Pension Pot Low - What should I do now?

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dubdub123

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While I started contributing to my Irish pension some years ago, there's been a few bumps along the way and now I'm pretty concerned about where I'm at... Looking at some of the figures that people have accumulated is actually after putting the fear of god into me :(

Fund Value: Across an old occupational pension scheme + PRSA that I opened years ago + my current occupational pension scheme ==> 70K in total
Age: almost 50
Marital Status: Divorced
Salary: approx 60K
Current Employer contributions: 5%
Current Employee contributions: 5%

Note: Employer will not match any higher than this amount.

Realistically what should I be aiming for? For the purposes of this let's assume I receive full state pension ( I'm not sure I will)..

Assuming retirement at 67, how much of a "pot" should I plan to have? What sortof contributions do I need to make? Any input appreciated.
 
I wouldn't worry too much about the figures here - the demographic that are using this site are hardly representing averages plus everyones needs are different.

Do you have a mortgage / rent?
Do you have any savings / Are you saving at the moment?

Main question you need to ascertain is how much do you expect to spend a year in retirement? Track your expenses now and get an average yearly spend - be realistic. Once you know this you can work out what you need a personal pension pot to provide in combination with the state pension

Depending on your capacity to increase AVC's you can put up to 25% (30% from 50, once you have a clearer target of the pot needed, you can adjust current pension savings so much as is feasible which would get you as close to that target. Then just set it and forget it.

You have 17+ years until retirement and your pension has a lot of growth potential in that timeframe

50+O
 
@dubdub123 , it is not a straight forward answer unfortunately. From your various posts, you have a lot going on between trying to sort your contributory pension and moving house/increasing your mortgage.

One approach to take is to first figure out what your cost of living is, i.e. if you were mortgage free, kids were no longer a cost, how much does it cost you to live comfortably? If you decide that you can live on €23k, you need to top up your state pension by €10k. Drawing down from an ARF at 4% would mean you need to have a pot of at least €250k. And more than that if you also want to take a lump sum at retirement so €300-330k.

In order to get there, you need to increase your monthly contributions. At 50 you can contribute 30% of your salary to get tax relief but if you do this, that would give you a monthly take home of ~€2600. However you are also talking about taking out a €200k mortgage. A 15 year 2.2% mortgage will have monthly repayments of €1300 leaving you with €1300 a month to live on. Can you do this?

You need to find a balance between how much you will fund your retirement and how much you should realistically borrow. If you prioritize the mortgage, you may not have much in terms of a pension but you will have a home (asset rich, cash poor). If you prioritize your pension then you will have to make sacrifices to the mortgage or to your lifestyle.

Realistically your solution should be a combination of the above. Maybe you shouldn't stretch yourself to a €200k mortgage, €100-150k would be more comfortable to allow you to increase your pension contributions. Again you might not be able to contribute the 30% but getting as close to it as possible is a good starting point. You don't want to reach retirement and have a sudden change in lifestyle so living within your means over the next 10-15 years will help you transition to retirement.
 
At present you have 17 years to your anticipated retirement. So you have time and that is very important, you are looking at this now and not in ten years time.

It is very difficult to answer "how much" as that is very dependent on your own life needs and lifestyle. It would be a sensible exercise to observe your own life and work out exactly how much you will probably need to live on post-retirement. Do it in today's terms, don't try to project what €100 will buy in the future, work out what proportion of your €60,000 income you need to live on comfortably now, don't think about being parsimonious, think about being comfortable, you want to aim for a liveable income that means you can see yourself living that lifestyle over say 30 years. So if you determine that actually you can comfortably live on €20,000 (after tax), then you have an idea of the sort of income you would need from a pension, on top of the contributory pension that you would be entitled to.

Looking at your comfortable life will answer another question, how much additional money would you be able to contribute in the interim. You may also be able to identify a liveable but less comfortable life, cut backs in your current lifestyle that you wouldn't want to maintain for 30 years but you might be willing to accept for a few years in order to build your pension pot.

That will give you a rough idea of your personal target fund (i.e. what fund would reasonably support the and what income you have now to work with it. The next things to look at would be to look at your contributory record. Request a statement of contributions from the Department of Social Protection. There is an online service if you have a myGovID account https://services.mywelfare.ie/en/topics/statements-and-refunds/contribution-statement/ or you can write to them in Sligo to request it.

Once you have all that done you can decide your path. Review it every year, it's not set in stone.
 
This might offer you a bit of comfort - https://www.businessworld.ie/financ...ople-s-views-on-a-good-retirement-572802.html

You're ahead of 64% of the population by even having a pension setup and of the 36% that have one, the average pot size is €120k. It's unclear if that €120k is current value or at retirement, either way you're not a million miles from it. Not that being average should be your target, but as others said above there is a natural selection bias to the posts you will tend to see on places like AAM.
 
Thank you for the really good advice. It's very reassuring to hear that I have time to improve this situation and I will certainly take a look now to get some realistic figures in mind. I'm pretty good at budgeting out the regular big expenses (all bills get paid from CU except for mortgage as I get discount through the bank ) and would have a track of what's needed each month. I know there's area for improvement with certain outgoings that don't direct debit each month and improved tracking of those costs.. Really to get a handle now on what costs will reduce and what new or increased costs will come into play.

As mentioned above I'm also looking to sell my home this year and hopefully return to Dublin. From a cost perspective, I would absolutely end up increasing my mortgage amount but I feel I would be future proofing myself regarding options for employment should something happen in my current role, affordability of college for my dependents and for my own welfare as I get older (accessibility to transport/ hospitals).
I am going to think long and hard about what mortgage level I'm comfortable with and not just use a loan offer to drive what I spend... Been down that road before and I'm wiser this time around.. Initially I was looking to max out a potential 207K mortgage but I think 175K is much more realistic. I'll be able to understand this better further down the process and I appreciate this being called out - to try obtain that balance between mortgage and retirement that was highlighted above.

For now, I've decided is to increase my pension payments immediately. I was actually able to do this online and didn't have to wait for a certain window. I believe this is affordable and I'll give it a trial run. I think it will sharpen my focus on budget and really show what I may be able to afford from a pension and also mortgage perspective.

I've also obtained the contributions record online. A couple of gaps but I'd expect to get state pension, though it may not be full amount.

Really appreciate the guidance and support on this, it has helped to ease the state of panic and to step back and make some assessments and start to put some plan in place. Thanks so much
 
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