It’s Not Too Late…

Are you over 50 and thinking it’s too late to save into a pension?

Never fear…although it’s regularly said that the time to start a pension is yesterday, it is not too late to start in your 50’s. For some, it is a time in life when there may be less expenses and perhaps more disposable income. The picture of life in retirement is going to look different for everyone, but it’s worth thinking about what lifestyle you would like when you retire and what income would allow you to live comfortably in that lifestyle.

Starting a pension at 50 with an aim to retire at 66 would give you 16 years to grow your pot. One major advantage is the ability to contribute 30% of your income while receiving tax-relief should you wish. This rate increases to 35% between the age of 55 and 59 and is up to 40% from age 60 onwards.

In Ireland, there is a contributory state pension of around €13,000 a year (The Pension Authority, 2021) which doesn’t kick in until you turn 66. The amount you receive as a state pension will depend on your number of Pay Related Social Insurance [PRSI] contributions. Do you think you could retire and get by on €253.30 per week? If not, now is the time to act.

Usually as we get closer to retirement, we have more disposable income for multiple reasons. Children no longer financially relying on us, mortgages and loans paid off and our salary has hopefully increased significantly. What a lot of people do not realise, is that they can probably afford to contribute more to their pension than they may think.

If you are on the higher rate of tax and invest/save €192,000 into a pension during the 16 year term above, you would receive €76,800 in tax-relief. So, it will cost you €115,200 (€600 per month net cost to you) to have €192,000 in a pension before you even factor in any potential growth.

At a very conservative rate of 3%, this could leave you with a pension pot of €245,000. That would give you a cash lump sum of €61,250 for your retirement party and you could easily drawdown an annual salary of €9,100 (or more if you wanted) on top of that to supersize the state pension.