The total amount of money you have for your retirement depends, among other things, on how much you contribute to your pension pot. But how much should you contribute to your pension? How much pension do you need? Here are some considerations and tools that can help you decide.
How much you put into your pension pot depends on the type of lifestyle you would like in retirement and the length of time you will spend in retirement. Obviously, no one knows exactly how long they will live for and therefore how long their pension will need to last for. Due to better health for an ageing population, life expectancy is increasing. By 2046, men can expect to live until they are 85 years of age, and for women, their life expectancy will be on average 89 years of age*.
What is the average retirement income in Ireland?
The general thinking is that we will need two thirds of our current pre-retirement income to retire comfortably. However, this is not enough for everyone and is dependent on the lifestyle you want when you retire. For some, costs reduce in retirement as the mortgage should be paid off and children have fled the nest. But for others who were late getting on the property ladder, their average pension income may need to be higher to cover mortgage repayments or other bills.
Another important thing to consider when working out your average pension contributions is if you are planning to retire before the State Contributory Pension kicks in, you should consider how you would finance the gap years.
What pension will I need
How much should you be putting away for your retirement? It's a question we're often asked. Of course, it's up to you. But a simple way to check is to use our pension calculator which can help you decide how much to contribute towards your pension. They'll also show you the levels of tax relief you may be eligible for on your contributions. Just input your details, set your retirement goal and you'll quickly work out what you may need to start putting away for your retirement.
Saving for your retirement is down to you, but to encourage you to save for your future, you will receive valuable support from the government in the form of tax relief. It's one of the most compelling reasons to save through a pension. Other forms of savings, like bank accounts or savings plans, do not attract such generous incentives. Every contribution you make to a pension plan receives tax relief based on the rate of income tax you pay (most of us pay income tax at a rate of either 20% or 40%).
Not sure what you're spending your money on and want to see how much you could save for your retirement? Take a quick look at your monthly income and expenses with our budget calculator. This will give you an idea on how much money you have available to save.
* Source: CSO Population and Labour Force Projections 2016-2046.
The information contained herein is based on Zurich Life's understanding of current Revenue practice as at January 2023 and may change in the future.