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Can I afford to wait?
The first question you need to ask yourself is "Can I afford
to wait or plan for it at a later date?” Realistically, the answer
to this question is NO. As you know you can no longer rely on
your government to provide for you financially in your old age,
therefore, it is now up to you to make sufficient funds available around
your retirement.
Already the trend is that people are forced to retire earlier by companies, and governments are trying to lengthen the benefit time frames. Added to this we are living longer thanks to modern medicine, this also means that we need more money for a longer period of time.
What will I need?
Your retirement date has arrived, you have no debt, a paid-off house and your
children no longer depend on you financially. How much money do you need to maintain the same standard of living? A simple exercise is to calculate what your monthly expenses are today, and then calculate inflation of at least 5% pa until your retirement date. This will give you an approximate estimate of what you
would need at the time.
Does inflation have any effect?
Yes it does, in order to calculate your spending power around your retirement date
we must assume that the inflation rates will double. Therefore, if your monthly living expense is Euro 5,000 today you will need around Euro 10,000 in order to give you the same buying power as the original Euro 5,000.
Questions to ask on company pension plan
Basic questions you should be asking yourself if you have a company pension plan.
- Do you receive regular statements on the performance of your company plan?
- Do you know if your company plan is secure and growing in line with inflation?
- If you are already saving for your retirement, are you sure that the amount you are putting aside will be enough to afford you the same lifestyle as you have now?
- Do you know what would happen to the value of your company plan if you leave or are forced to retire earlier?
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