Simple Steps to Building Your Pension
According to recent research carried out by Friends First, around 40% of households in Ireland with adults in the 25 to 55 age group do not have private pensions. Furthermore, less than half (46%) of people surveyed have their own private pension with a further 14% sharing a pension with their spouse. The Friends First survey tells us that 830,000 adults are therefore relying on the state pension for their retirement. When those without a pension were asked how they planned to fund their retirement, less than 20% of respondents said they were confident that they will have enough income in retirement.
Many individuals who have pensions are still quite disillusioned and frustrated with the concept of saving for their retirement after the damage that was done to many of their funds in the stock market crash of 2008. However, by following some simple steps we can put ourselves in a better position to either start planning for our retirement or begin rebuilding our existing pension pots.
Begin right away
Your employer may already have offered you the opportunity to become a member of a pension scheme or Personal Retirement Savings Account (PRSA) and enrolling in this plan is a great way to put your savings on autopilot. Simply inform your employer that you wish to start and contributions will be automatically deducted from your payroll, increasing your savings and decreasing your immediate tax liability. Your employer’s scheme may offer to match your contributions up to a certain percentage so, if you can stretch it, be sure to contribute enough to get the full match. For the self-employed, be sure to begin a Personal Retirement Savings Account (PRSA) sooner rather than later to plan for your future.
Watch your household spending
Holidays, cars, children and all the day-to-day expenses take a big chunk out of your salary. It sounds obvious but to maximise your savings you need to minimise your spending. Put aside the temptation to buy the 42” LCD TV or upgrade your car to a 151 Reg and increase your pension contributions. Living a lifestyle that is within your means and not funded by credit cards are all necessities if you want to boost your retirement savings.
Monitor your pension fund
There’s no need to obsess over every movement in the stock markets in a long term pension fund. Instead, check your retirement fund reasonably regularly (say once a month) and make a point of meeting with your Financial Broker/Advisor once or twice a year to review the funds you are invested in and the charges you are paying. It might be a case that you have to rebalance the assets in your portfolio to keep your plan on track and your Financial Broker can help you make this decision.
There’s no hidden secret to doubling or trebling your retirement pot in a shorter space of time so simply take a long term investment horizon, maximise your contributions to your pension to avail of the tax relief and then be patient. The Bulmer’s ad tells us “Nothing added but time” – well your pension requires the same element of time to allow compound interest to do just that – compound.