How much is needed?
Someone who is currently 30 can retire around 60 by virtue of building up a pension fund of about €800,000 in today’s money. I believe this is what is needed to be truly comfortable.

In order for that to happen, you need to be contributing about €1,000 per month, and that can be made up of employer and employee contributions. You don’t have to develop any other assets.

This may seem like a lot every month, but when you take into account the tax relief you’ll achieve, which is typically 40% for anyone earning over €42,000 per year, it makes sense to put it into your pension rather than pay tax on it.

In terms of the lowest amount needed, I don’t think anyone could retire at 60 with less than €400,000 in their pension fund.

 

Auto-enrolment
I am not a fan of auto-enrolment, which is a government scheme that will come into force at the end of this year. While it is good for people who do not have an existing company pension arrangement, it is very restrictive. You can only contribute 1.5% of your annual salary and your employer contributes 1.5% too.

Contributions to auto-enrolment schemes will increase to a minimum of 6% in nine years time. Some employees may not want to pay into their pension, and people who want to pay more than the fixed contributions cannot do that. You also have no choice over where your money is invested.

With auto-enrolment, if you are earning over €42,000 per year, you only get tax relief of 25%. With a company pension, you get tax relief of 40%. Even if you earn less than that, you can only access it from the State Pension age, which is currently 66. With a company pension, you can access it from age 50 onwards.

 

Other assets
I am not a big fan of people going into speculative investments such as cryptocurrency or gold. They are volatile and not very regulated.

People often talk about buying a second property, renting it out and selling it upon their retirement – but this is not as secure as a pension fund, plus you don’t get your 40% tax relief.

Some people may want to keep their money in a savings account as it’s easier to access. Irish banks are not particularly competitive so we advise using foreign banks with jurisdiction in Europe under the European Government Guarantee Scheme

German banks like Trade Republic and Raisin provide gross interest rates between 3.5-4%, with instant access to your money.

Trade Republic is the best of these. You can transfer up to €50,000 on your phone and get 2.7% interest after DIRT is deducted. This makes more sense than keeping your money in low interest savings accounts.

This is an extract from full article by Nick Charalambous, Financial Advisor, Alphawealth.ie

Contact: nick@alphawealth.ie

 

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How much is needed?
Someone who is currently 30 can retire around 60 by virtue of building up a pension fund of about €800,000 in today’s money. I believe this is what is needed to be truly comfortable.

In order for that to happen, you need to be contributing about €1,000 per month, and that can be made up of employer and employee contributions. You don’t have to develop any other assets.

This may seem like a lot every month, but when you take into account the tax relief you’ll achieve, which is typically 40% for anyone earning over €42,000 per year, it makes sense to put it into your pension rather than pay tax on it.

In terms of the lowest amount needed, I don’t think anyone could retire at 60 with less than €400,000 in their pension fund.

 

Auto-enrolment
I am not a fan of auto-enrolment, which is a government scheme that will come into force at the end of this year. While it is good for people who do not have an existing company pension arrangement, it is very restrictive. You can only contribute 1.5% of your annual salary and your employer contributes 1.5% too.

Contributions to auto-enrolment schemes will increase to a minimum of 6% in nine years time. Some employees may not want to pay into their pension, and people who want to pay more than the fixed contributions cannot do that. You also have no choice over where your money is invested.

With auto-enrolment, if you are earning over €42,000 per year, you only get tax relief of 25%. With a company pension, you get tax relief of 40%. Even if you earn less than that, you can only access it from the State Pension age, which is currently 66. With a company pension, you can access it from age 50 onwards.

 

Other assets
I am not a big fan of people going into speculative investments such as cryptocurrency or gold. They are volatile and not very regulated.

People often talk about buying a second property, renting it out and selling it upon their retirement – but this is not as secure as a pension fund, plus you don’t get your 40% tax relief.

Some people may want to keep their money in a savings account as it’s easier to access. Irish banks are not particularly competitive so we advise using foreign banks with jurisdiction in Europe under the European Government Guarantee Scheme

German banks like Trade Republic and Raisin provide gross interest rates between 3.5-4%, with instant access to your money.

Trade Republic is the best of these. You can transfer up to €50,000 on your phone and get 2.7% interest after DIRT is deducted. This makes more sense than keeping your money in low interest savings accounts.

This is an extract from full article by Nick Charalambous, Financial Advisor, Alphawealth.ie

Contact: nick@alphawealth.ie