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Funding a full retirement

For former geologist Andy Sleeman, the measure of his retirement success is the time it allows him to spend with his grandchildren, and on his boat

Retirement may be feared by some and eagerly anticipated by others. Geologist, Andy Sleeman was in the latter category. Long-haul travel, a boat and spending lots of time with the grandkids were just some of the things Sleeman had on his retirement list.

After squirreling away a substantial pension pot during his 35 years working as a geologist, when he finally took early retirement in 2009, at the age of 62, all of his dreams became a reality. He bought a boat and named it Galatea, he travels extensively and he spends a healthy amount of time looking after his five grandchildren. Born in Devonshire, Sleeman went to school in Bristol and studied Geology at the University of Liverpool. He met his wife Cherry when he moved to Dublin to take up a PhD at Trinity College and set up home in Ireland soon after.

Sleeman says that while his career and working life was a wonderfully enriching experience, he also looked forward to the day he would retire and could pursue with greater vigour some of his other passions. He says having a decent pension allowed him do just that.

He admits there were times it was a little bit of a struggle to save, but he’s grateful he started contributing to his pension when he did, as he can still live the lifestyle he had previously, but now with much more freedom.

“I worked for the Geological Survey of Ireland, a government body. I joined in 1974 on a temporary capacity, and in 1976 I was made permanent but when I came to retirement age my pension rights were backdated to 1974, which was nice as I hadn’t anticipated that,” he says.

Voluntary contributions

While Sleeman’s civil service pension was part of his deferred pay, he made additional voluntary contributions, as much as he could, all the way through his working life, in order to ensure he would not have to curtail his lifestyle come retirement.

“With a civil service pension, it meant that you got half your final salary if you worked for 40 years. I worked for 35 and made additional voluntary contributions for much of my career to top up the pension.

“It was a struggle because the children were in secondary school and going off to college and there was a huge amount of expenditure going out. I wasn’t able to put as much into it at the beginning as I would have liked but once I got closer to retirement age and the children had left home, I was able to put the maximum amount in. In the last five years that was about €20,000 a year. With the tax relief, I could afford to put the maximum in without changing the way we lived and my wife was doing the same,” he says.Looking back on the day he was handed “the golden watch”, Sleeman says he had nothing but positivity about entering into retirement.

“It was a great feeling. I had completed the projects I was really interested in, in my job and I had stayed a year longer than I had intended to. I was ready to go and I could afford to do it,” he says.

As he entered into his retirement, he had extensive plans and was able to execute them with ease – including buying that boat.

“I had done a lot of sailing previously and I thought that would be a great retirement project. We got to take a lot more holidays. We’ve been to South Africa quite a lot, as my son-in- law is from there, we’ve been to Canada a few times, as well as New Zealand, Peru and the United States to name a few. I didn’t spend as much time on the boat as I anticipated, instead I spend a lot of time looking after my grandkids, but I really enjoy that.

“We have three grandkids here and two in London and there was a point when I had to be in London one weekend a month. My pension has allowed me to do that and it has also allowed me help my children with not only their primary degrees but they all went back for their second and third degrees. It was really nice to be able to do that.”

Start early

While he understands the struggles are great for young people these days, Sleeman’s advice for anyone considering starting a pension is simply “do it now”.

“Start one as soon as you can and put as much as you can in there. I’ve been impressing upon all my four children that you need to put in as much as possible. If you don’t want to reduce your lifestyle when you retire then you need to end up with half of your final salary or preferably 60 per cent to 65 per cent of it.”My wife was a social worker and she had three different pensions and between the two of us we’re reasonably comfortable.” Now living in Newcastle, Co Wicklow, he is honorary treasurer in his parish church and is also the choir director. This is one passion Sleeman relished when he stopped working.

“I’ve been in choirs all my life, and it’s a very important part of my life. I sang in St Patrick’s cathedral for 20 years while working in Dublin. The fact that I can spend a lot more time being involved in this now is wonderful.”

Family history is another pastime of Sleeman’s, and he has traced his family tree all the way back to the late 1500s. Another pursuit, woodwork, is lower down the list, given the numerous activities he partakes in.

“The job was very rewarding and I still keep my hand in a little bit doing field trips for horticultural garden-design students. My wife went back to do a course in garden design and I got roped in to doing the basic geology for them. We have a very full active retirement, a bit too full at times but it’s great.” he laughs.

Reference: www.zurichlife.ie

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How To Restructure Your Investments For Retirement

You’ve earned and saved money and now you’re headed into retirement. What could go wrong? Along with a new schedule and opportunities come new questions and challenges, particularly around finances. The most pressing ones are often: “Do I have enough savings to last my lifetime?” and “How do I turn my nest egg into a paycheque that I can count on throughout retirement?”

One of the biggest changes in retirement is going from receiving a consistent paycheque to needing to generate your own cashflow to cover expenses. This shift requires a new investment strategy and mindset.

The 3 Phases of Retirement

To start, you’ll want to think of retirement as a series of three unique stages:

The “Go Go” Years In the first years of retirement, you’ll likely be focused on the fun things in life, such as travel or enjoying activities with friends and family. The result can be a spike in lifestyle expenses. During this period, your investment strategy should account for a faster withdrawal rate from your portfolio and more money going out the door.

The “Slow Go” Years Throughout these years, it’s likely you’ll settle into a routine. Your desire to be as active may taper off, and with it, life expenses can tend to go down.

The “No Go” Years More people are living into their 90s or beyond. While this is a testament to our medical advancements, increased longevity is often accompanied by physical limitations. At this point in life, you may scale back your activity even more and find that your remaining expenses are focused on daily living and possibly health care-related.

5 Ways to Restructure Your Portfolio for Retirement

Throughout the different phases of retirement, you’ll need to develop strategies around covering your day-to-day expenses as well as the best ways to tap into your assets. Both strategies should meet your goals and reflect your views on risk. Regardless of your circumstances, be sure to address five key areas when mapping out your retirement income plan:

  1. Protect against sequence risk If the stock market takes a tumble and you’re not appropriately diversified, you could be forced to pull money out of investments that have declined precipitously. The returns during the first few years of retirement can have an especially significant impact on your long-term wealth picture — this is known as “sequence risk.”So consider keeping some of your money in liquid investments such as cash or other relatively safe, short-term vehicles to cover expenses for the first two or three years of retirement.
  1. Match your assets to your expenses  Identify which of your expenses are required to meet your basic needs of living, (such as food, shelter, utilities and health care) and which are discretionary (like travel and hobbies). Then, target sources of guaranteed or stable income to meet your essential expenses. This can include Social Security, a pension if you’ll get one and perhaps an annuity with guaranteed payments. You can use investments that may vary in value to meet your discretionary expenses.
  1. Remember that taxes are an ongoing expense   As you create your own paycheque in retirement from your savings, remember that you may still have a tax liability. Unlike your working years, taxes may not be automatically withheld from your sources of cashflow. Even the majority of Social Security recipients are subject to tax on the benefits they receive.Depending on how effectively you manage your income level, you may qualify for a 0% long-term capital gains tax rate when liquidating certain investments in a taxable account.Working with a financial professional before, and throughout, retirement can help you calculate how much you may owe in taxes or which tax breaks you may be eligible to receive.
  1. Pay attention to required distribution rules for your retirement accounts I f you have money in traditional Individual Retirement Accounts (IRAs) or workplace retirement plans, remember to comply with the government’s required minimum distribution (RMD) rules.After age 70 1/2, you must take withdrawals from these accounts annually — even if you don’t need the money — based on a schedule provided by the Internal Revenue Service. Failure to comply can result in a significant tax penalty. (Money held in Roth IRAs is not subject to RMD rules).
  1. Keep in mind that growth is still a concern  When you are younger and accumulating wealth, your primary investment focus is growing your assets. However, in retirement you need to think about the potential impact that inflation could have on your future income needs.

To keep pace with rising living costs, you will still need to grow your assets. That may mean keeping a portion of your portfolio invested in equities that historically have outpaced inflation, but could also be subject to more market volatility.

Start planning early to protect what you’ve accumulated and position your assets for their new purpose — to generate income to last throughout your retirement.

Source: Marcy Keckler, Next Avenue Contributor, Forbes.com, Nov 14th 2017

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Mind the Gap: Women’s attitudes towards pensions must change

To close the pensions savings gap we need to raise awareness of the importance of saving as young as possible for both genders, but particularly for women.

We want young women going into the workforce with a really clear view of what they need to do to get to their retirement

Women are far less likely to save for their retirement than men, according to new research carried out by Aviva. The research shows that men are much more aware of pensions and the benefits of saving.

This is partly a legacy issue arising from the marriage bar which, until it was abolished in 1973, forced many women to leave the workforce when they got married. But women also tend to take more career breaks either to have babies or to care for young children or elderly parents.

On the other hand, women live longer and without income from pensions to supplement welfare payments, they are more vulnerable to poverty in their retirement, says Aimee Scriven, retirement solutions proposition manager at Aviva.

“Women’s attitudes towards pensions need to change. We want young women going into the workforce to have a really clear view of what they need to set aside throughout their working lives to enjoy a decent standard of living in their retirement,” she says.

Calculate your own pension gap – click here to go to the pension gap calculator

The research, which was carried out by Ipsos Mori as part of Aviva Ireland’s Consumer Attitudes Survey, found that almost half of women, as against just 27 per cent of men, say they don’t understand pensions and investments*. A quarter of women admit they haven’t considered how much they would need for a comfortable retirement and yet they worry about not having enough.

“In comparison to 25 per cent of men, almost 40 per cent of women are worried they won’t have enough money to provide an adequate standard of living in retirement. But despite their worry, only 8 per cent of women are taking steps to do something about this as against 25 per cent of men*,” she says.

Aviva published its ‘Mind the Gap’ Pensions’ Report last year which found that Ireland’s annual pension savings gap (that’s the amount of money people are currently saving for their pension versus the income most likely needed to provide an adequate standard of living in retirement), increased from €20.2 billion in 2010 to €27.8 billion in 2016. This means that Ireland has the joint-second largest pension savings gap in Europe**.

Raising awareness among women about the need to prepare for retirement is a must in order to encourage people to close that gap, says Scriven.

“The pension gender gap is caused by a number of factors: women are more likely to take career breaks, for things like maternity leave. Another factor is that almost 70 per cent of part-time workers in Ireland are women. That has a huge impact on their contributions to any kind of occupational scheme and also, on their entitlement to the contributory State pension as well,” she says.

She says some women still hold an old-fashioned notion that they can rely solely on their husband for financial security. “A lot of women in their fifties are in that space and are possibly thinking there is no point in doing anything about it now, that it’s not going to make any difference, starting to save towards a pension. We would say absolutely not, saving for five years is better than saving nothing.

“If I look to my own family, my grandmother had nothing to do with the home finances, then to my mum who might have had a bit more to do with it. But she never worried about a pension as that was my dad’s job, to earn the money and bring in the pension. I am in my very early thirties and I’m very much more clued in about pensions and I’ve been saving into mine since I was 18.”

Scriven says younger women do think differently when it comes to pensions but more needs to be done to inform the next generation. She says children need should be taught in secondary school about the importance of forward planning and saving for their future.

“We need to start the education process around pensions at a much younger age for both genders, but particularly for females. The world has changed and women are much more self-sufficient and independent. Things like how long they take out of the workforce for maternity, that’s never going to change, so it’s the things they can do to help themselves and to be mindful of that when they’re thinking about what retirement is going to look like for them.

Ann O’Keeffe, Aviva’s head of Individual Life and Pensions welcomes the recent announcement by the Taoiseach, Leo Varadkar, that a system of auto-enrolment in a pension scheme for all private sector workers will be in place by 2021.

“As we pointed out in our Mind the Gap Report, such a move will raise the level of coverage across the population. But the devil will be in the detail: we look forward to further information when the Government publishes its five-year Pension reform roadmap before the end of the year. It is important that the level of contributions to the proposed universal scheme should be adequate to fund retirement for private sector workers, men and women alike.

“Thankfully, we are all living longer, more active lives and our good fortune in this respect should not become a financial burden. That is why we need to ensure that women – as well as men – understand the benefit of financial planning as early as possible in their careers. It is the responsibility of all of us who work in the pensions’ industry to ensure that we play our part in educating women about pensions,” she says.

Reference: The Irish Times