Deferring your State Pension (Contributory) - break even point is age 88

T

TheJackal

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Age when you start to claimMaximum rateper yeardiff v 66
Age 66€277.30€14,469.51€0.00
Age 67€290.30€15,147.85€678.34
Age 68€304.80€15,904.46€1,434.95
Age 69€320.30€16,713.25€2,243.74
Age 70€337.20€17,595.10€3,125.58
Age6667686970
66€14,469.51€0.00€0.00€0.00€0.00
67€28,939.03€15,147.85€0.00€0.00€0.00
68€43,408.54€30,295.71€15,904.46€0.00€0.00
69€57,878.06€45,443.56€31,808.93€16,713.25€0.00
70€72,347.57€60,591.42€47,713.39€33,426.51€17,595.10
71€86,817.08€75,739.27€63,617.86€50,139.76€35,190.19
72€101,286.60€90,887.12€79,522.32€66,853.02€52,785.29
73€115,756.11€106,034.98€95,426.78€83,566.27€70,380.38
74€130,225.63€121,182.83€111,331.25€100,279.52€87,975.48
75€144,695.14€136,330.69€127,235.71€116,992.78€105,570.58
76€159,164.65€151,478.54€143,140.18€133,706.03€123,165.67
77€173,634.17€166,626.39€159,044.64€150,419.29€140,760.77
78€188,103.68€181,774.25€174,949.10€167,132.54€158,355.86
79€202,573.20€196,922.10€190,853.57€183,845.79€175,950.96
80€217,042.71€212,069.96€206,758.03€200,559.05€193,546.06
81€231,512.22€227,217.81€222,662.50€217,272.30€211,141.15
82€245,981.74€242,365.66€238,566.96€233,985.56€228,736.25
83€260,451.25€257,513.52€254,471.42€250,698.81€246,331.34
84€274,920.77€272,661.37€270,375.89€267,412.06€263,926.44
85€289,390.28€287,809.23€286,280.35€284,125.32€281,521.54
86€303,859.79€302,957.08€302,184.82€300,838.57€299,116.63
87€318,329.31€318,104.93€318,089.28€317,551.83€316,711.73
88€332,798.82€333,252.79€333,993.74€334,265.08€334,306.82

In all cases, deferring your State Pension (Contributory) from age 66 to either 67, 68, 69 or 70 will take until age 88 to break even

Deferring your State Pension (Contributory)

You can start to claim your State Pension (Contributory) at any age between 66 and 70. This page explains who can defer (delay) their State Pension (Contributory), rates for different age groups, and how to apply.
www.citizensinformation.ie www.citizensinformation.ie
 
If you factor in the time value of money the breakeven age is in the 90s.

It only makes sense for someone who doesn’t have 2080 PRSI contributions by 66 and needs a few more years of employment to get there. Or perhaps some big drop in other income that would see marginal rate fall from 40% to 20%.

Even still I suspect the numbers who will take this up will be small, and most of those will have been ill-advised.
 
Just an alternative way of considering this instead of break-even period, but if I wanted to forego €277 a week for four years, I could put it on deposit at say 3% to build up a pot of about €61,500, then buy a €3,125 annuity at 5.5% (taking an annuity rate from a recent post here) for €56,818.

In that light, it’s not the worst deal going. But you could do significantly better by investing rather depositing if your plans could tolerate that risk.
 
conor_mc said:
In that light, it’s not the worst deal going.
Click to expand...

If I do the sums that’s 100/5.5 or 18.7 years of expected annuity at 70. You deflate that by the 12.5% investment return over the three years so 16.9 years. So putting the money in deposit then purchasing an annuity would see someone break even at 87 rather than 88.
 
Just an alternative way of considering this instead of break-even period, but if I wanted to forego €277 a week for four years, I could put it on deposit at say 3% to build up a pot of about €61,500, then buy a €3,125 annuity at 5.5% (taking an annuity rate from a recent post here) for €56,818.

In that light, it’s not the worst deal going. But you could do significantly better by investing rather depositing if your plans could tolerate that risk.

If you did build up €61,500 at age 70 though and invested at just a 5% average return (ignoring volatility/sequence of return risk for the purposes of this hypothetical exercise), you could withdraw €260/month or €3125 a year, and still have €59.5k of capital left after 25 years.

(Edit: Oops, double post!)
 
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