- May 27, 2017
- Bob Quinn
When he retires as Taoiseach and Teachta Dála, Enda Kenny will get a lump sum of €378,000 and an annual pension of €126,000.
Before you start getting pension envy – I said pension envy – console yourself with the knowledge that for ordinary Irish citizens, that kind of pension is not possible. There are restrictions as to how much we mere mortals can contribute and in fact it becomes tax inefficient to fund a pension over €2 million.
Still feeling inadequate? OK, what if I were to say “It’s just a number”?
Or “The number doesn’t matter”?
It’s what you want to or need to do with the number that’s available to you that’s important.
Do you need a fund worth €3 million on retirement? I can’t see how Enda Kenny does, but then again, I know little about his wider financial affairs. Maybe you’ll win the lottery.
How much money is available to you to invest, save or spend is an abstract concept – just an arbitrary number – until you know what you need from it.
“That’s why when a stranger asks me how much they need to put away for retirement, my answer is typically vague. This is not my attempt to be evasive, but when we know what your objective is, then we can answer that question!”
Can you identify yourself in this case study?
You celebrated the big 5-0 recently and you decided that you want to sell your business in five to seven years. By the age of 57 or so you would like not have to work anymore – neither you nor your spouse.
When you’re 57, two of your children will be going through third-level education and another will be coming out the other side but may need financial support for further study or travel or while they get themselves a decent graduate job.
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At 57, you’ll have plenty of energy and the two of you would like to do the Everest Basecamp hike and a couple of other bucket-list endurance type holidays.
You’re also planning on actually getting some use out of that expensive golf club membership.
You’re both healthy and have no reason to assume that you won’t live until the age of 81, the average life expectancy in Ireland, and increasing.
You love where you live and can’t imagine downsizing but you realise you will have to pay for the upkeep of the grounds as you become less physically able.
You’d like to leave something for your children and maybe even grandchildren.
So now you know what your pension or retirement fund needs to stretch to.
You have clear objectives.
Now the number is important. Because now the number is your outcome.