Tag Archives: #retirement

6 Ways to get Financially Fit for your Retirement

Introduction

Retirement marks a significant milestone in life. It’s a time where you can finally take a step back and unwind. However, making sure you are financially fit for retirement is extremely important. People are living longer and leading more active lives in retirement. As a result, it is more important than ever for you to think about where your income will come from when you retire. Here are a couple of the essential steps we advise to ensure you are financially fit for your retirement.

  1. START EARLY

One of the golden rules of retirement planning is to start as early as possible (but it is also never too late!). The power of compounding works wonders over time. Even small, regular contributions to your retirement fund can grow substantially over the years. Remember there is significant tax relief on pension contributions that you can also avail of.

  1. SET GOALS

Determine your retirement goals – where you want to live, what activities you want to pursue, and the kind of lifestyle you wish to have. If you have clear goals, it will help you estimate how much money you need to save for the lifestyle you want in retirement.

  1. DIVERSIFY INVESTMENTS

Diversification is key to managing risk. Spread your investments across various asset classes like stocks, bonds and property. Diversification can help you achieve better returns while mitigating potential losses. Many pension plans offer access to multi-asset funds at different risk levels which can help you diversify at a level that suits you.

  1. CLEAR DEBTS

Entering retirement with debt can put a significant strain on your finances. Prioritize clearing in particular high-interest debts like your mortgage and credit cards. Being debt-free allows you to enjoy your retirement without the burden of monthly payments.

  1. LIVING LONGER

With advancements in healthcare, people are living longer. Plan your finances with the expectation that you might live well into your 80s or 90s. This means ensuring your savings can sustain you for several decades. Retiring at 68 could mean you still have 20+ years ahead of you.

  1. GET PROFESSIONAL ADVICE

While the idea of retirement can seem very attractive putting a financial plan in place for it is very important but can be daunting. That’s where we can help. Don’t hesitate to seek advice from Coleman Financial Planning to help you plan the retirement you deserve. Just get in touch to start planning your financially fit retirement.

Pensions & Tax Relief….How does it work?

How does the area of pensions and tax relief work? Bottom line is that the State will incentivize you to save for your retirement by allowing you save some of your gross salary (i.e. income before tax is applied) in to a pension plan.

For example:

How much tax relief can I avail of?

Each individual is allowed tax relief based on their age and percentage of their salary.

Know your limits!

  • Don’t be greedy! The maximum salary you can claim relief on is €115,000 p.a. Therefore if your income is €500k p.a., you can still only claim relief up to the first €115,000 p.a.
  • If you are a member of a Company Pension scheme and your employer is making a contribution to your pension, this is NOT included in your salary limit (so you probably have plenty of scope to contribute up to your limit).
  • If you are a member of a Company PRSA Scheme and your employer is making a contribution to your pension, this IS included in your salary limit (so be careful not to exceed your limit).

Sounds good? There are even more tax benefits...

  • When you contribute to your pension, the money is invested in a fund where it is allowed grow TAX FREE! Unlike a deposit account where the growth is taxed annually, a pension fund can grow without the burden of the growth being taxed. This cumulative tax free growth is the key ingredient in your pension fund, providing you with a long and happy retirement.

What about the tax when you want to retire?

  • The tax relief doesn’t stop just because you want to retire! There are a few options but in general, the day you retire you can get at least 25% of your total pot transferred in to your bank account TAX FREE!
  • The balance of your fund can remain invested and grow TAX FREE!
  • Whenever you do drawdown on the balance of the fund you are liable to income tax. However, there are various structures and ways to minimise the tax liability at that point.

What if I die and I haven’t spent all of my pension fund?

  • Even on death your pension can be tax efficient!
  • If you die and still have a pension fund (pre or post Retirement) it doesn’t die with you. Instead, your family can inherit your pension in a much more tax efficient way than if you had left them a property or money in a bank account.

So in summary you can get…

  • Tax relief on your pension contributions
  • Tax free growth on your pension fund
  • Tax free growth on your retirement fund until you draw it down
  • Tax efficient access to your pension fund throughout your retirement
  • Tax efficient transfer of your funds to your estate on death
  • Tax free lump sum at retirement age

With all aspects of Personal Financial Planning, it is important to get professional impartial advice that is specific to your own needs and circumstances.

For an initial chat to see if we are suited to working with you, simply get in touch.

What happened to the pension in my old job?

Clients ask me this question regularly when we meet. So what does happen with your old pension?

We are often solely focused on a fresh start and looking forward when we move job. We neglect to address what we’re leaving behind – our own pension funds!

What you are allowed to do with your existing plan can vary. This depends on the structure of the pension scheme. You may be entitled to leave the funds in the scheme until you reach retirement age (normally 65) however there are other options that will allow you take control of your pension fund, control how you invest it and control when and how you draw it down.

For example you can transfer it into a:

  1. Pension plan with your new employer.
  2. Personal Retirement Savings Account (PRSA) and continue saving in to it.
  3. Personal Retirement Bond (PRB) and access it from the age of 50.

Like all important financial planning decisions, your individual goals and objectives will determine what option is best for you.

As a starting point you should seek out independent advice from a trusted advisor.

So if you’re wondering what you do about your old pension, get in touch with us today at Coleman Financial Planning to discover what option suits you best.

Make a start on giving yourself the retirement options you deserve!