What is your personal retirement target sum?

Savvy said:
What valuation do people use for the state pension in the future for these calculations? Do you assume it will rise at say 2% annually?
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Will "Auto Enrolment" have any future negative effects on the value of the state pension or who will be eligible to claim it??
 
Dr Strangelove said:
There is no formal indexation in Ireland. It’s reasonable to assume it will keep up with inflation, possibly more as a bonus.


I looked for CSO data on this and they don’t really have spending measures by fine age group. My anecdotal experience with several relatives is that discretionary spending drops a lot after 80, even with good health. People just don’t have the urge to go out as much, often you lose your driving licence, people only really want essential house repairs, etc. I’ve had relatives accumulate six figures in bank deposits in their 80s without even trying.
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Look to your Covid spending as a proxy for late old age...basically no socialising, car stays put, no holidays etc etc. Maybe less packages delivered too! There were plenty of savings accumulated in this country for many, all behaving in the same way as I guess a lot of elderly people do naturally.
 
Savvy said:
Looking at that payment rate from 1995 to 2014, they have risen from €92 to €277, so that's a CAGR of ~3.9%
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CPI averaged 2.2% over the period so indeed a big inflation-busting improvement.

The late 90s and early 2000s saw an unprecedented improvement in the public finances as well as a kind of negative demographic dividend. A lot of people born in the 30s and 40s due to retire had emigrated!

I doubt this will ever be repeated and I assume 2% with all else a bonus.
 
Will we be able to fund that level of state pension with an ageing population. Might it become means tested, at least to some extent. Hard to see any of this happening if we continue to have spineless populist leadership in government.
 
My own retirement sum is 1.5 million. Probably split about 2:1 between pension and other financial assets.
 
I'm in a tough situation with everything going on in my family, so I don't think I can afford to think of retirement yet, but I like to think that about 800k is a good target to go towards.. maybe things will get better in the future
 
David_Dublin said:
Will we be able to fund that level of state pension with an ageing population. Might it become means tested, at least to some extent. Hard to see any of this happening if we continue to have spineless populist leadership in government.
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I certainly hope it won't be means tested . It would be v unfair inmho. Let’s hope the influx of overseas workers continues to drive population growth
 
I understand that people that have "paid all their stamps all their lives" will be 100% against it being means tested, but if someone has a massive income in retirement I really don't see why the state should be paying them a pension. I'd much rather see that money be spent on education, housing, health. The means test could be really generous, i.e. someone with an annual income in retirement above 150k or something like that, i.e. they are saving money in retirment (throught their hard work of course)....I honestly can't see why the state should be contributing to their wealth in retirement years.
 
David_Dublin said:
I understand that people that have "paid all their stamps all their lives" will be 100% against it being means tested, but if someone has a massive income in retirement I really don't see why the state should be paying them a pension. I'd much rather see that money be spent on education, housing, health. The means test could be really generous, i.e. someone with an annual income in retirement above 150k or something like that, i.e. they are saving money in retirment (throught their hard work of course)....I honestly can't see why the state should be contributing to their wealth in retirement years.
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Your hypothetical 150k pension earner will pay taxes in retirement that are a multiple of the OAP. And presumably paid far more during their working life.

It's a universal benefit (like Child Benefit) and should remain as such.
 
mtk said:
I certainly hope it won't be means tested . It would be v unfair inmho. Let’s hope the influx of overseas workers continues to drive population growth
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I don't think it will be means tested.

I do think however that the current very generous rates will come under threat as the ratio of working to retired people skews over the coming decades. It's inevitable.
 
Should the pension be means tested is a head against the heart. By the time I get to retire I will have been paying stamps for 50 years. Should I be punished for savings during my work life to ensure I am comfortable in retirement.
I note the number don't look good currently. I think we have 5 workers per retiree current this will drop to 2 when I go looking for my pension. Also looking at current tax rules a large portion of my state pension will likely be handed back in tax anyways.
If the government of the day was to do this it would need to be flagged well ahead to allow people to plan
 
Lot of focus here on the pot of money you will have available when you retire but should a different question be asked, what is the amount you need to maintain the lifestyle you want to live post retirement, support kids/grandkids etc. ?

In my case, myself and my wife (hopefully assuming we live long enough to collect it) will have the full state pension and also a UK state pension which I've done the top ups on. Those combined will give us an income of approx €30k per annum. To maintain the current lifestyle we have, allowing for the fact that we won't then be contributing to a pension fund, saving less etc we need to get the equivalent amount from the various personal pensions we have. Currently on course to exceed that.

The bigger question I have right now is the gap between when I can retire from work and get my work pensions and what happens until the state pensions kicks in, that often seems to get overlooked. Perhaps that is where the tax free lump sum might kick in from my work pensions but not thought through that yet.
 
thedaddyman said:
Lot of focus here on the pot of money you will have available when you retire but should a different question be asked, what is the amount you need to maintain the lifestyle you want to live post retirement, support kids/grandkids etc. ?

In my case, myself and my wife (hopefully assuming we live long enough to collect it) will have the full state pension and also a UK state pension which I've done the top ups on. Those combined will give us an income of approx €30k per annum. To maintain the current lifestyle we have, allowing for the fact that we won't then be contributing to a pension fund, saving less etc we need to get the equivalent amount from the various personal pensions we have. Currently on course to exceed that.

The bigger question I have right now is the gap between when I can retire from work and get my work pensions and what happens until the state pensions kicks in, that often seems to get overlooked. Perhaps that is where the tax free lump sum might kick in from my work pensions but not thought through that yet.
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Ireland and the UK are both due to hit the unsustainable dependency ratio of 1:1 around 2050. That is: one worker per one retiree. We'll get there a lot faster if we hit a recession and the young emigrate in mass. So no-one really really knows what the state pension will look like in 25 years. I've heard some propose the gov should invest 5k at the birth of every child and let that 5k grow over the course the childs life. That's then their state pension.
 
theObserver said:
Ireland and the UK are both due to hit the unsustainable dependency ratio of 1:1 around 2050. That is: one worker per one retiree. We'll get there a lot faster if we hit a recession and the young emigrate in mass. So no-one really really knows what the state pension will look like in 25 years. I've heard some propose the gov should invest 5k at the birth of every child and let that 5k grow over the course the childs life. That's then their state pension.
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I think there is a lot of undue panic regarding population decline. We will simply have to engage slightly different economic models, rather than the ever expanding, ever destructive capitalist monster.
The 5k at birth idea, relies on a capital market expanding, exponentially into the future. But, if population is dwindling, won't that be difficult?
If AI allows wealth to grow, but large numbers of people to become superfluous, then we would need to share that wealth in a way that doesn't destroy our social fabric. Which might mean giving people money, for nothing, or , as some on this site believe, even more people, more money for doing nothing.
 
There's been a lot of people alluding to state pensions being done away with or means tested for many years across most countries that provide it.

The question posed by Cervelo above is an interesting one: "Will "Auto Enrollment" have any future negative effects on the value of the state pension or who will be eligible to claim it??"

When changes are made to pension entitlements, there are obvious reasons why they are made in a slow and controlled manner. Take, for example the 10-year phased removal of the Yearly Average Method. This is done because, with less than 10 years to retirement, one has insufficient time to plan if they had assumed their pension was going to be calculated on the yearly average method.

I'm not sure that the state pension will ever be completely removed or made entirely means-tested as that'd be political suicide. I wouldn't be surprised, however, to see the government make a move along the lines of the UK's "stealth tax" on income in recent years where they froze income tax bands from 2023 to 2026.

Basically, the UK income tax approach was a tax by inflation. Over the years, it pulls more lower income people, including pensioners, into the tax net and has higher income earners pay a larger percentage of tax at the 40% band. There wasn't as much uproar about this as there would have been about a 1% increase in income tax rates as people don't tend to see it immediately.

As of 2020, 64.7% of Irish people had private pension coverage, an increase of almost five percentage points on the same period in 2019. If people in 2019 had under 60% private pension coverage, it's very difficult for the government to make moves on the state pension. If auto enrollment were as successful as one might expect, private pension coverage would be significantly higher and such moves would be less impacting on the general population.

I guess what I'm saying is that I don't expect state pensions to be removed or means tested. However, I do expect the pressure on government to deliver the inflation-busting rises in state pension rates experienced in the past to be lessened. Instead, I would expect sub-inflation rises going forward and an emphasis that if one were to opt out of auto enrollment, especially at an early age, they do so at their own peril.
 
I have a feeling state benefits won't keep pace with inflation...so if I was calculating, I would be negatively reducing my state pension entitlements...worst case scenario would be means tested so 100% discount, and then better case scenario X% for it eroding due to inflation.
 
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