We are almost at the very end of 2016, much like all the years before it there was lots happening for everyone. If you had plans for the year you probably have reviewed them and identified what you want out of 2017. Or perhaps you didn't have plans, which probably accounts for many of us.
Stephen Covey coined the phrase 'begin with the end in mind', meaning we should focus on the end goal of whatever it is were are doing, this will keep us on track, accountable, moving forward, and progressing in the right direction.
I'm always conscious of this when we in the this industry tell people they should be preparing an income for themselves in retirement. Irrespective of whether that is through pension, estate planning, alternative assets or indeed sheep (check out blog #13) unless we know what we are aiming for, what the end goal is, it's really difficult for us to engage in anything. That's what this blog is going to address, how do I get my money from my pension in Ireland, when I finally reach that point? Podcast Episode 16 (here) focused on the ages at which we can retire in Ireland, this is going to focus on the 'how'!
Pensions are technical, there is no avoiding that fact. Another fact, we almost all love cake! So I've set myself the challenge of helping you understand all this through cake terminology, just to keep you all sweet.....!
Imagine that as we work we are contributing 'ingredients' (money) to our giant 'cake' (pension fund). The more ingredients we put into this cake, the bigger it will get. Provided we keep the 'temperature' & 'cooking time' (risk & volatility) to a manageable level for the size of cake then we should end up with the cake that we had planned for, just as the 'recipe' (your financial plan) had outlined! Simple yes!?
Key Point #1: "When I get access to my cake (retire) can't I just take the cake out of the oven and devour it?" Not that simple I'm afraid. There are rules as to how you can eat your cake, just as there were rules as you were adding ingredients and cooking it over all those years. Irrespective of which type of pension (cake) you have there are 4 methods of accessing it, your circumstances at the time of retirement and the type of cake you have will determine which options are open to you. They are:
There are 2 main types of pensions which the majority are members of, either personal pensions (Personal Pensions and PRSAs), and secondly members of company pension schemes (Occupational Pension Schemes).
In this post I will focus on the following; How do I take my money from a Personal Pension or PRSA (Personal Retirement Savings Account)?
#1: Congratulate yourself on reaching retirement
#2: Take 25% of the cake as a 'tax free slice', and do with it as you please
#3: Provided you have enough cake from another source (min €12,700 per annum guaranteed income) you are allowed to put the rest of your cake into the press and take a slice of it as you wish, you control it and the full cake remains in your name. (This is called an ARF). There is a minimum % of cake which you must take each year either 4 or 5 per year, but you can take more if you wish. You pay Income Tax, USC and PRSI (if applicable) on the cake that you take at this point.
#4: If you do not have the minimum guaranteed income from other sources you can still do #2 above, but #3 changes for you. Instead of putting it into the press and taking it as you need, the revenue insist that you place just over €63k of it into a sealed container (AMRF) until you are 75. This is a requirement apparently in order to stop you leaving yourself with nothing in later life! After doing that, if you still have cake left over, you can put that amount then into your own press and take it as you want it, as above.
Pardon the pun but this may all seem very spongy, so lets stop trifling around and bring this to the plate! For example, you accumulate a PRSA with €200k value at age 68, happy days, a nice lump of cake you might say! Using #2 you take €50k tax free and do with as you wish. #3, assuming you have the minimum income sorted via State Pension (€12k approx) and another small guaranteed annual income, you can then put the rest of your cake into the press (ARF), manage it and take out (for example) 4% which would give you €6,000 Gross, per annum. If you lived for a long time then the cake could run out, or if you didn't eat all the cake before you passed away then the cake goes into your estate and passes to your beneficiaries.
Lets run the same example, but this time you do not have enough cake to allow you do the 'pop it in the press' option. You take the €50k tax free and live it large. You then have to put just over €60k of the remainder and lock it away until 75. You have just under €90k of your cake (less than 50%) which you can 'pop into the press' and take slices as you need. If you were taking the minimum 4% of this it would provide a shade under €3,500 per annum.
So there you go, that is the 'end in mind'. If you 'have a pension' and believe it to be 'enough', consider how much cake you might like to have when you get to that point of your life. If you feel you need to make your cake a bit bigger or smaller then speak to a professional, find out how exactly you will be able to get your hands on your cake, and then you bake it accordingly.
Next week we will look into accessing money from Company Pensions, Occupational Schemes and the likes. More cake analogies are in store, I hope you like cake!
Thanks for sharing and spreading the 'informed decisions' word, please keep the shares going!
Your're a legend,
If you have ever wondered about any of the following:
What age can I get the State Pension?
When can I access my other Pension Funds?
How much will the State Pension Provide me with?
If your answer to any of these is 'yes' then this episode is right up your alley!
Next week we will look into how one goes about getting one's money from a pension, but that's for another day!
Hopeful that this is an informative episode for you.
Thanks for listening and sharing.
Paddy (QFA, RPA, APA, BBS).
Whether you are a first time buyer or are an existing mortgage holder Paddy Delaney (QFA, RPA, BBS) shares some useful information on how to take control of your mortgage, and the benefits of doing so.
A recent survey suggests that a large portion of us millennials don't care about the future, merely about the 'now'!
Indeed we can often be in a rush to secure our mortgage that we take an eye off the terms we agree to, and we then forget all about it and get on with our lives.
However it can have a significant impact on our lives if we take control of our money, our borrowing, and make it work for us for a change!
Here are the links as promised:
God Give Me Patience: http://www.informeddecisions.ie/patience-right-feckin-now/
Grateful for you all for listening and sharing, and hopeful that some of you take control of your borrowing and see the benefits of it.
Thanks for tuning in again, this time to Episode 14.
Paddy Delaney (QFA, RPA, APA, BBS) outlines the top 7 reliefs, allowances and benefits to claim your full tax benefit, and get the money you are due into your bank account!
Below are some links to further useful information.......enjoy!
Paddy Delaney. Your Personal Finance Informer!
www.informeddecisions.ie contains all the links to all personal finance blogs and podcasts to date, so please do check it out.
Here's a link below to the revenue website with further info on all allowances:
Here's a link to the first Informed Decisions Pension Podcast:
Life Cover, Life Insurance, Life Assurance......call it what you will, the fact is that there are many ways we can put this in place, and many different types of cover to choose from.
Which is the best Life Cover for me? In this episode Paddy shares information regarding the most common types of cover available, and some of the key differences between them, to enable you make an informed decision on your Life Cover and Family Protection.
You can sign up for weekly email from InformedDecisions.ie by visiting this page: http://www.informeddecisions.ie/spreadtheword/
Thanks for tuning in, and for sharing this on Facebook & LinkedIn.
Investments can be ferociously complex things, and made even more complex by some, for their benefit and not yours!
This episode of the Informed Decisions Personal Finance podcast shares some basic insights to the 5 main Asset Classes, giving you a working understanding of what they each are and what sort of volatility they each tend to carry.
Valuable listening whether you are a newcomer to the world of savings, investing or pension planning in Ireland, or are a seasoned regular.
Please visit the website www.informeddecisions.ie for access to all of our blogs and podcasts.
Thanks for listening and sharing.
Thanks for tuning in to Episode 11 of the Informed Decisions Podcast. In this episode we will share with you one of the largest and most unknown potential tax that cohabiting couples can be faced with, and a few pointers on your options to help ensure it's never an issue for you.
Please continue to share on social media and spread the word, our listener numbers are increasing every month, meaning we are getting this info out to the millennials of Ireland, who seemingly want it!
Link to Revenue Website and further info regards the Family Home/Dwelling Relief:
Thanks for tuning in again!
In previous episodes we have discussed the basics of emergency funding, clearing debts and having awareness of where our money goes. Assuming that you have those things in order (or on the way to being in order!) here is a useful podcast episode sharing the key things to consider before you invest for the medium or long term.
While we will delve into 'asset allocation' in more detail, this episode is an introduction to the 4 key things to consider when doing an Irish Investment.
If listening via iTunes etc. please visit the website www.informeddecisions.ie for all other blogs and podcast episodes
Thanks for tuning in.
Episode 9 of the Informed Decisions Podcast introduces Physical Health expert Andrew Hageman of Meath-based A&S Fitness. We discuss links between Financial & Physical health, reasons to pursue both and some really useful tips to get on the path to physical (and subsequenty financial) wellbeing.
Andrew shares his story, his vision for giving ourselves the best chance to perform, and some really practical ideas on how to go about it.
We would be delighted to hear your comments, see your shares, and please do send it to a friend who you feel would benefit from listening.
As always, thanks so much for listening, and do check out the website.
Discover the benefits and indeed the savings to be had from clearing your debt early. While it is not something everyone can aim to do, there may be scope for many to make small changes to save lots of interest, and to be free of debt earlier than expected.
Please continue to share the love, and don't forget to subscribe to the weekly email update. Magic!
Thanks as always for tuning in.
One of the other core foundations to an effective Financial Plan is to have a back-up in case you aren't around to see it through,Life Cover can play a part in that!
Many folks in Ireland wonder if they need it, what does it really do (seeing as they won't be around to benefit!), and how much really is enough.
Here's a shed-load of ideas on how to begin to work that out for yourself. This is the first of a series exploring the different ways to protect the protectible, easy!
Thanks for sharing, listening and continued support of the cause.
Paddy & John shed some light on what is the best way to go, rent your home, or take the plunge and buy it with the help of a mortgage. Both have experience from a personal & professional perspective and share their thoughts on how best to consider this question......plus some other stuff!
Colm McCarthy (our esteemed Irish Economist) recently said "retirees don't eat equities and bond for their breakfast, they eat rashers and eggs and bread and stuff".......meaning we need cash to survive and feed ourselves in retirement, not funds and technical products.
Paddy & John discuss why this matters and how we can begin to consider catering for our retirement.
Recorded in a busy pub, there is a nice background ambience to compliment the lad's dulcet tones!
Thanks for tuning in!
Many of us deal with budgets in a work environment, everything revolves around budgets. Yet for many the thoughts of budgeting our own finances seems alien!
Paddy & John discuss the merits and the ways to approach budgeting, and most importantly WHY bother!
A large emphasis is on identifying your own personal Financial Goal, then and only then will budgeting be an activity you'll be motivated to actually do.
Thanks so much for listening, you're a legend!
Available on iTunes and Podcast Addict. Just search for 'Informed Decisions'.
For more check out www.informeddecisions.ie
For many establishing an emergency fund may seem like an unnecessary hassle, or indeed an impossible mountain to climb. Your new co-host, and Paddy discuss the ins and outs and ways to get started on this journey.
This is the first Podcast the 2 guys have embarked on together, so go easy on them!
Thanks for tuning in.
Now available on iTunes for iPhone, and Podcast Addict for all Android.
Or visit the site for more info....
Many folk think that Financial Planners and Advisors have all the answers, the truth is that YOU have the answers, and we provide the technical advice & the tools to get you to where you want to go.
Plus, a basic overview of the 6 key foundations to financial freedom.
Plus, some dodgy singing!
As always, thanks for tuning in.
What a day for Informed Decisions, and all the fans of Personal Finance in Ireland and beyond! This is the very first episode of what is Ireland's very first dedicated Personal Finance & Financial Planning Podcast!
This introductory episode is aimed at giving you a sense of who Paddy is, and what he's aiming to share with you over this podcast.
Thanks to all our supporters and hopefully all our listeners for downloading and following the show.