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It’s never too late to start saving for your retirement

Consider that for a couple aged 65, there is a 47% chance one of them will live to 90

There can be all kinds of reasons for not having saved enough for your retirement, including simple inertia, poor investment returns and competing financial priorities, particularly in your 30s and 40s.

However, if you are not saving enough at the moment, all is not lost. This is because retirement investment strategies are changing to reflect the longer and healthier lifespans that many of us expect to have, but also because the traditional concept of retirement is changing too.

So depending on what age you are, what should you be bearing in mind when it comes to your retirement savings?

Up to 29: Needless to say, pensions won’t be uppermost in your mind, particularly if you’re still living a home, have just left third-level education or your employment is not particularly secure, says Alastair Byrne, senior defined contribution investment strategist with State Street Global Advisors.


But if you’re working for a firm that has an occupational pension scheme where the employer matches your contribution, it’s a no-brainer: join it. “They’ll get a very substantial return on that because of what the employer is putting in.”

Andrew Fahy, head of tax and financial planning at Investec, says even if there is no scheme in place, you should set up a personal retirement savings account (PRSA) and try to contribute something. “Affordability will clearly be an issue for people in this age bracket, but the aim should be to try to create good habits around contributing which will be of benefit in later life.” This age group should also be aiming for high-risk investments but in a “globally diversified manner”.

30-49: “A lot of us would lump the 30s and 40s together in that you’ll ideally be at a stage where you’re doing some planning and thinking about what you can afford to save, and paying some attention to building up some assets for retirement, said Byrne. “But it’s still a struggle at that stage, as peoples’ attention may be drawn to other things like setting up a home and starting a family . . . inertia is still a big issue”.

You should be starting to maximise your pension contributions in line with the limits for your age group. For instance, those aged between 40 and 49 can contribute 25 per cent of their annual net relevant earnings up to €115,000.

Byrne recommends using a facility where you can raise your contributions automatically by 1 per cent each year for the next number of years as a “less painful” way of upping your savings level.

However, people in this age group are still not taking on enough investment risk, says Fahy. “They believe that they’re being prudent by not investing exclusively in equities, but in reality they should be invested 100 per cent in riskier assets.” Your asset allocation should be monitored regularly as you approach your 50s.

50-59: Given that most of us change jobs quite frequently, you might have a number of pension pots at this stage, but it’s worth consolidating them into a single fund if you can. At the very least, it will allow you to quickly see how much you have saved at any one time and then make adjustments if you need to – perhaps even to cut back.

“The reality is that many underestimate what they’ve actually got, which is unfortunate because they’re actually on track, they’re doing okay,” said Byrne.

Fahy said: “Having more than one pension plan should not increase costs materially but it would create additional unnecessary administration and paperwork to keep track of. Plus a larger fund may have superior buying power in terms of costs.”

But if you still need to make up lost ground from previous decades, you should continue to ramp up your contributions to the applicable maximum for your age group, ie 30 per cent of up to €115,000 at age 50 to 54, and 35 per cent from age 55 to 59.

You should also be engaging with your adviser on a regular basis, added Fahy.

60 and over: Fahy says that the easier access these days to approved retirement funds (ARFs), whereby new retirees can continue investing all or a portion of their pension pot rather than spend it on an annuity, has “changed the landscape dramatically, particularly in terms of an individual’s investment time horizon”.

“For a couple aged 65, there is a 47 per cent chance that at least one of them lives to at least 90.”

He says an ARF can be passed to children tax-efficiently and prolongs the lifetime of the underlying capital, whereas an annuity typically dies with the holder, while annuity rates look set to remain unattractive for years to come.

What this means is that the investment strategy known as “lifestyling”, whereby you would “de-risk” your fund the closer you got to retirement, may no longer be appropriate in many cases.

Byrne says that the concept of retirement is also changing. “The idea that at the age of 65 or 66 you stop working seems to be outdated for people who don’t have a clear idea when they will retire.

“They may want to retire gradually, or find another occupation that you can work on a part-time basis after you retire from your main job. That affects how you access your retirement assets.”