After you retire, you may need an income for over 30 years
People are living longer. That’s a good thing. It means you may be retired for up to a third of your life. But, of course, you’ll need money to enjoy your lifestyle during your retirement.
Now, imagine you have a savings plan that helps make sure that the money you earn during your working life lasts your whole life. In essence, that’s what a pension is.
A pension plan can provide you with an ongoing income to ensure you have the money you need to enjoy your retirement.
Your income could drop by over 70% if you rely solely on the State pension
When you retire, you may want to have a similar lifestyle to the one you enjoy today. However, unless you put a pension plan in place now, your income in retirement could drop by over 70%.
For most adults in full-time employment, the contributory State pension is currently €12,636 a year (or €243 a week), but the average full-time salary in Ireland is much larger at €46,402*. That’s a potential drop in income of €33,766 a year, from the day you retire, if you are on the average full-time salary.
How will you bridge that drop in income? You should start saving for your retirement as early as possible to help reduce the impact it may have on your lifestyle.
If you qualify for the State pension, you could be 68 before you get it
The age you become eligible for the State pension (contributory) is no longer 65 for everybody. If you were born on or after 1 January 1961, your minimum qualifying State pension age is now 68.
That’s potentially a three-year gap after you finish working at 65 and before you can claim the State pension at 68: A loss in income of three years’ worth of State pension worth €37,908.
Starting your retirement savings
For all these reasons, it’s good to start a pension in your 30s or 40s when you still have time to save. Putting the right plan in place depends on:
- Your age
- Your expected retirement date
- The lifestyle you want when you retire
- And what you can realistically afford to save.
Remember: pensions are flexible. You can usually stop contributions if your circumstances change and restart again at any time.
* Source: CSO, Average annual earnings for full-time employees in 2017, Earning and Labour Costs 2017.
The information contained in this article has been prepared by Bank of Ireland (“BOI”) for information purposes only. BOI believes any information contained in the article to be accurate and correct at the time of publishing.