While there are no age criteria for retirement in Ireland, most people prefer to retire at age 66 due to state pension benefits. However, retiring early is a budding concept that is getting popular amongst citizens. Most people’s decision to retire early is influenced by the popular concept of investing: FIRE (Financial Independence Retire Early).
Although early retirement is challenging for most people, it is not impossible at all. Moreover, with the right strategies, you can achieve this goal easily. So, if you are planning to retire early, this ultimate guide will take you through every aspect you need to know about early retirement in Ireland.
How to retire early: Step by Step Guide.
People often ask, “Can I cash in my pension early?” The answer is yes. After attaining 50, you can cash in your pension early and get a 25% tax-free lump sum.
Systematic planning paired with disciplined financial habits can help you achieve this goal. Here is a step-by-step guide to retiring early.
Step 1: Clear your vision for retirement life
Whether you want to pursue your passion, travel, start a business, or just want to stop working, having a clear vision is a key to early retirement. At first, the decision looks fascinating, but in the absence, it can hit back harder in the absence of clear goals. Moreover, this step helps you prepare well for the next step: Estimating retirement expenses.
Step 2: Estimate Retirement Expenses
This step entails estimating your monthly expenditure after your retirement. Start by adding up essential expenses such as:
- Food and Clothing
- Healthcare
- Transportation
- Housing
- Insurance
After that, take into account other liabilities like mortgages or loans. The general thumb rule is to retire debt-free completely. But, if you want to keep the books running after retirement, add these up to retirement expenses.
Step 3: Calculate how much you need to retire early in Ireland.
After estimating your estimates, calculate how much money you need to fulfill these obligations, plus some cash in hand. For example, here is an illustration of how much money you will need if you retire at 50.
The average income in Ireland, According to Central Statistics Office, is €41,600
Life expectancy: 85 years
Expected retirement salary: 50%
An individual in this case needs to save (€41,600 x 50%) x (85 years – 50 years) = €728,000
It is a general guide and doesn’t include any other pension benefits. This figure may vary according to the personal situation or inflation rate.
Step 4: Start Investing Early and Fill Retirement potts.
Systematic financial planning is critical to building a substantial pension pot for early retirement. Fortunately, Ireland citizens can select from different types of pensions. Here are some noted ones:
Occupational pension: Also known as company or employers’ pension plans, your employers offer this retirement fund. In this fund, you and your employer contribute (contributory), or only the employer contributes (non-contributory).
Personal pension: This retirement fund is maintained by you only. Most people contribute to this fund as an adjunct to an occupational pension. It is more flexible, highly customizable, and offers some tax relief on your contributions.
Personal Retirement Savings Account (PRSA): This tax-efficient, long-term saving product is popular in Ireland. It lets contributors save for retirement more flexibly.
State Pension: It is eligible for individuals aged 66. Several benefits are attached to this scheme. However, if your retire early, you need to have a backup plan until you reach state pension age.
Step 5: Get A Professional Financial Consultancy
As mentioned earlier, every individual’s personal circumstances and financial stability are different. Therefore, one size fits all strategy doesn’t work to calculate how much money you will need for early retirement.
The best practice is to work with a financial advisor to get a personalized solution. The trained professionals will help you sail through the process smoothly. Moreover, you can make informed decisions in accordance with your financial situation.
EndNote
Every retirement plan has a unique feature. So, if you are planning to retire early in Ireland, you have to access your needs and budgets accordingly. On top of this, it is imperative to do the maths to ascertain the implications of every decision on your retirement life.
With careful planning and disciplined life, you can easily realize the dream of early retirement. So, start today and stick to this guide to prepare yourself for early retirement. Then, contact a financial advisor to know the pros and cons of every plan as per your situation.
