Your retirement is a time you have worked hard for, a time to start doing the things you always promised yourself. To ensure you are able to make the most of your retirement you will want to ensure you are financially independent. Especially since your retirement could last for 20 years or more.
Whether you are approaching or at retirement there are certain things you need to think about in order to make the most of your retirement years.
COUNTDOWN TO RETIREMENT
As you approach retirement it’s a good idea to meet with a financial advisor each year to get a clearer idea of what your financial circumstances are likely to be when you retire.
COUNTDOWN CHECK LIST – 2 TO 5 YEARS FROM RETIREMENT
- When can I retire? Check the rules of your pension plan to determine the date from which you can choose to retire. If you want to retire early you could have a number of years before you are eligible for the State Pension. You may need to bridge this income gap by topping-up your pension now.
- What level of pension and tax-free lump sum can I currently expect at retirement?
- What benefits, if any, will I receive from my employer at retirement?
- Will this income be enough to sustain my current standard of living in retirement?
- Will I have enough money to last me for 20 or more years? How do I maximise my retirement fund? Depending on your age, you can save up to 40% of your income into a pension and claim full tax relief.
- What portion of my pension pot is tax free and what is taxed?
- What options are available to me when it comes to taking my retirement benefits?
- In the event of my death in retirement, do I need to provide an income in retirement for my spouse? Do I need to make additional pension preparations now to fund for these extra needs?
- Am I invested in the right pension fund given how I plan to take my benefits at retirement? Now is a good time to review your fund choice, especially if you are considering opting for an Approved Retirement Fund (ARF) at retirement.
COUNTDOWN CHECK LIST – 1 YEAR FROM RETIREMENT
- Meet my Wealth Manager and start planning the financial aspects of my retirement.
- What is my expected annual retirement budget? Include your expected annual pension income after tax and other deductions. Estimate your expected outgoings and expenses in retirement. Factor in the potential cost of long-term health care for you and/or your spouse.
If the lifestyle you want in retirement will cost more than you expect, you may need to consider continuing to work part-time, reducing your expenses, or postponing your retirement date to meet your goals.
COUNTDOWN CHECKLIST – 3 TO 6 MONTHS FROM RETIREMENT
- Meet my Wealth Manager. Get advice on your retirement income and how to best set this up. Do you want a secure income for life or do you want to remain invested so that you can pass the balance of your retirement fund to your dependents?
- Contact my local Social Welfare office. Advise them of your retirement date and obtain the necessary forms you will need to complete to avail of your benefits.
OPTIONS AT RETIREMENT
Now that you are at retirement you have an important financial decision to make regarding your pension fund and how it could be best used to meet you and your family’s needs in the future.
Two of the most important factors you should consider are the way in which you wish to use your pension fund to provide an income in retirement and whether you wish to pass the balance of your fund to your dependants after your death.
What you can do with the proceeds of your pension plan depends on which employment category you fall into and the type of pension plans you currently hold. Depending on your circumstances there are different options for you to consider at retirement. You have the option to take a tax-free lump sum and may be able to use the balance to avail of:
- A pension income for life (an Annuity)
- An Approved Retirement Fund (ARF)
- A taxable lump sum
Most people will choose to take the very attractive tax-free retirement lump sum option of up to €200,000 from their pension fund (subject to Revenue rules) and then use the balance to meet their financial needs in retirement through one of three further retirement options:
- Purchasing a pension income for life (also known as an Annuity),
- Investing in an Approved Retirement Fund (ARF) or,
- Taking a taxable lump sum,
The retirement option that is right for you will depend on many factors, including:
- The size of your retirement fund;
- The level of income you and your spouse/civil partner/dependants will need during your retirement years;
- The amount of other assets – apart from your retirement fund – that you have to fall back on;
- Whether investment growth or security is more important to you during your retirement years;
- Whether you wish to pass your retirement fund on to your dependants; and
- Your current state of health.
Planning how to provide an income for your retirement years involves careful consideration. Because of this, it makes sense to discuss your retirement options with a qualified Wealth Manager.
