If you think €40,000 a year would give you a comfortable life in retirement, the maths might give you a land.
A recent Irish Times analysis of a Royal London Ireland survey found a 30-year-old on just over €60k per annum would need to start saving 22 per cent of their monthly income (€1,135) to secure that figure by the time they’re 66.
That’s assuming they have the PRSI contributions to qualify for the full State pension, currently worth about €15k a year.
Who has that amount of money to squirrel away every month, we hear you cry!
That’s precisely Paul Merriman’s reaction. The financial adviser and founder of AskPaul.ie is here reassure you there’s no need to be alarmed.
“There shouldn’t be any need to panic really if you’re in your 30s or even your 40s or even tipping into your 50s, because you’ve still got a few decades or down to 10 or 15 years to plan and figure it out... The spreadsheet doesn’t know your life, your goals, your ambitions. I’d rather one of my kids set up a business and even fail in the next six or seven years in their 20s than have money set aside in a pension.”
In this episode of Better with Money, Merriman emphasises the need for a realistic financial plan that looks at income, family costs and housing “because a good financial plan will tackle the pension eventually”.
The 44-year-old former Fairstone Ireland chief executive and now president recommends prioritising being mortgage-free by 66, even if that delays pension saving.
“Maybe it’s not the Irish property ladder, but you need to be on a property ladder somewhere to make sure that when you get to 65, you don’t have a mortgage over your head, and you can live somewhere rent-free or mortgage-free.”
He explains the tax relief in a nutshell, how pension plan tweaks (like upping your risk level) might be more prudent than increasing your contributions and urges listeners to set clear financial goals.
You can listen to the episode on the player above or search for Better with Money from The Irish Times.
This episode is for information purposes only and does not constitute financial advice.
