What is a reasonable pension pot?

The Mighty Quinn

Raoul Duke III wrote: »

Did we reach a consensus on the original question?

I'm sticking with '€1 million'.

The other question of course would be 'are you realistically going to reach your target by your target retirement date?'. I suspect a lot of the non-PS cohort have unrealistic expectations here.

I always wonder why people choose PS to denote public sector (which I assume you're talking about) when private sector has the same initials!

Regarding the bit I've put in bold above. When I met a pension advisor at the age of 29, he told me I should be planning for a pension pot of 800K. Not in two working lifetimes will I manage that while still paying for all the other bits in life, like mortgages, children etc. If I manage 400K I'd be a happy man!

Raoul Duke III

The Mighty Quinn wrote: »

:eek::eek:

That's incredible and surely was never sustainable. Imagine 6 months salary as a bonus, even at 50% tax it'd be an incredible sum of money to most as a bonus. I get a €250 voucher at Christmas and I'm delighted with it

Still fairly common in the investment banking world to get big bonuses. I work in a very unglamorous part of that world and I'd say the average is 2-3 months of base salary as bonus. Best I ever got personally was about 7 months worth (although the next year we got zero, guess the year!).

The Mighty Quinn wrote: »

I didn't have the financial intelligence, or life intelligence, to start retirement planning early. I was a late in the day 29 before I started a pension, and it was only small money per month until the last year really, I'm 35 now with c.40K in a pension. Between employer contribution and tax relief, I'm adding about 12K a year to the pot.

All going very well - assuming I can continue payments as they are, that things don't crash etc, ignoring any potential growth - I'll have about 100K in the pot by 40 years old. While this feels like a lot of money to me, It's a long long long way from having an 800K pot by retirement haha, I reckon if I'm lucky, I'll have 300-400K by 65.

No chance of retiring in my 50s. It's a lovely dream, but I haven't the means to do it. I'll be 57 at best before my daughters finish college (should they choose to go) which I intend to finance for them.

It can be done.

I had [x] in my pension, aged 37. Not having really taken it seriously until I was about 28/29. And then prioritising getting on the housing ladder etc. My previous employer was great but their contributions were quite stingy, just 5%.

Now aged 47, I have 4*[x] and I'm on target. No magic to it, I just max out my contributions up to the ceiling and my employer makes a good contribution too. Hence 35-40k flows into the pension each year and I don't even think about it. Plus the markets have been good for a really long time. Dividend reinvestment is your best friend.

Raoul Duke III

Henry Ford III wrote: »

Surely it depends on what income the pension is replacing?

Incomes vary enormously so there's no "one size fits all" answer.

After-tax income, I assume you mean?

Because replacing a pre-tax income of 100k (for example) where you're making a 35% AVC with a 40k pension actually isn't that much of a dropoff, in cash terms.

The Mighty Quinn

Raoul Duke III wrote: »

It can be done.

I had [x] in my pension, aged 37. Not having really taken it seriously until I was about 28/29. And then prioritising getting on the housing ladder etc. My previous employer was great but their contributions were quite stingy, just 5%.

My employer's contribution is 4%!

I am currently maxed out on tax relief, so it's growing at the best I can do.

Jim2007

The Mighty Quinn wrote: »

:eek::eek:
That's incredible and surely was never sustainable. Imagine 6 months salary as a bonus, even at 50% tax it'd be an incredible sum of money to most as a bonus. I get a €250 voucher at Christmas and I'm delighted with it

But that was the normal back then and just like now, most people assumed it would continue... If they spent their money on a new car each year, three holidays and building up their wine cellar, they are probably still working today.

The Mighty Quinn wrote: »

No chance of retiring in my 50s. It's a lovely dream, but I haven't the means to do it. I'll be 57 at best before my daughters finish college (should they choose to go) which I intend to finance for them.

Well I suspect if you are working for someone else these days that is the case for most people.

Jim2007

Raoul Duke III wrote: »

Still fairly common in the investment banking world to get big bonuses. I work in a very unglamorous part of that world and I'd say the average is 2-3 months of base salary as bonus. Best I ever got personally was about 7 months worth (although the next year we got zero, guess the year!).

In the context that I'm talking about it certainly is not the case. I was talking about a time when everyone from the doorman/receptionist to the MD level could expect a bonus of six months pay in a good year and those days are long gone.

Raoul Duke III

The Mighty Quinn wrote: »

My employer's contribution is 4%!

I am currently maxed out on tax relief, so it's growing at the best I can do.

Well then you should be happy with where you are. You're doing a lot more than most!
That capital will start growing all by itself until one day you'll look at your fund and say 'wow, my pension fund growth was greater than my salary last month'. It will happen.

Raoul Duke III

Jim2007 wrote: »

In the context that I'm talking about it certainly is not the case. I was talking about a time when everyone from the doorman/receptionist to the MD level could expect a bonus of six months pay in a good year and those days are long gone.

Mostly gone at that level, I would agree. The two big Swiss banks are underperformers though so be aware they don't represent the industry at large.
The really huge bonuses tend to be in PE now.

One other trend is that bonuses tend now to be structured over a number of years, rather than a big lump.

Raoul Duke III

Raoul Duke III wrote: »

After-tax income, I assume you mean?

Because replacing a pre-tax income of 100k (for example) where you're making a 35% AVC with a 40k pension actually isn't that much of a dropoff, in cash terms.

Just ran the numbers on this out of curiosity:

100k turns into after-tax income of 40,509
40k however gives you 31,657

Not much of a dropoff really.

Henry Ford III

Raoul Duke III wrote: »

Just ran the numbers on this out of curiosity:

100k turns into after-tax income of 40,509
40k however gives you 31,657

Not much of a dropoff really.

How could €100,000 net down to €40509?

Top rate of tax is tax is 40% and even including levies is still below 50%.

Maybe I'm missing something obvious here?

The Mighty Quinn

Henry Ford III wrote: »

How could €100,000 net down to €40509?

Top rate of tax is tax is 40% and even including levies is still below 50%.

Maybe I'm missing something obvious here?

Think he's talking net after paying into a pension is accounted for, which he's saying you won't be doing when retired.

kegblag

In Ireland with our progressive income tax, it makes more sense than in other countries to switch from a demanding but not very highly paid job to a modest pension where'll you be paying much less tax. For example someone single on 75k making 20% pension contribs will take home around 35k a year.

Switching to a 50% pension would leave them not much worse off. Or if you already have a reasonable pot (say 500k) then switching to a low paid or part time job and let the fund grow in the background without further contributions.

I'm frequently talking to tech workers who were hired in the 90s thinking about speeding up retirement. Our income tax system is tuned to tip people who can into retiring earlier than in other countries.

Raoul Duke III

Henry Ford III wrote: »

How could €100,000 net down to €40509?

Top rate of tax is tax is 40% and even including levies is still below 50%.

Maybe I'm missing something obvious here?

35% pension contribution.

And the top marginal rate is above 50%.

40% + 4% PRSI + 8% USC. 52%.
Trust me, I'm living that dream.

garbanzo

https://www.boards.ie/discussion/comment/117530558#Comment_117530558

“Our income tax system is tuned to tip people who can into retiring earlier than in other countries”

Can you elaborate on this kegblag?

One More Toy

I've had a pension since I was 21 and have always maxed it out. I decide myself what funds I want it invested in as I'm taking more risk than the pension provider would suggest.

Great and all but I don't have much by the way of savings for a deposit now a decade later

Henry Ford III

Please don't resurrect old threads.