How to Set You and Your Family Up for Retirement

Having a solid retirement plan is essential. You should be able to enjoy your golden years and live to the standard of living you desire for yourself and your loved ones without being burdened by monetary worries or concerns. Organising a pension and setting oneself up for retirement is essential, however, it is something that many Irish people do not plan for - according to the Central Statistics Office, in 2020, 35% of Irish workers aged 20 to 69 did not have pension coverage.

Creating a retirement plan may seem like a large undertaking. This is simply not the case. We at Fitzgerald Flynn want to make the process easy and find a plan that suits your precise needs. Fortunately, this article will cover all the necessary information that you need to set you and your family up for retirement. 

Let's get started!

Plan with the end in mind 

Recalling the famous words of Steve Covey, when planning for your retirement one must "Start with the end in mind". You need to have a clear vision of your retirement and how you would like to enjoy your work free life. First of all, you need to know how many years you have left until you retire from your job or day-to-day activities at your personal business. Would you like to retire at the State retirement age of 66? Would you like to retire much younger? Or, would you like to continue working into your seventies?

Starting a pension plan early is essential to maximizing the amount of money waiting for you on the other side of employment. Simply put; the earlier you start the more you will save. Alongside the additional years of active income, the effects of compound interest also come into play. For example, a person who starts a pension when they are 20 will have double the amount as compared to someone who started at age 30 by the time they both retire. This assumes an average interest rate of 6%, and seeing as the S&P index has historically averaged an 8% yield, this figure is not out of reach, but requires some forethought. 

You will also need to have a clear vision of how you intend to spend your retirement. Think of where you want to live, whether you will stay in your current house or downsize if you plan on traveling the world, and how much you intend to spend compared to your current expenditure.

If you have a spouse and grown-up children, you need to actively involve them in this discussion so that you paint a clear picture of what life will be like during retirement. Yes, things may not turn out to be exactly how you want them, but having a clear vision of where you are heading makes it easier to create a solid plan. 

You also need to know when your spouse (if you have one) intends to retire. As a couple, your retirement plans have to sync. If you intend to split responsibilities, you can agree on who will be doing what and how much each of you should be saving in order to meet your retirement obligations. Of course, this will largely depend on the income each of you earns plus your current expenditure and obligations.

Life insurance and assurance

Signing up for a life insurance or assurance policy is one of the best ways you can set up your loved ones for life in the unfortunate event of your passing during retirement. Here at FitzGerald Flynn we are life insurance experts, so for more information on life plans, feel free to reach out to us; but first, here’s a quick explainer.

Both life insurance and assurance are aimed at covering the needs of your loved ones. There are key differences to understand before making your decision, however, they have a fundamental difference that you need to understand before deciding which one to go with. 

Life insurance policies cover the policyholder for a fixed time period specified in the policy, while life assurance policies cover the policyholder for the duration of their life. This means that the beneficiaries of a life insurance policy will only receive a pay out if the policyholder passes away during the term of the policy. That is why life assurance is usually referred to as whole life cover. 

Since life assurance has no time limit, your monthly or yearly premiums tend to be higher than life insurance. Life assurance gives you peace of mind because you know your loved ones will be given your insurance savings no matter when you pass.

So, as you set yourself and your family up for your retirement, you can consider acquiring a life insurance or assurance policy so that your kids, spouse, and the rest of your loved ones have a secure financial safety net.

Long term investment 

Besides your retirement savings and insurance, you also need to consider making some long-term investments to earn some extra income during retirement. A well-constructed and balanced investment portfolio, in keeping with your assessed risk profile, can seriously increase your earning potential over the long term.

The goal of long-term investments is not to make small amounts of money fast, but to ensure your financial freedom in the future. Some of the long-term investment instruments you can consider include trusts, equities, long-term bonds, mutual funds, and commodities. The instruments that make up your personal investment portfolio depends largely on your appetite for risk, and age profile. As you age and approach retirement, we would be encouraging you to de-risk your portfolio to less risky assets. That way, your glide-path to retirement will be smooth and free from any malign market movements.

Another factor to consider, are the various tax rates that are applied to different investments. Retirees can take up to 25% of their ARF/pension fund thus; there is a lifetime limit of €200,000 tax free where lump sum exceeds €200,000 tax is due, the portion between  the next €200,000 and  €500,000 is taxable at a rate of 20% with the excess being fully liable to income tax and Universal Social Charge (USC) under the PAYE system.

Personal investments can be taxed as high as 41% (Investment Funds and ETF’s), there are also Capital Gains tax and Capital Acquisitions tax at rates of 33% (subject to the annual Finance Act).

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Plan for your elderly parents 

If your parents or other elderly people are a part of your life, you may want to include them in your retirement plan, especially if they are not fully self-sufficient. The primary consideration while planning for the elderly is their health and essential well-being. 

If any of them already suffer from health problems, you may have to specifically budget for  this in your retirement plan. You may also have to talk to your doctor or any other qualified medical personnel for guidance regarding the current and expected health status of the elderly people you intend to take care of in your retirement. This will give you a picture of how much you might be expected to spend on their healthcare during your retirement. 

Think of long-term care insurance 

If any of the elderly people in your life reach a stage where they can't take full care of themselves and you feel you cannot provide for those needs, the only alternative may be to commit them to a long-term care facility. Long-term can require paying thousands of euros per month, which to some people, is an unavoidable, often overlooked cost.

Signing up for a long-term care insurance policy is the recommended way you can go about this. When you do the maths, you will often realize paying for these policies is usually way less expensive than paying for this service using your retirement savings. A long-term care insurance policy circumvents these unforeseen costs. 

Final thoughts 

There are several things that you will have to consider as you plan for your retirement. Having a clear vision of when and how you wish to spend your retirement should always be the first step in creating a sustainable retirement plan for you and your family.

If you have a spouse, kids, and other dependents, your plan should clearly articulate how you intend to support them during your retirement. Your plan should include insurance/assurance policies and saving schemes that will take care of their essential needs. 

All in all, creating a solid plan for your retirement is crucial if you want to have peace of mind as you enter into the later stages of your life. Most importantly, involving all the necessary parties that will be part of your life during retirement should be at the top of your agenda.

Here at FitzGerald Flynn Insurances, we pride ourselves in creating extensive, bespoke pension and life assurance plans that can ensure all the factors above are taken into account. We strive to deliver a personal touch to all of our plans and commit to creating a retirement plan, life assurance plan and savings & investment strategy that works for you. Feel free to get in touch with us to discuss how we can help you set up the rest of your life!