Retirement Planning

People are living longer. People want to retire earlier. The state pension will only become payable at age 68 for people born after 1961. It is likely that this pension age will be increased further in years to come. State pensions are payable from current government expenditure, so they are an ongoing expense that is becoming unsustainable for the State.

In the past, people typically retired at age 65. They died at age 75 so their pension was only payable for 10 years.  Nowadays people want to retire at 60 and they typically die at age 85, so their pension now needs to be paid for 25 years.  This problem is known as the “pension time bomb”. It is not going to go away by simply ignoring it.

Mason Wealth Management have been providing retirement planning advice for over 20 years.  We know we can help the following people in particular:

• Business Owners
• Company Directors
• Self Employed
• Professional People

Company directors enjoy unique benefits when it comes to retirement planning. These benefits include the following:

• Generous tax reliefs in respect of pension contributions
• Company Directors with sufficient service can extract much of their pension fund as tax free cash rather than having to purchase a pension.
• Their business can make considerable once off premium pension contributions to cover previous service.
• The funds that are invested enjoy tax free growth – no capital gains tax or personal taxes etc.
• Setting up pension schemes as a way of transferring wealth from your business to yourself.
• Using your pension assets to purchase a property. However, there are certain revenue restrictions that need to be adhered to.

Retirement planning is an area that is very complex.   Many clients demonstrate behavioural and investment biases that actually makes retirement planning even more difficult.   The natural way to think is in many cases incorrect and needs to be challenged.  People approaching retirement need financial advice more than ever before.  Once they reach retirement age, they realise that they have a limited amount of money that must sustain their desired lifestyle for the rest of their life.  They need to ensure that they don’t run out of money or even worse, die without having spent their money and doing the things they would like to have done.

The earlier you start retirement planning the better. As Certified Financial Planners, we understand the value of compounding and the real benefits of beginning to save much earlier. By way of example, if you invested a once off lump sum of €10,000 into a pension fund 30 years ago and achieved a growth rate of 9% p.a. (which has been achieved), the value today would be €132,676. This is a growth rate equivalent to 1226% over the term. These numbers clearly demonstrate the power of investing over the long term, through thick and thin, in good times and bad, in a disciplined manner.

Remember Warren Buffets famous statement “stock market rewards the patient and punishes the rest”.