Specialist
With the plethora of stories appearing in the media concerning the multi-million Euro retirement packages for the CEO’s of multi-national corporations, top government officials, etc, thinking of retirement becomes a fearful task to undertake as the average wage earner strives to accumulate enough capital on which to live-off once their employment years have come to an end.
With these recent, high-profile scandals, people worry about their own retirement and a bigger question has emerged for the ordinary worker to address, and it is one of great concern: How much of a pension is needed in order to retire with financial security, will we make the right investments and save an adequate amount of money in order to meet our financial needs for retirement?
Well, the responsibility of making adequate provisions for retirement rests solely on the shoulders of the individual, even qualifying for the State Pension demands that finances are taken care of in specific ways, making the correct PRSI contributions for example. Individuals need to prepare well for their retirement, and this means taking a long-term view, taking personal responsibility- investing in a comprehensive Irish pension for example- whilst trying to ensuring that their finances are as secure as they possibly can be, not always easy in our fluctuating economic climate.
If an individual is not concerned with their own financial security, there is nobody else who will come forward and do it for them.
When planning their retirement, many people feel that they have such a long period of time in front of them in which they can save money, that they can afford to take ‘contributions holidays', but it is important to remember that taking time out from contributing to a personal pension fund during the employment years will only result in a longer working life or a lower annual income during retirement.
Estimating how much money a person needs in order to retire comfortably is an issue that needs to be addressed on an individual basis, only the person concerned can decide what is sufficient for them. A good way of predicting retirement needs is to consider how much of an annual income that person wants in retirement. For example, can that person manage on an annual income of £20,000, £30,000 or even £40,000? The next step is to establish how much capital the person has currently accumulated on which to live-off during retirement; for example, do they have a pension plan? How much is it currently worth? Are they entitled to a State Pension? Are they eligible for the full amount? Do they have assets? At what amount are these assets valued? Once a person has a rough estimate of how much money they currently have towards their retirement, then they need to work-out the difference between the amount they have, and the amount they want.
Media panics about pension investments, the state of the State Pension, given the aging ‘baby boom' generation, and the worsening global economic crisis can all lead to people feeling overwhelmed when they think about their own future financial security, but there are definite ways of improving their chances of securing a comfortable retirement.
If the shortfall between the amount a person feels they need, and the amount which the person actually has, is fairly large, and the person fears that they will be unable to make the necessary contributions to ensure their financial security during retirement, then there are still many steps that they can take towards improving their current situation. One such way is to tighten the purse strings during their working years, which will thus allow the person concerned to accumulate a more substantial nest-egg; such steps could include downsizing properties, selling-off assets, relocating to less-expensive neighbourhoods or even getting a second job.
However, possibly the most effective way of saving for retirement is to begin contributing to a long-term pension plan. Pensions are an excellent source of income during retirement as they come with some fantastic benefits, for example, they offer the saver huge amounts of tax relief, which means that they offer an unprecedented return on investments.
In summary, it is important not to feel waylaid by the masses of media attention concerning retirement, there are definite steps that can easily, and comfortably, be undertaken to help to ensure financial stability in retirement.
This article is based on the authors own observations and research and is not associated with any 3rd party organisations.