I’m in my 50s – is there an age when it is too late to start a pension?

One of the most asked questions we get!
Many people in Ireland wonder when is it too late to start a pension. The answer is not simple, as it depends on several factors, such as your current income, your desired retirement age, your expected lifestyle and expenses, and the type of pension plan you choose. However, some general guidelines can help you make an informed decision.
1. First of all, it is never too late to start saving for your retirement. Even if you are in your 50s or 60s, you can still benefit from the tax relief and compound interest that a pension offers. However, the later you start, the more you will have to save each month to achieve a comfortable income in retirement. For example, if you start saving at age 25, you will need to save about 15% of your salary to have a pension of 50% of your salary at age 65. If you start at age 45, you will need to save about 35% of your salary to achieve the same goal.
2. Secondly, you should consider how long you want to work and when you want to retire. The state pension age in Ireland is currently 67, but it will increase to 68 in 2028. If you want to retire earlier than that, you will need to have enough savings to cover the gap between your retirement age and the state pension age. You can also choose to work part-time or flexibly after reaching the state pension age, which can reduce the amount of savings you need.
3. Thirdly, you should think about how much income you will need in retirement and what kind of lifestyle you want to have. The rule of thumb is that you will need about 70% of your pre-retirement income to maintain your standard of living in retirement. However, this may vary depending on your personal circumstances and preferences. For example, if you have paid off your mortgage and have no dependents, you may need less than 70%. On the other hand, if you want to travel or pursue hobbies, you may need more than 70%.
4. Finally, you should compare different types of pension plans and choose the one that suits your needs and goals. There are two main types of pension plans: defined benefit and defined contribution. A defined benefit plan guarantees a certain amount of income in retirement based on your salary and years of service. A defined contribution plan allows you to invest your savings in various funds and gives you more flexibility and control over your money. However, it also involves more risk and uncertainty, as the value of your pension depends on the performance of the funds.

I have a rental property, can’t that be my pension?
Many people in Ireland rely on their rental property as a source of income and a way to secure their retirement. However, depending on a single asset for your pension may not be the best strategy. In this article, we will explore some of the risks and challenges of relying on rental income for your retirement, and some alternatives that may offer more security and flexibility.
One of the main risks of relying on rental income for your pension is that it is subject to market fluctuations and regulatory changes. For example, if the demand for rental properties decreases, or if the government introduces new taxes or regulations that affect landlords, you may face a reduction in your income or an increase in your expenses. Additionally, you may have to deal with vacancies, maintenance costs, tenant issues, and legal disputes that can affect your cash flow and profitability.
Another risk of relying on rental income for your pension is that it may not be enough to cover your living expenses and lifestyle goals in retirement. According to the Daft.ie, The rental market in Ireland has seen significant changes in 2024, with the average rent for a one-bedroom apartment in the city center reaching €1,493 and €1,241 in the suburbs. A three-bedroom apartment in the city center now costs around €2,412, while outside the center, it’s approximately €1,903. Dublin continues to experience the highest rental costs, with a three-bedroom apartment renting for about €3,800. These figures reflect a broader trend of increasing rental prices across Ireland, attributed to high demand and limited supply. Balance this against the cost of living for a retired person in Ireland, which encompasses various expenses from basic necessities to housing. For instance, monthly costs for a single person are estimated at €3,241, with housing being a significant portion. Daily essentials such as food and transportation also contribute to the annual expenditure, with prices for groceries and public transport reflecting the country’s high cost of living. It’s important for retirees to consider these factors when planning their finances, especially in a country ranked as the 3rd most expensive in Western Europe.
Moreover, this does not account for inflation, taxes, health care costs, and other unexpected expenses that may arise in retirement.
Therefore, it may be wise to diversify your sources of income and consider other options for your pension plan. For example, you could invest in a personal pension or a PRSA (Personal Retirement Savings Account), which allow you to save for retirement and benefit from tax relief on your contributions. You could also consider an ARF (Approved Retirement Fund) or an annuity, which provide you with regular income in retirement and can be tailored to your needs and preferences. Alternatively, you could sell your rental property and use the proceeds to fund your retirement, either by investing them in other assets or by spending them as you wish.
The bottom line is that relying on rental income for your pension may not be the best option for everyone. It is important to assess your financial situation, goals, and risk tolerance, and seek professional advice if needed. By planning ahead and diversifying your income sources, you can increase your chances of having a comfortable and secure retirement.
In conclusion, it is never too late to start a pension, but the sooner you start, the better. You should consider your income, retirement age, lifestyle and pension plan options carefully and seek professional advice if needed.

If you’d like help with any financial planning contact Carey Corbett Financial Solutions today for an appointment on 065-6893540.