A financial advisor on how to get your retirement plan on the right track

A key part of retirement planning is to be able to answer the question: “How much do I need to retire?” The answer varies greatly by individual and depends largely on your income now and the lifestyle you would like to enjoy in retirement. With life expectancy rates in Ireland at around 82 years old, you may need to fund for a retirement income that lasts up to 30 years. The good news is that most of you still have the time to put an effective plan in place. Acting now and seeking the right expertise will greatly help to set and achieve a realistic retirement goal.

The first task is to estimate your likely expenses in retirement. Usually, these will be much lower in retirement than during other phases of life. Your mortgage will hopefully be paid off and there’s a good chance your kids will have flown the nest so will no longer be financially dependent on you. Furthermore, PRSI contributions from your income currently cease at the age of 66 (this may change in the future, however). There are also some income tax concessions for retirees which may improve your net income position in retirement.

The second piece of advice I can give is to engage with a professional financial advisor in this regard and they will assist you to first estimate your retirement income needs in line with these expenses. They will then review what you have saved already in detail and identify any potential gaps. Detailed calculations will need to be carried out so you will then know exactly how much money you need to save between now and your chosen retirement date to hit that magic number. As pension contributions qualify for tax relief at marginal rates, (subject to certain limits) the taxman is on hand to help you achieve your financial retirement goal.

Everyone’s retirement income needs will be different. You may have other sources of income in retirement that will also need to be factored into your plan. Do you own a rental property? Are you entitled to the full state pension in Ireland? Will you qualify for an adult-dependent supplement pension from the state? Do you plan to do some part-time work after you retire from your primary career? Any of these factors could significantly reduce how much you need to save.

Other factors need to be considered such as your health and your desired post-work lifestyle. For example, you might need more than initially planned if you have plans to travel extensively during retirement or you may need to retire earlier if you unfortunately fall ill.

It is very important to review the pension policy you have already in terms of the funds you are invested in, and the costs associated with it. When was the last time your attitude to market risk was properly assessed? Maybe your portfolio needs to be re-balanced in line with your risk tolerance these days.

Seeking proper retirement planning advice now is key, exact time horizons will need to be determined, expenses estimated, potential after-tax income in retirement needs to be calculated and your risk tolerance needs to be assessed regularly for the remainder of your pension funding journey. This guidance will help you build greater financial clarity and confidence so that you can look forward hopefully to a very long and financially comfortable retirement.

Carol Brick has worked in the Irish financial services industry for over two decades. She has been at the helm of CWM Wealth Management, an established provider of bespoke financial advice, for 16 years. As a working mother, and through her work with CWM clients, Carol Brick identified a significant number of professional women with major gaps in their financial plans. This led to the establishment of a specialist division, HerMoney, in early 2017, run by an all-female team of financial advisors. The company has offices in Cork and in Dublin. See hermoney.ie or cwmwealthmanagement.ie for more information.

Photography by Monstera.

This article was originally published in February 2023.