ARF so you should not start the ARF with €400k unless your pension pot is ~€533k
 
garbanzo said:
Can you explain why “it never makes sense to leave tax free money in a taxable product like an ARF”.
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I think it's self evident. You pay no tax if its part of your 25% tax free lump sum. If it stays in the ARF then it is subject to tax when you withdraw or deemed disposal tax if you do not withdraw. Why gift revenue the tax when you don't need to ?
 
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One edge case where it could make sense not to take the full 25% tax free lump sum might be where the mandatory 4% and eventual 5% drawdown is small enough to be tax free due to one's tax credits (PRSI and/or USC may apply if taking retirement income early - PRSI contributions may be useful if one needs to bridge a gap to the full pension 2,080 target). But, as I say, it's probably an edge case and depends on future tax conditions whereas the tax free lump sum is guaranteed to be tax (and PRSI/USC) free.
 
thanks everyone.
Clubman you are right about the tax free lump sum. I guess a better way of putting it is to aim to have income from ARF plus investments, plus my wife's COAP around c.38k.
Thanks for the comments about qualifying for the interim payment as well - noted. And exploring qualifed adult when starting COAP.
I'll get financial advice this year, including how best protect income for my wife if I pop my clogs first.
 
Tempo66 said:
I guess a better way of putting it is to aim to have income from ARF plus investments, plus my wife's COAP around c.38k.
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But do you know that you actually need €38K p.a.? As I mentioned above it's worth doing an objective analysis of your expenditure to figure out what is actually needed for (a) essential household costsand (b) lifestyle choice/discretionary costs.
 
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