22 year old starting pension

S

sooty

Registered User
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Hi there - could someone give a bit of guidance as to where a 22 year old in full time employment would get information in relation to starting a pension. She really does not have the time to sit down with a financial consultant who will prob sell her the sun moon & stars but wants to maybe start putting E50 a month into a pension fund....


Sooty
 
Your employer is obliged to provide access to a pension scheme or if there isn't one, provide you with access to at least one standard PRSA. Have you talked to them as a starting point?
 
First question she should ask is of her employer, do they provide an occupational pension scheme?
 
No, the first question is why does she want to start a pension?

Unless her employer is matching her contributions, she should be saving up for the deposit for a house first.

Brendan
 
Brendan Burgess said:
No, the first question is why does she want to start a pension?

Unless her employer is matching her contributions, she should be saving up for the deposit for a house first.

Brendan
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€50 a month is better off going into a pension at this stage of her life than putting €50 a month or €600 a year towards a house deposit which will not make much of a dent. To be fair to the OP, it doesn't sound like she has much spare income so I would do the same. It's a good habit. She can start saving the house deposit when her earnings increase. She is only 22.
 
Brendan Burgess said:
No, the first question is why does she want to start a pension?

Unless her employer is matching her contributions, she should be saving up for the deposit for a house first.
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A 3% real return will see any contribution increase nearly four-fold by the time she is retiring at 68.

Of course buying a house makes sense when the circumstances are right for her. But pension contributions, even small ones, at a young age make a lot of sense.
 
Her absolute first priority is to buy a house. Locking money away is just wrong.

If €50 a month will not make a dent on her mortgage, it will make a similar lack of dent on her pension.

The other big advantage is that if she has little spare income, the money saved will be available to her if she needs it.

Brendan
 
Brendan Burgess said:
The law of compound interest also applies to the purchase of property. It is not limited to pensions.

Brendan
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There is much more upside in equities.

The price of property is linked to the price of building a house, and the price of land. There is a lot of empty land in the world, and building a house is just building a house.

You could get lucky in where you buy, but it's unlikely that the price of built land will increase 4x in real terms over half a lifetime in Ireland.

Equities have shown shown such returns over the long run, and indeed there is no real theoretical upper limit on their value.



Anyway, a balanced portfolio should have some property AND some equities in it, and this 22 year old would be doing well by starting off with a pension young.


Locking money away is just wrong.
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I have a fair bit of equity in my PPR - but it's not that accessible to me!

You are just saying lock away in property rather than lock away in a pension.
 
Brendan Burgess said:
Her absolute first priority is to buy a house. Locking money away is just wrong.

If €50 a month will not make a dent on her mortgage, it will make a similar lack of dent on her pension.

The other big advantage is that if she has little spare income, the money saved will be available to her if she needs it.

Brendan
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Maybe it isn't her first priority Brendan. She is 22. Maybe if she doesn't lock the money away, she will end up spending it on something else. I would rather have €50 a month going into equities for 5 years and leave it there for 40 years rather than have 6000 for a house deposit at the age of 27...…..
 
Brendan Burgess said:
If €50 a month will not make a dent on her mortgage, it will make a similar lack of dent on her pension.

The other big advantage is that if she has little spare income, the money saved will be available to her if she needs it.

Brendan
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Agree 100% Brendan. How much you have in your pension at retirement is based more on how much you put in rather than the fund performance. If you put in a small amount, you will get a small pension. 43 years of €50 a month at 6% return will have a pot of €121,731.

While it's great to see a 22 year old looking to start saving for retirement, €50 a month won't do much. If she is in a job that has the potential to see decent increases over time, maybe wait until she can contribute more.

Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
SBarrett said:
Agree 100% Brendan. How much you have in your pension at retirement is based more on how much you put in rather than the fund performance. If you put in a small amount, you will get a small pension. 43 years of €50 a month at 6% return will have a pot of €121,731.

While it's great to see a 22 year old looking to start saving for retirement, €50 a month won't do much. If she is in a job that has the potential to see decent increases over time, maybe wait until she can contribute more.

Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
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Guys no offence but that is a bit ignorant and smacks of snobbery. 50 euro might not be much to you but it is for some people. Do we want low earners to start saving for a pension or not? More than likely she will be earning more in the future and will be able to contribute more but even if not, a pension pot €121,731 is better than nothing. It's more about the discipline and understanding about saving for retirement.

Telling someone that it is not worth your while bothering if you can only afford 50 euro is just plain wrong. It's a start and any 22 year old starting a pension is to be applauded. No matter if it is only 50 a month.
 
Sunny said:
Guys no offence but that is a bit ignorant and smacks of snobbery.
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First of all, exclude me from that as I did not dismiss it.

Secondly, include yourself

Sunny said:
€50 a month is better off going into a pension at this stage of her life than putting €50 a month or €600 a year towards a house deposit which will not make much of a dent.
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It's absolutely clear that she should not be contributing to a pension. A small start on saving for a house is a good start.

And we have not yet even discussed what her earnings are and whether she is getting top rate tax relief.

Brendan
 
Great points everyone, her employer has given her access to PRSA but this is with a leading Irish Bank which will involve going for a consultation and i know from experience she will end up signing up for stuff she doesn't want. i was of the mindset too that she should put it away as a savings rather than pension fund to have as you say Brendan a deposit for a house in the future.....she could probably stretch to E100 a month if she had to so maybe an idea for her would be E50 to savings and e50 to pension......her job has potential for increase but her lifestyle will also change in years with house purchases/family etc etc...........
 
sooty said:
E100 a month if she had to so maybe an idea for her would be E50 to savings and e50 to pension.....
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Hi Sooty

Not really.

Paying into a pension is a terrible idea at her age. If she can save €100 a month, when she is 32, she will have €12,000.

If she puts it into equities, it could be more.

It's well worth making a start on saving.

She probably shouldn't be stretching herself too much at age 22. She should enjoy life a bit as well.

Brendan
 
I know at that age, I spent pretty much all my disposable income on my social life.

Looking back, I genuinely think it was the best "investment" I ever made. :D
 
Sarenco said:
I do think it’s important for folks at that age to focus on building their social network. It’s an “investment” that pays dividend in later life.
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I think it's probably more important to actually enjoy life rather than seeking a social life with a view to building a social network. Unless it's a very specific type of career like being a barrister or setting up a business like an accountancy practice.

Brendan
 
SBarrett said:
Agree 100% Brendan. How much you have in your pension at retirement is based more on how much you put in rather than the fund performance.
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You're forgetting a key factor - time. How early you start makes a difference!


SBarrett said:
If you put in a small amount, you will get a small pension.
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Only to a point. Assume a 3% real return:
  1. Mike puts in €500 month from age 40 to 68.
  2. Maura puts in €50 a month from 22 to 39, then €500 a month from 40 to 68.

At the end Maura has paid in only 6% more than Mike, but she has a fund that is 12% bigger.
 
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