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As a 30 something, the best time to start thinking about your retirement and future financial security is… well….yesterday.
Of course, it’s not the most exciting topic when you’re young and have to consider things like mortgages, weddings and children, which require more urgent financial attention.
The reality is, however, the sooner you embrace the topic of pensions, the better. Not only will it take one of those big ‘life admin’ weights off your shoulders, but an early start brings great benefits.
State pension age is on the increase (set to be 68 after 2028), as is our life expectancy. Irish men and women are expected to life to 78 and 82, respectively and surviving for that long on the current state pension personal rate of €230.30 per week, seems like an unimaginable stretch.
So if you’re new to the world of retirement planning and feeling a little bit more ready to get started, here are some things you can do now that your older self will thank you for.
- Know where you currently stand
Pensions seem complicated when you don’t know anything about them, but there’s plenty of information online and it’s always worth asking those around you too. The most important thing to know, when you’re getting started, is whether you have or are eligible for a pension and what the contributions are. If you are in the public sector, you’ll be covered by the public sector pension but if you work in the private sector, this may be more unclear. If you’re unsure, talk to your employer or HR department to understand your current position.
If there is an option to join a company pension scheme, you should strongly consider this, as it’s basically free money for future you. Take an interest in the scheme and understand your contributions. It might automatically be set to a minimum of 1% of your earnings. If you feel like you can increase this, you should.
- Calculate and set a budget
Once you know where you stand, the next step is to figure out exactly how much you need to put away each month to secure the kind of comfortable future you want after retirement age. Irish Life has a very handy pension calculator which will take you through everything. All you need to know is your annual salary and basic information about your existing pension, if you have one.
It can tell you how much you need to save on a monthly basis to reach your goal. By having this information in front of you and knowing how much you need to save, the reality of retirement planning will seem a little bit easier to take on.
- Set up a pension
No matter if you have all the savings in the world it’s still worth having a pension, as a pension receives income tax relief, if you’re eligible. This basically means you’ll pay less tax if you have money in your pension. For example, if you invest €100 in your pension, you’ll get €20 off your tax bill. And the relief is even greater for higher rate taxpayers.
If your employer is matching your pension contributions, you should contribute as much as you can to benefit fully from this.
- Pay off your debts
Retirement planning is not just about setting up and having a pension. Having control over your current finances will help stand you in better stead in later life.
If you have any debts, make it your priority to clear all of these before you do anything else. Start with the ones with the highest interest rates first as they’ll be costing you most, longterm. From there, try to avoid when possible, purchasing items on credit or getting loans that you don’t absolutely need.
- Ask for more money
It’s not a conversation that anyone wants to have but if you don’t negotiate your salary, you’re not only undermining your potential income but your savings too. Having an extra €100 or more per month to put towards your savings can make a significant impact on your financial security in later life.
- Save as much as you possibly can
Even though buying that new pair of shoes may seem more appealing, it is worth saving as much as you can, while you can – before you have to come to terms with the big life expenses such as mortgages and weddings and your money has to stretch much further.
Every time your wage increases, or if you manage to clear a monthly expense, put this towards your savings. If not, you’ll find you’re just unnecessarily spending this extra cash with nothing to show for it.
- Consider investing
For most people entering into the world of savings and investment for the first time, setting up a pension is often the first step. But once you have that set up, it might also be worth considering other investments to add a little bit extra to your pockets, so you can afford to put away extra for your retirement. Of course, with investment, there is greater risk but there’s also greater reward. We have some great investment information and resources at IrishLife.ie to suit investors of all types and levels of experience.
- Buy a home and buy wisely
We know, we know – in Ireland, this is much easier said than done, as the average age of first time buyers has risen to 34.
But if you have the chance to get a foothold on the property ladder, buying a home is a solid investment for your future, retired self. If you manage to pay it off well before retirement age, you’ll be able to save more and will have considerably less expenses. If you’re buying a house that you don’t currently want to live in, but want to rent out instead, consider if it may be somewhere you could comfortably settle later in life, for greater practicality.
- Talk to a professional
To maximise the potential of your retirement plans, it’s always best to talk to a professional who understands pensions, investments and savings inside out and can give you the best advice. At Irish Life, we have hundreds of thousands of pre-retirement pension customers in Ireland so we have a detailed understanding of how to cater for customers of varying needs and levels of expertise when it comes to finance.
As much as talking to friends, family members and colleagues can help guide you, discussing your situation and your goals with a professional will give you that extra bit of confidence in your decisions.
Let us help you plan your future!
No matter what age you are, planning for your retirement or making sure your pension is on the right track should be a priority.