The effective tax rate for a retired couple on €50k?

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Protocol

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I just did the income tax return for my retired parents.
Income = 49.5k.

Guess the effective rate of tax and USC?
 
You are good.

7.2%

They get:
  • 2 full medical cards
  • 2 free travel passes
  • free TV licence
  • 35 pm / 420 pa off the electricity bill

Such a great country.

Other countries might provide more benefits, but would charge more than 7.2% tax on nearly 50k income.
 
It’s why it’s so frustrating when some people say that there is no point in paying into a pension because your tax rate in retirement is going to be 40%.

For many people it simply isn’t
 
Marc said:
It’s why it’s so frustrating when some people say that there is no point in paying into a pension because your tax rate in retirement is going to be 40%.

For many people it simply isn’t
Click to expand...
I presume you mean this hoary old debate?

Key Post - My pension pot has reached €800k - should I stop contributing ?

I am starting a new role in a company that does not have a pension scheme. They will offer a PRSA as they are legally obliged to do but they is no offer of contribution. I am aged 51 and I have other pensions that mean that all my future income will be at the higher rate of tax. Am I correct in...
www.askaboutmoney.com
 
ClubMan said:
I presume you mean this hoary old debate?

Key Post - My pension pot has reached €800k - should I stop contributing ?

I am starting a new role in a company that does not have a pension scheme. They will offer a PRSA as they are legally obliged to do but they is no offer of contribution. I am aged 51 and I have other pensions that mean that all my future income will be at the higher rate of tax. Am I correct in...
www.askaboutmoney.com
Click to expand...
Yes exactly. Just checked 26 likes on my post and interestingly no defamatory remarks from the usual AAM trolls even though it’s about tax. Maybe they were having their bridge repaired that day
 
Protocol said:
You are good.

7.2%

They get:
  • 2 full medical cards
  • 2 free travel passes
  • free TV licence
  • 35 pm / 420 pa off the electricity bill

Such a great country.

Other countries might provide more benefits, but would charge more than 7.2% tax on nearly 50k income.
Click to expand...
A very interesting calculation !, and If they both have private pension income, and income stays the same, they will have an extra €200 tax credits in 2022, (personal credit & paye credits both up by €50 each for 2022)they should edge the effective rate, to just under 7%, allthough the €5 state pension increase, will eat into some of that
 
Protocol said:
Other countries might provide more benefits, but would charge more than 7.2% tax on nearly 50k income.
Click to expand...
It's a while since I looked at the numbers but €50k is inside the top 25% of incomes for retired households.


Marc said:
It’s why it’s so frustrating when some people say that there is no point in paying into a pension because your tax rate in retirement is going to be 40%.
Click to expand...
There are maybe a few unusual cases where someone is near the SFT but this is not the case for the vast, vast majority of people. They will get relief at the higher rate and draw down at the lower rate.

Ireland's income tax system is unusually progressive, moving from zero to low to high marginal rates very quickly. This is the reason why tax-relieved pension contributions almost always make sense.
 
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NoRegretsCoyote said:
It's a while since I looked at the numbers but €50k is inside the top 25% of incomes for retired households.



There are maybe a few unusual cases where someone is near the SFT but this is not the case for the vast, vast majority of people. They will get relief at the higher rate and draw down at the lower rate.

Ireland's income tax system is unusually progressive, moving from zero to low to high marginal rates very quickly. This is the reason why tax-relieved pension contributions almost always make sense.
Click to expand...
But only if your combined income for retirement is under the threshold for higher tax (i.e. €70800 is it?)
 
NoRegretsCoyote said:
CSO finds that mean nominal household income for a two-person household with one person over 65 is €38k.

They don't have distributions but very few will be >€70k.
Click to expand...
Wow, €700 a week with no mortgage, a medical card, free travel etc. That's a very comfortable income.
 
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