How to avoid being broke when you’re old

Colette Sexton, news correspondent at The Sunday Business Post, on why saving for retirement needs to be a priority, no matter what age you are.

I’ll do it once I hit 30. I’ll start once I turn 40. As soon as my big holiday is over, I’ll set it up. I’m saving for a house, once that is finished I’ll look into it. When the kids have finished primary school I’ll have some extra cash.

Any of the above excuses sound familiar? You can come up with 101 reasons not to start your pension but when you edge close to pension age and are facing a financial crisis every single one of those reasons will seem stupid with hindsight.

Nearly 60 per cent of private sector workers in Ireland have made no provision for retirement. When they retire, at 67 or 68 depending on what age they currently are, they will have to rely on the State pension, which currently stands at just over €12,000 a year. These people are barely above the poverty line. You need to ask yourself now if you want to spend your retirement planning holidays or wondering whether you can afford to turn the heating on.

The pensions authority recommends an “adequate” gross retirement income of 50 per cent of gross pre-retirement income. By that measure, if you earn €40,000 annually at the moment, you need an annual income of €20,000. If €12,000 comes from the state – where will the rest come from?

Don’t think you can rely on an increase to pensions by the time you retire. Ireland has an aging population which means more of us will be drawing pensions at the same time, putting pressure on the state coffers. If anything, it is likely that the pensioners of 2040 will be getting less money from the state than current pensioners.

I hate to break this to you but you are probably not going to win the lotto. Nor are you are going to discover the next iPhone and become a multi-billionaire. That long-lost great-aunt in America is not going to leave you a windfall in her will.

You are on your own and you need to take responsibility for yourself and your future.

What can you do about it? Start a pension. Right now, today. If you are an employee, talk to your HR department about what your company offers. If you are self-employed it is worth getting advice from a financial advisor.

You can thank me when you are cruising the Caribbean when you’re 80.