Making sure you have enough money to provide for your retirement might seem like a daunting task. Many people don’t know where to start, often putting this off until later life. The following is a short list of a few do’s and don’ts regardless of where you are on your journey to retirement:
Dos
- Start a pension now. This might seem obvious however, many people expect to rely on the State pension to fund their retirement. Currently paying €277.30 per week or €14,419.60 per annum if you are entitled to full benefits, this will only provide for basic needs. Funding for your own pension will give you a secondary income to more adequately meet your needs. Remember, if you hold your own pension account, you are still entitled to receive the State pension. Both combined will certainly work hugely in your favour;
- Appoint a Financial Advisor. It is important to seek professional advice when building a retirement income. We will help you to calculate how much you need to ensure you have a sufficient pension pot. Based on anything you are already contributing, we will give you a better idea of what this might actually give you. We will also help you better understand the different structures, their advantages and how these work. We also make sure you are correctly invested, to maximise the growth on the fund itself to add further value;
- Ask questions. There is a lot of financial jargon and legislation that might feel a little intimidating. Knowledge though is power, if you better understand how your account works, it will be a very large step to ensuring you can get the most from your pension;
- Know how much tax relief you are entitled to and take full advantage of this. Your level of tax relief will depend on your age and income. If your highest rate of income tax is 40%, for every €100 you contribute to your pension, you will receive €40 tax relief. In other words, for every €100 you save, it has only cost you €60;
- Take advantage of the benefits of Benefit In Kind (BIK). If you own your own company and contribute to a pension or your employer makes a contribution on your behalf, there is no benefit in kind implications.
Don’ts:
- Don’t wait. The earlier you start, the less it will cost you to build a fund sufficient enough to meet your needs. Investment returns or interest over time will add hugely to your final account;
- If you already have a pension, don’t leave it until just before retirement to find out what choices. Familiarize yourself with your options now;
- Don’t assume just because you are contributing to a pension, it will adequately meet your needs. It may very well be enough but find out now and know what to expect in today’s terms;
- Don’t just sit back and ignore your pension. Take ownership, it is your future. Review your pension annually, keep up to date with investment performance, any changing legislation and continually remind yourself what it will give you once you finish working.
And remember, a pension is not very different to an ordinary savings account. The earlier you start, the longer you save for and the more you put away, the bigger the final fund and ultimately your income in retirement. Investment returns will add to your account but there is no magic bullet, work your pension and it will work for you.