Withdrawal from ARF before reaching 61.

4

4ofablue

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I'll turn 61 in 2026 and will be required to withdraw 4% from my ARF befrore the end of the year and in subsequent years as I understand it.

I'm considering withdrawing a sum this year, just enough not to reach the 40% tax bracket. Are there any major downsides to doing this? (I'll obviously be slightly depleting the fund). And is it straightforward to organise?

The way I look at it, I'll have more fun spending the 4% at 60 than at 70.

TIA
 
What are your overall financial/personal circumstances? Do you actually need the money now? If not then why not wait until next year when you have to take it? If you'll have more fun spending it at 60 than 70 then that's probably not going to change in 5 months?

Or, if you don't need the full amount then you could take just enough to use up your 2025 tax credits (your total tax credits x 5) but not your standard rate tax band so that you don't pay any tax and just some PRSI/USC? If the amount is over €5K then you'll also get 52 additional PRSI class S (I think) contributions in case you have a shortfall to 2,080 for the full contributory old age pension at 66 if that's relevant to your situation.
 
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I have conversations with clients all the time the the 4% is the minimum amount you have to take out. If you want to take out more, do so and enjoy spending it.

BTW, unless you have health issues, you will probably still enjoy spending it at 70. Taking care of your health in retirement is the most important thing you can do. I have seen client's health deteriorate very quickly in their 70s and I have others who are still enjoying life in their 80's (albeit a bit slower than previously!).

But definitely enjoy the money.
 
This is an excellent idea. Especially if you will enter into the 40% tax band when you start your Contributory State Pension.

Just calculate the extra spare 20% tax band available and drawdown this amount.
 
Thanks for the replies. Just to clarify, I'm on a teacher's pension so no PRSI implications or future state pension.

Current financial position is fine - this money would be spent on travel. My thinking is to take advantage of being taxed at 20% if that makes sense.
 
Difficult to say for sure without more details such as your overall financial/personal circumstances, existing pension income, what your lifestyle costs, the size of your ARF, what other assets/savings/investments and debts you have, etc. The sort of stuff that a Money Makeover would cover.

Key Post - Basic information required for the "Money Makeover" forum

It can be difficult, but please try to use a meaningful title in your thread For example "27 year old with mortgage arrears". You will get a much better and much more coherent answer if you give as much information as possible in your first post. For example, if you give your mortgage rate, it...
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4ofablue said:
Just to clarify, I'm on a teacher's pension so no PRSI implications or future state pension.
Click to expand...
Are you pre or post 95 ?

There is always the potential to gain a portion, or extra amount of the COAP.

Check out this thread.

Key Post - PRSI and planning retirement

This Key Post is in the form of a FAQ where I don't know many of the answers. I will update the post as I get answers. 1. PRSI payable on reaching state pension age Answer: 0 (Class M) 1a. Does this relate to the start of the tax year in which you become 66? Or to after your birthday? Answer...
www.askaboutmoney.com
 
@4ofablue

If you make a 5k+ ARF drawdown this year and each year up to age 66 you can gain 6 years of Reckonable Prsi paid contributions.

This alone will qualify you for a pro rata COAP.
You will also qualify for treatment benefits.

You can also gain up to 2 years of Reckonable change of status credits if you gain at least 1 class A Prsi contribution from employment.

If you get the 1 class A contribution, sign on for Jobseekers credits up to age 66.

Aim to qualify for Benefit payment 65.

There is information on all this on the thread.

A small bit of planning at this stage will be of enormous benefit to you.
 
There's a lot of reading on that thread, thanks. I'm just getting started!

Basically the aim is to reach 260 Class S contributions before age 66 to add to my approximately 1800 Class D contributions? And that entitles you to a small COAP?
 
I thought they needed at least 260 paid Class A stamps before any of the above would be taken in to consideration for the Contributory Old Age Pension and that Class S Stamps from drawdown of the ARF would not count towards this 260 figure ?

Am I misunderstanding the rules ?
 
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You need 260 full rate paid contributions. (in combination with at least 260 class B or class D contributions for a pro rata pension)

Class A and Class S are both full rate paid contributions.

So any combination of Class A or Class S up to 260 are okay.
 
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Thank you S Class again for sharing your knowledge.

I am asking for my friend. Apologies for hijacking this thread.

Can you advise if he is going about things in the correct way to enable him to gain a Partial C.OAP please.

1. He is retired from teaching last year. Now aged 61. (Pre 1995 so has appx 1900 Class D Stamps).

2. He worked for a week in 2024 after retiring and paid a Class A stamp. This would enable him to apply for a Change of Class for 2024 + 2025 and gain 104 Class A stamps if he qualified for the C.OAP at 66.

3. He will drawdown > €5k in his ARF for the next 6 years. This should give him 52 Class S Stamps for each year.

He doesn't really want to commit to working bar an odd week or two of subbing.

Should the above qualify him for a partial C.OAP at 66 ?

Is there anything else he should do to maximise his chances of qualifying ?

Thank you as always for any steer and guidance you can give.
 
Everything in his plan is fine.

He will definitely qualify for a pro rata pension at age 66.

He should get his Prsi record from DSP and check if he has any full rate Prsi contributions from before the start of his class D employment. If he has, he might be able to reach the 520 full rate paid contributions level at or after age 66.

Even if he has no previous full rate contributions, he might be able to reach the 520 full rate paid level if he deferred his COAP up to age 70.

Would his ARF allow him to drawdown 5k per year up to age 70 ?

He would get a higher defered pension if he managed this.

Other than that he should sign on for Jobseekers credits to keep an option open to qualify for Benefit payment 65.

He might change his mind about doing a bit of extra employment. 13 weeks of employment for a few hours a week (in a single calendar year) would be all he would need to qualify for BP65
 
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Thank you S Class.

That is fantastic. He thought that he would have to achieve 260 paid A Stamps (5 years) and that drawdown of the ARFs (S Stamps) would not count towards this 260 figure.

He will be thrilled to hear otherwise.

I will advise him to sign on for Credits and tell him the benefits of working 13 weeks per calendar year (not needing to be consecutive)

Thanks again .
 
Joebloggs said:
I will advise him to sign on for Credits and tell him the benefits of working 13 weeks per calendar year (not needing to be consecutive)
Click to expand...
Just to clarify this.

He would only need the 13 weeks of employment in any one calendar year.

The 13 weeks could be made up of several short periods of work during the chosen year.

He would need to be careful if he does this during the calendar year of his 63rd birthday. This is because he needs a minimum of 39 contributions during this particular year.

So if he is in employment during that year he needs to ensure that he signs on for Jobseekers credits during the gaps in his employment periods.

He would just need to phone his local Intreo center at the end of each employment period and ask to be signed on again.
 
Thank you S Class.

If he works for 13 weeks during the Calendar Year of his 62nd Birthday, should he sign on for Credits also ? (he will be drawing down >€5K in his ARF each year from 61 to 66 ).

His ultimate goal is to achieve a partial C.OAP. The BP65 would be a total bonus if this happened !
 
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