By way of ‘preparation’ I am not talking about the courses that some employer organisations arrange. They are helpful, of course, but the real ‘preparation for retirement’ starts many years beforehand when hobbies are taken up or when people get involved in organisations.
Preparation for a comfortable retirement should really begin once we START work after leaving school or college. That might sound like what we may call a tall order, but it is eminently sensible.
At 19 or 20 years of age, retirement age was over 40 years away and was more than twice the time we had lived already. I certainly didn’t realise that the sooner I started the better the outcome, even though it would be several decades down the road before I would reap the benefits.
In one web page I found on the internet the following calculation appeared:
Suppose I started a pension savings fund at age 35 and decided that I would retire 30 years later, at age 65, with a pension of €1,500 per month; I would have to save €534 per month.
If, however, my contribution was eligible for 40% tax relief then the monthly contribution would be reduced to €320 per month. Low interest rates such as we have now would make a big difference.
A sum of €534 (or even the lesser sum of €320) is no small amount, especially if one has family responsibilities — in effect, children to rear and educate. The best general advice suggests:
1. Start saving, keep saving, and stick to your goals
If you are already saving, whether for retirement or another goal, keep going! You know that saving is a rewarding habit. If you’re not saving, it’s time to get started. Start small if you have to and try to increase the amount you save each month. The sooner you start saving, the more time your money has to grow. Make saving for retirement a priority. Devise a plan, stick to it, and set goals. Remember, it’s never too early or too late to start saving.
2. Know your retirement needs
Retirement is expensive. Experts estimate that you will need 70 to 90 percent of your preretirement income to maintain your standard of living when you stop working, though I think that is a bit high, particularly if one has paid off and redeemed one’s mortgage.
Take charge of your financial future. The key to a secure retirement is to plan ahead.
Start by consulting a reputable pensions expert.
3. Contribute to your employer’s retirement savings plan
If your employer offers a retirement savings plan, sign up and contribute all you can. Your taxes will be lower, your company may even kick in more – if you are with the right employer — and automatic deductions make it easy.
Over time, compound interest and tax deferrals make a big difference in the amount you will accumulate. Find out about your plan. For example, how much would you need to contribute to get the full employer contribution and how long would you need to stay in the plan to get that money.
4. Learn about your employer’s pension plan
If your employer has a traditional pension plan, check to see if you are covered by the plan and understand how it works. Ask for an individual benefit statement to see what your benefit is worth.
Before you change jobs, find out what will happen to your existing pension benefit.
Learn what benefits you may have from a previous employer.
Find out if you will be entitled to benefits from your spouse’s plan.
5. Consider basic investment principles
How you save can be as important as how much you save. Inflation and the type of investments you make play important roles in how much you’ll have saved at retirement.
Know how your savings or pension plan is invested. Put your savings in different types of investments. By diversifying this way, you are more likely to reduce risk and improve return.
Your investment mix may change over time depending on a number of factors such as your age, goals, and financial circumstances.
6. Don’t touch your retirement savings
If you withdraw your retirement savings early, you’ll lose principal and interest and you may lose tax benefits or have to pay withdrawal penalties.
If you change jobs, leave your savings invested in your current retirement plan, or roll them over to an IRA (an ‘Individual Retirement Account’ — or a PRSA — a ‘Personal Retirement Savings Plan’) or your new employer’s plan.
7. Ask your employer to start a plan
If your employer doesn’t offer a retirement plan, suggest that it start one. There are a number of retirement saving plan options available. Your employer may be able to set up a simplified plan that can help both you and your employer.
8. Put money into an Individual Retirement Account or a PRSA
There is a maximum that one can contribute and either The Revenue or a pensions expert should be consulted.
9. Find out about your Social
Social Welfare pays benefits also and a person who is in employment which might exclude him/her from a Social Welfare payment should enquire about becoming a voluntary contributor.
10. Ask questions
While these tips are meant to point you in the right direction, you’ll need more information. Read any publications about the subject that you can find. Talk to your employer, your bank, your union, or a financial adviser. Ask questions and make sure you understand the answers. Get practical advice and act now.
That, of course, is all about the financial aspects of retirement. Many people who retire without having prepared for how they will spend their time run into problems within a relatively short time. No matter your personality, studies have shown that retirees who keep a busy schedule with three to four regular activities and who maintain their relationships and social interaction tend to lead happier retirements, maybe even live longer.
Keeping engaged can boost your physical and mental health. Recent studies have shown how certain activities in retirement can reduce your risk of developing diseases like Alzheimer’s.
In addition to having a plan for your time (even if it’s just a general idea), thinking about how you want to spend your time in retirement now can help you prepare.
Volunteers are always welcome and in every area there is something positive going on that calls for a good corp of volunteers. It could be helping out the local ‘Meals on Wheels’ or the ‘Tidy Towns’. Older people by their very nature usually have a good sense of history and either getting involved in a local history society or even a local museum can be most enjoyable and beneficial to the community. Conducting guided history walks in your area would be very beneficial and maybe even a source of extra income.
Hobbies, of course, can be vital to a retiree’s well-being. One hobby I’m involved in is woodturning and people are often surprised to hear that in the Cork branch of the Irish Woodturners Guild there are over 60 members and the regular monthly workshops rarely have less than 40 members attending.
A long-term interest in scouting contributes hugely to my life-style too. We have a very active group called The Cork Scouting Fellowship with well over 20 active members. Most of us are retired scout leaders and as well as helping with some charity events we meet once a month and each month we have an outing. For the outings we are very lucky to have access to a minibus and that helps greatly to the enjoyment of the day — camaraderie and even the personal friendly slagging that we engage in. Some members are involved in other activities and hobbies. I, of course, enjoy my writing — including this column — and I may still produce a poem or short story. I have two books published at this stage.
No! Retirement is not the end of the road. It can be, instead, the beginning of a new chapter in our lives. Active Retirement groups can be found in most parishes/areas and they in turn can inspire other activities to keep us busy and focussed. In fact this article was inspired by a most enjoyable evening I spent as a guest of the Timoleague Retirement Group recently as they listened to my poems, stories and general observations. I have done similar events several times and I really enjoy them.
For me retirement is second only to the invention of the wheel.
(Contact Michael at email@example.com)