Taxes for 50 year old early retiree

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Ndiddy

Registered User
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Hi, If one were to stop working at 50, no DB pension and start living off savings and eventually dipping into the DC plan, how would that person be taxed?
I believe there is a tax exemption up to a certain amount of income drawn when over 65 but is there anything if you are 50?
 
At age 65, a person with income of under €18,000 per year is tax exempt - €36,000 per year for a couple where one is 65 or over. Below those ages, normal taxation would apply. There are plenty of free online tax calculators, e.g. http://download.pwc.com/ie/2018-income-tax-calculator/index.htm

If you are living on savings alone, then you have no income. When you say "dipping into the DC plan" that's a bit of a vague expression. If you have benefits accumulated in a DC pension plan, then to access them you would need to "retire" the DC plan. If under 61, you could take a tax-free lump sum and re-invest the balance into an Approved Minimum Retirement Fund (AMRF) and Approved Retirement Fund (ARF) and dip into those for income as required. Any income from either would be subject to tax and levies. Same rates as earned income.

Regards,

Liam
http://ferga.com
 
I'm in this situation. Yes, taxation is as normal. I file a self-assessment Form 11 each year. One concern is to make sure you continue to pay PRSI contributions if you want to qualify for the State contributory pension. This is the case if you have no "earned income" -- you will pay 4% PRSI on any unearned income subject to a €500 annual minimum.
 
thanks to all.

so if you don't need to start using DC funds, ie savings is enough, you don't pay tax (except dirt on savings) through income. this means probably best to leave DC plan to grow as much as possible before needing it so the tax-free amount is bigger?

still a ways away but currently saving max 20% in our DC plans but with not much extra cash left so with 10 more years to age 50, trying to figure out if better to save more in cash....
 
You've a bit of planning to do, and it depends on the size of your pension pot, and if you're already getting maximum tax free lump sum, etc.

There's no point deferring pension benefits during a period you've no taxable income if ultimately you're going to pay a higher rate of tax when you start taking pension benefits.

Assuming you're about 40 now, completely debt free, you might also look at ways of increasing the amount of money going into your pension. For example does your nature of work allow you to become self employed? Or could you change jobs / contracts so that employer is making a larger pension contribution.
 
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