If you are below the age of 35 you may feel that you don't want to think about your retirement. However, if you are earning it is never too early to start your retirement planning. By contributing to a pension you can benefit from tax relief, and by starting early you can take advantage of compounding to increase the chances of having a large retirement fund on which to retire.
Under normal circumstances, a 40 year old man commencing his planning, who desires a retirement income of €1,000 per month in excess of the state pension, may need to put €560 per month into a pension to secure that amount. By contrast, if he had commenced his pension saving at age 25, he would only need to put aside €300 per month.*
These figures may seem daunting. However tax relief on pension contributions can potentially reduce the cost of saving for retirement by 40%. Contributions from an employer could further reduce the burden.
Employer provided pensions
* The growth rate assumed is 6% per annum. Contributions are assumed to increase by 3% per annum. The precise level of retirement income will depend on several factors; the figures above are merely indicative.