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One of the most common questions our clients ask us is, “When I retire, I will receive my pension. Why do I need you to help me manage it before I retire?”
This is a very good question. Many people don’t think about retirement until we’re about three to five years away from it. Although some people do “save for retirement,” a typical return in a savings account won’t allow you to live in the manner to which you have become accustomed.
With Ireland’s pension of €12,107, if you have been used to living on a salary of between €40,000 and €55,000 or more, this represents a significant shortfall—unless you begin contributions towards your retirement pension. As with everything, the sooner you start, the more you will have when you reach 68 years of age.
One of the biggest incentives you will see right now is tax relief. For example, if your income is taxed at the standard rate of 20 per cent, for every €100 you save, the government will add €25. If you can save €100 a month, by the end of each year you will have actually put €1775 vs. €1200 towards your pension.
As your salary increases, which is inevitable the older and more experienced you get, and as you move into a higher tax bracket, the government increases that €25 incentive on every €100 to €66.
Another incentive to paying contributions towards your retirement pension is that it is exempt from Deposit Interest Retention Tax, also known as DIRT, which is currently at an all time high of 41 per cent in Ireland.
Don’t wait until you are 60 or 65 years of age to start saving for retirement. The sooner you start planning, the better and more relaxed your retirement will be.