How Much Money Will You Spend In Retirement

You might not like the idea of retirement. It might even scare you. You might very well live to be aged 90 and the idea of filling your time successfully in retirement seems like a big job!

However, we recommend that you plan your finances to give yourself the option of being able to retire at age 60, even if you don’t plan on retiring until much later. When it comes to planning your retirement, It’s always best to plan for the unknowns:

  • You might be ill and unable or unwilling to work past 60.
  • If you have a business, your business might fail
  • You might get to a point in your life whereby your priorities change and you want more time to spend with family, travel the world, or just slow down a little.

The most common question when planning your retirement is ‘How much money will I need in retirement?’

Is €500,000 enough? Is €2,000,000 too much?

Let’s assume the following:

  • You would like to retire at age 60 and
  • You want to have €50,000 per annum available to spend each year from age 60 to age 90 (increasing with inflation at 2% per annum).

How much money will you spend based on these two key financial considerations?

The answer is € 2,028,000. This is what you will spend between age 60 and age 90.

So, where will this money come from?

There are lots of ways. Pensions, Property, Selling a business just at the right time, State Pensions, Inheritance and much more.

However, there are a few simple rules to keep in mind when it comes to planning your retirement: 

1. When it comes to long term wealth creation, cash is not king. Inflation will destroy the real value of your cash if you allow it.

2. Any investor willing to take a long-term view with regards to how they invest their cash, providing they have a very well diversified pension or investment portfolio, will outperform cash in the long run.

3. Don’t be afraid of stock markets for long term investing. Investing in stock markets is at its most basic, a bet on capitalism. Do you believe the value of the top 1,000 companies in the world will be greater in 10 – 15 – 20 years-time than they are now?

4. Planning a tax efficient exit strategy from your business will save you tens and hundreds of thousands of Euro in Capital Gains tax and Income Tax

5. The closer you get to retirement, and needing your money, the safer your portfolio should become and the more attention and advice your financial advisor needs to give you.

6. Investing in property is a good idea but investing all of your wealth in property, or for that matter any single type of asset, is unwise. Diversification is the key!

7. Understanding the Income and Capital Gains Tax impact of your decisions will make a substantial difference to your bottom line.

8. Make sure you and your spouse are paying PRSI contributions so that you both benefit from full rate state contributory pension.

Developing a successful retirement strategy does not happen by accident. There are many pieces to the puzzle which require investment, tax and pension advice in order to make the most of the opportunities available to you.

For expert advice when planning your retirement, contact me, Michael Coburn and I would be happy to assist you in any way.

Michael Coburn

Dublin 01 5267770
Wexford 053 9110380