Pensions Council: "€33k a year pension needed for 'comfortable' retirement"

At a high level, I reckon an individual would need a pension pot approaching €600k, plus a full State contributory pension, to meet the Pension Council’s definition of a “comfortable” retirement.

A huge sum obviously but hopefully not entirely unrealistic for most folks if they start saving for retirement early enough.
 
faketales said:
While a start and something is better than nothing I feel there is a big gap between reading the article and understanding what you need to do to get each of those pension amounts.

Eg. A person who is 30 with no pension will need to contribute x per month to have a pension equivalent to 33k take home today (assuming x% growth and that the state pension is still on the go).
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Here's my stab at this
Firstly your gross pension would need to be 37k pa in order to yield a net 33k pa after deductions.
The gross state pension is €14,454 pa so your gross annual private pension would need to be 37000 - 14454 = €22,546 pa.
Giving yourself an optimistic post-retirement lifespan up to the age of 96 you're looking at a 30 year annuity.
The usual interest rate used is 4%, to represent the real growth rate of savings.
Using the calculator here with those figures and €390,000 appears to be the sum required.
Using the savings calculator here, with a 4% interest rate, saving €4,750 a year for 36 years appears to just about get you there.
For someone on 45K the net contribution will be €3,600, and their net income would then be just over 33.5K, ie the same amount
as the pension they'd be hoping to have in retirement except that they also have rent etc to pay now.
Just shows I suppose that a comfortable retirement is not possible for the average worker if they're single.
 
While it's important to start early, there are times in your life for which payments into a pension are easier than other. While early is better, the message should also be that it's never too late. My spouse was working for more than 10 years before he got an occupational pension. And then, with a small family, funds were limited so planning 30 years ahead was difficult. However while perhaps not ideal as a financial plan, we have been able to make substantial contributions now, which means we should be comfortable. Our finances change with time and it's important to reevaluate priorities. We are putting more funds in than if we had done it earlier. However for us, it's much easier now to put these additional funds away than 15 years ago.
 
jimmij said:
The gross state pension is €14,454 pa
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It's closer to €17K from 2025.

Pensioners should have 100% equities - side issues

These are the non-core issues moved from this thread https://www.askaboutmoney.com/threads/pensioners-should-have-100-of-their-retirement-funds-in-equities.238762/ Most threads go off down rabbit holes to such an extent that the ordinary reader trying to understand the issue gets alienated. I...
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ClubMan said:
It's closer to €17K from 2025.

Pensioners should have 100% equities - side issues

These are the non-core issues moved from this thread https://www.askaboutmoney.com/threads/pensioners-should-have-100-of-their-retirement-funds-in-equities.238762/ Most threads go off down rabbit holes to such an extent that the ordinary reader trying to understand the issue gets alienated. I...
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It's closer all right, €12 a week closer! :p
 
Premos said:
While it's important to start early, there are times in your life for which payments into a pension are easier than other. While early is better, the message should also be that it's never too late. My spouse was working for more than 10 years before he got an occupational pension. And then, with a small family, funds were limited so planning 30 years ahead was difficult. However while perhaps not ideal as a financial plan, we have been able to make substantial contributions now, which means we should be comfortable. Our finances change with time and it's important to reevaluate priorities. We are putting more funds in than if we had done it earlier. However for us, it's much easier now to put these additional funds away than 15 years ago.
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This, 100%.

I've been in a small defined benefit scheme since 2013 but only started paying into my PRSA-AVC in 2020.

Obviously I would have been better off starting earlier even with €50 a week, but putting as much as I can reasonably afford into my pension the last 5 years (combined with aggressive investing) and into the future gives me a decent prospect of retiring at 60 in reasonably comfort.

Failing to invest in my pension would force me to work until 66 at minimum.

It's never too late.
 
Sarenco said:
At a high level, I reckon an individual would need a pension pot approaching €600k, plus a full State contributory pension, to meet the Pension Council’s definition of a “comfortable” retirement.
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Median earnings are €43k for all employees. That's all ages, part- and full-time in 2023. With wage growth probably €45k by now.

If you assume a 5% real return you'd need to contribute €5,000 per annum for 40 years to hit €600k. All inflation adjusted.

Obviously your earning profile over your lifetime is not the same and starting later hurts. Also many people don't make the full 40 years due to education, unemployment, kids, ill-health, etc.

Back to the point: is saving €5k out of a typical €45k (11%) possible? Very possible, but will require some sacrifice for some workers at key points in life.
 
Dr Strangelove said:
Median earnings are €43k for all employees. That's all ages, part- and full-time in 2023. With wage growth probably €45k by now.

If you assume a 5% real return you'd need to contribute €5,000 per annum for 40 years to hit €600k. All inflation adjusted.

Obviously your earning profile over your lifetime is not the same and starting later hurts. Also many people don't make the full 40 years due to education, unemployment, kids, ill-health, etc.

Back to the point: is saving €5k out of a typical €45k (11%) possible? Very possible, but will require some sacrifice for some workers at key points in life.
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How have you calculated that it's €600,000 that you would need to accumulate by retirement to fund a €24 approx gross pension?
I think it should be a lot lower than 600k?
Assuming a continuing 5% investment return of the fund post retirement and a 25 year payout time frame, you could get €2k a month
with a fund of €350k at retirement. At least that is what this calculation suggests :

Annuity Payout Calculator

Free annuity payout calculator to find the payout amount based on fixed-length or to find the length the fund can last based on a given payment amount.
www.calculator.net www.calculator.net
 
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Roro999 said:
Are these figures for retirement gross or net ? For an individual or couple ?
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You need a gross private pension of €23-24k on top of the full state contributory pension (which is about €14k gross currently) to give you a pension after tax of €33k which is the number they say is required for a 'comfortable' pension for an individual.

A couple, both having a state contributory pension would only require one additional gross pension of €15000 (with double the credits they'd have hardly any deductions) to get them to the comfortable figure for a couple of €42,300 net p.a.
 
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jimmij said:
How have you calculated that it's €600,000 that you would need to accumulate by retirement to fund a €24 approx gross pension?
I think it should be a lot lower than 600k?
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I assumed a 4% annuity rate for simplicity.

So, €24k x 25 = €600k.
 
jimmij said:
You need a gross private pension of €23-24k on top of the full state contributory pension (which is about €14k gross currently) to give you a pension after tax of €33k which is the number they say is required for a 'comfortable' pension for an individual.

A couple, both having a state contributory pension would only require one additional gross pension of €15000 (with double the credits they'd have hardly any deductions) to get them to the comfortable figure for a couple of €42,300 net p.a.
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Our case 2024 figs:
Retired couple.
Net income 48k
Expenses no mortgage, no car loans, run 2 cars comes to 39k which incudes about 2k household repairs and 8k holidays.
Very comfortable so.
 
Dr Strangelove said:
Back to the point: is saving €5k out of a typical €45k (11%) possible? Very possible, but will require some sacrifice for some workers at key points in life.
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I think another relevant point is that very often those in late career have paid off mortgages, raised kids, etc., and are a position to really start ramping up their pension contributions.

Also, a lot of folks will get a matching employer contribution of some sort.
 
Sarenco said:
I think another relevant point is that very often those in late career have paid off mortgages, raised kids, etc., and are a position to really start ramping up their pension contributions.
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I think the benefits of even small contributions at a very young age are poorly understood too.

I have big doubts about AE but this is one of the best features.
 
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