Retiring Comfortably – What to do about a Pension
You will probably not be shocked to hear that people with a positive outlook on life will tend to be optimistic about their future and this includes the problem of saving enough in order to be able to retire in comfort.
But consider how likely it is for anyone to have an optimistic view of their financial situation and their potential to earn an adequate nest-egg from which to live out their retirement. Given our current climate of fear, everywhere we look, television, newspapers, friends, colleagues, etc, we are being reminded that there is a global credit crisis and that the financial institutions are apparently crumbling around us. Fear abounds for the present, but also the future too. But there are many reasons to feel positive and hopefully you will come to adopt a better view once having read the following article.
If you have ever tried to establish exactly how much capital you will need to support you through your old age, you have probably drawn up a budget documenting expected income and expected expenditure. You may well find that by your own calculations you have a slight deficit between what you need and what you have. But have you taken account of all the necessary factors determining your expenditure?
This is where the good news comes in; by the time you are approaching, or entering, your retirement years, you will have found that your lifestyle and financial circumstances have changed dramatically since your youth. Did you consider the following life changing events? By the time of retirement, your children would surely have left home, this means that you food budget, utility bills, and other associated costs would be dramatically reduced. If you bought a mortgage during your younger days, by retirement you will probably either find that you have paid it off, or are close to paying it off. Just these two simple things will mean that you will have more of your gross pay left over for yourself.
Already you should be beginning to feel a little happier about the situation. These changes in life circumstance can mean that you may only need in retirement, three-quarters of the income that you needed in your earlier years, meaning that you do not have to match in retirement, the amount that you earned when employed. In a sense, you return to how you were in your teenage years, only needing to pay for food, clothes, bills and fun, fun, fun!
For the many people who feel that they have not been making adequate pension contributions, or who have yet to set up an Irish pension plan and are worried about how they will save enough money, this is all excellent news. Ok, so you might not have as much capital as you had hoped, but the chances are that you do not need as much as you had expected.
A pension plan is actually one of the safest and most lucrative ways of earning sufficient capital in order to retire comfortably.
Just a quick consideration of alternative methods people have engaged in will reveal how unstable they may be. For example, many people who have relied on property investments for sources of income have found that during the global economic crisis they have become less wealthy than they were, property prices dropped dramatically and therefore so did these individuals incomes. They may be starting to relax a little now, but the economy is largely unpredictable, no one knows when the next recession will bite, or how hard, so property may in fact not be as lucrative as it may appear in times of a booming economy. A pension plan is tailored to suit the saving patterns needed to garner enough capital during retirement. They have massive tax-relief benefits for example, and are genuinely a positive step for any individual to take.
If you are still feeling a little pessimistic about your financial future, there are other things you can do to help yourself. Firstly, you can make lifestyle adjustments in the here and now. Cutting back on luxuries for example, and every penny you save can then be added to your pension fund for investment and further growth. The more you put in, and the earlier you do so, the more will be the return on your money. Alternatively, if you do not want to cutback on luxuries, but you feel you will not have enough capital by the age of 65 to retire, you can always plan to defer your retirement for a while in order to increase your savings.
But the best news yet is that the media is beginning to talk of an improvement to the financial crisis. Soon we will be hearing about how great the economy is and the media would have moved on to their next scare tactic. Although we may be a while away yet, our current global financial outlook is brightening.
This article is based on the author's own observations and research and is not associated with any 3rd party organisations.
