Is it time to start saving for your pension or is it too early?

It is never too late or too early to start saving for your retirement.

The earlier you start your pension savings, the better retirement income you will have. It really is that simple. As we continue to experience the growing cost of living in Ireland, we may begin to wonder what does the future hold.  Escalating rents, inflation, increasing energy costs mean that it is often hard to see past the here and now and saving for retirement can often be put on the long finger.

Retirement often seems like a distance prospect especially to the 22 year old just finished college or the apprentice just starting a new job. We often think ‘sure we have loads of time to worry about retirement’, however, as we start to get older life often tends to get more expensive. Families start to grow, you buy your first home or you decide to travel the world and once again planning for retirement is often forgotten about.

This is why, although your retirement may seem like a long way off, the earlier you start a pension plan, the more time your retirement fund will have to grow and the bigger your pension pot will be. And, even better, contributions to your pension attract tax relief (subject to age and salary related limits).

The value of your pension at retirement depends on

(i) how much you can afford to put away;

(ii) the length of time you are making contributions;

(iii) the type of pension plan you select; and

(iv) the investment return.

Your pensions contributions should be sufficient to enable you to retire on a total income, including state pension, of two thirds of your pre-retirement income.

It’s never too late but it’s so much easier when you start early.

Some thoughts to keep in mind

Your contributions should increase each year in line with inflation to help keep your plan in line with the increasing cost of living.

There is a limit to how much you should put into your pension because if all your pension funds total more than €2M, you may have to pay an additional tax (40%) on the excess.

To get an indication of how much  you should be putting away each month visit some of the online pension calculators of our members.

How much should I put away each month?

To get an indication of how much you should be putting away each month visit some of the online pension calculators of our members.