Trying to figure out what age I can retire at

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lemonadefishing

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I am currently 40 years old. I would like to retire as soon as I possibly can. I have a mortgage that should be paid off in the next 10-12 years so I don't expect to retire before then. I currently have ~200k in my pension and contribute 3k p/m between my own and employer contributions. A compound interest calculator tells me this should have me at about 2m in the pension by the time I'm ~60, it sounds like that would be sufficient but ideally I'd like to retire before 60 if it is feasible.

Where I am confused is when it comes to taking an ARF vs an annuity. My understanding is with an ARF you keep your pension invested and draw down a certain % of it each year (I think I've read 4-5% per year?). Basically I am wondering how you can generally tell you have enough to retire on? Is there a calculator you can plug these figures into, if I have X in my pension pot, draw down Y% per year, but expect growth of Z% on an ARF? I have googled it but haven't found anything, hence the thread. Is it worth going to a financial or pensions advisor? I don't know enough about pensions to know how to approach this but would like to have a target in my head for retirement, thanks.
 
Great question. A pot of €2m will give you lots of flexibility and hopefully a good standard of living. I believe that certain financial advisors have the software to forecast net income over retirement for a client but as they pay for the software you may need to pay for that service. It might help ease your mind and validate your hopes. There is no solution that is guaranteed accurate as there are so many variables eg we don’t know what income tax rules will apply when you retire or what the state pension will be.

My home made approach has been to model it via a spreadsheet calculating forecast gross income by start date. For example your private pension might begin at age 56 and the state pension 10 years later. If you have other income sources add them too.

If you buy an ARF you can dictate the drawdown level (4/5/6% etc) so that you have the income you want or need. You won’t have that with an annuity. You can start the drawdown level high and reduce it later as other income streams are received. That approach could mean you run out of money sooner though. ARF drawdowns are subject to a minimum of 4% from the tax year you reach age 61 rising to 5% at age 71.

This Zurich calculator is a simple drawdown model that could help you picture how quickly you might run out of money ….or not ….with an ARF.

Retirement Drawdown Calculator

Retirement Drawdown Calculator
www.zurichlife.ie www.zurichlife.ie

This is one of several income tax calculators you can use to work out your net income. They get updated every year after the budget so they won’t be accurate into the future.

Income Tax Calculator | Deloitte Ireland

Use Deloitte’s income tax calculator to estimate your net income based on the provisions announced in the latest budget.
services.deloitte.ie services.deloitte.ie
 
The first, and most critical, thing to figure out is your “burn rate” - what will you spend per annum in retirement?

Once you figure out that figure, multiply by 30 and that’s your “number” for early retirement.

So, if you reckon you could live comfortably on €40k per annum, you would need total retirement savings of €1.2m.

Now, you can get into the weeds and start modelling for future taxes and social welfare payments but for planning purposes I think a 30X figure is a good enough starting point.

If you would like us to comment on whether you are on track for early retirement, I think we would need to see your details in a “Money Makeover” format.
 
If you really want to nerd out on this stuff, there's a book worth of blog posts on Safe Withdrawal Rates at EarlyRetirementNow as well as a Google Sheets calculator where you can fill in your own circumstances and see how they work out. It is US-focused though, but I think it's close enough for what you need if you just consider EUR/USD to be 1:1.

Generally, you'll find 3.35% or so per annum would have gotten you through an early retirement (40+ years) without running out of money in all historic circumstances. You can actually plug in fixed income (Contributory Old Age Pension, etc.) on ERN's google sheet and see how that increases the safe withdrawal rate.

If you're just looking for a ballpark, assuming you'll have all/most of COAP from age 66, then 4% is a good guide.
 
@ClubMan

The 30X figure is simply another way of expressing a 3.33%, inflation-adjusted, “safe” withdrawal rate, as referenced by @conor_mc above.

It gives you a good ballpark number for determining how much is “enough” to retire early with a degree of confidence that you won’t run out of money before you run out of life.

Incidentally, I think a 25X figure is fine for somebody retiring at the conventional age of 65.
 
TRS30 said:
Average 30 year life expectancy after retirement?
Click to expand...
Yes, but...
lemonadefishing said:
I am currently 40 years old. I would like to retire as soon as I possibly can. I have a mortgage that should be paid off in the next 10-12 years so I don't expect to retire before then.
Click to expand...

Sarenco said:
The 30X figure is simply another way of expressing a 3.33%, inflation-adjusted, “safe” withdrawal rate, as referenced by @conor_mc above.
Click to expand...
Ok, thanks for the explanation. Is this a variant on the common 4% drawdown rule (of thumb)?
 
For the avoidance of doubt, the 30X figure has absolutely nothing to do with average life expectancy.

The 4% rule of thumb is fine for somebody retiring at the conventional age of 65 but it’s too risky for somebody retiring in their 50’s or earlier.
 
Once you figure out that figure, multiply by 30 and that’s your “number” for early retirement.

Is that accurate. I expect by the time you are 90 you outgoings are minimal. Most expenditure will be in early days of retirement
 
Not necessarily.

Expenditure in retirement often follows a “smile pattern” where it starts relatively high, gradually falls and then gradually starts to rise again.

Bear in mind that health care costs typically rise as we age.

But for the purposes of deciding whether not you have “enough” to retire early, it’s fine to use an average projected annual expenditure figure.
 
You can retire now if you want. You just won't have as much income for the next few decades. This is Ireland, you won't starve

More conservatively, you can walk when the mortgage is paid off.

You can semi-retire by working part of the year and/or part of the week whenever you find a job that allows you.

You can work full-time until you're 70 or later. Someone in my job retired recently at 70. I saw something recently about a guy who's just retired at 84 after 65 years in the same company.

For most people employment is a tradeoff between time and money. You need to decide which you value more. Personally I intend to cut down to 10 months a year (currently at 11) as soon as my mortgage is repaid at age 50. I'll drop to 9 months at 55, and leave at 60. Worst case scenario I'll work 9 months of the year and 3 or 4 days a week until I'm 66. I won't be rich in retirement, but i expect to be quite comfortable- although my version of comfortable may be your version of indigent.
 
Calculator.net has a simple retirement calculator you can try out. Eg with guessed figures below shows you are on track for 60, however this will change year to year as your fund grows and you have good and bad years of return, I.e it’s only at 55/56/57 where you will be able to see can you go then, it’s hard to see a result that would let you retire comfortably with 5 years less returns, 5 years less input into pension and 5 years more to live for example IMG_5563.png
 
@Sarenco

You didn't really get the point of employment being a tradeoff of time vs money did you? I was highlighting points along the spectrum- I personally have always pitied the live-to-work crew though.

Also, you've presumably heard of social welfare etc.
 
Working for profit - not limited to employment - is always a trade off between time and money. Hardly a profound statement.

However, telling somebody with a mortgage and no other source of income that they can retire now is just bonkers.

If you want to work part time until you are 66 (or whatever), that’s obviously your choice.

But it is of zero assistance in answering the OP’s perfectly reasonable question.
 
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