- September 11, 2019
- Bob Quinn
The two most common questions I get asked are: ‘How much will I need in retirement?’ and ‘Am I going to have enough?’
The idea that we might outlive our income is a major concern for us as we approach retirement. At some point, the concept of not taking home a regular pay check for the next 25 odd years hits home.
This realisation can happen late in the day, months away from retirement. At that point, it’s too late to do much about it.
How much do I need in retirement?
This is easy enough to work out. Think of how much you might need per annum to live comfortably in retirement. Could you live on the state pension of around €12,900 per annum? Didn’t think so.
Let’s double that, to around €25,000, for the sake of our example.
Next, think about the age at which you’d like to retire. Let’s say that age is 60. That means that, assuming you live to 85, you have 25 years to bridge with your pension or other retirement plans.
25 years of an annual income of €25,000 (excluding the state pension) means you would need to have a pot ring-fenced for retirement worth €625,000 at 60.
Am I on track to have enough?
How many pay checks will you be taking home between now and 60? If you’re 45, you’ll have 180 monthly pay checks before you retire.
If you divide €625,000 by 180 you’ll need to save close to €3,500 per month! With the generous tax incentives for saving into a pensions plan, higher rate tax payers will need to contribute c. 60% of that, or €2,100 per month (I’m keeping this very simple and ignoring the effects of compound interest and other features of planning for retirement).
So, can you afford to save €2,100 per month? If yes, fantastic. Make sure you do. If not, then you will have to make some adjustments to your day-to-day budgeting or accept a lower income in retirement, or work for longer.
If you come to this realisation early enough there will be time to work out a plan, but the longer you put off engaging with these questions, the less wriggle room you’ll have.
If you’d like a good night’s sleep, get in touch for a no-obligation chat. You can book into my calendar here.