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How big a pension pot do I need to retire comfortably?

But hearing that Enda Kenny is going to be retiring from politics with a pension pot of €3m has made me sit up and wonder just how big of a pot I need to retire comfortably by the age of 68. Granted, he has been in public service a long time and has a DB plan, but still.

Conor, Athy, Co Kildare

Answering a question like ‘how much do I need for retirement?’ requires me to know lots about you, your standard of living, your dependants and your ability to ring-fence assets for later life. In the absence of that knowledge, I suggest you focus on: 1) how much you can set aside each year for your retirement, and 2) the growth of those assets long-term.

For many people in your situation, there are lots of competing demands on finite resources.

As you appear to be playing catch-up, I urge you to take advantage of the generous tax relief of 40pc (if you are paying tax at the higher rate) on your pension contributions (provided your annual contributions are no greater than 25pc of your annual salary).

Saving into a pension is one of the most tax-efficient things you can do.

That might motivate you to up your monthly contributions or add a lump sum.

There are more ways to save for retirement than through a PRSA, but let’s stick with that vehicle for now.

Find out what percentage of growth vs defensive assets (cash and bonds) are in your investment portfolio.

Many Irish investors who should be embracing market volatility shy away from it, and it costs literally thousands of euro over a lifetime.

Let’s assume a monthly contribution of €500, time left to retirement of 20 years, and an accumulated fund to date of €100,000.

Investing with an annualised return of 1pc p.a. leaves a pot at retirement of €255,000. Move along the scale to 4pc and the pot at retirement is €405,000. Embrace growth assets over the long term for a return of 8pc, and the fund is €763,000.

Assuming you have 20 years of living to fund in retirement, a fund of €255,000 will provide you with an income of €12,750 (ignoring inflation, etc), whereas a fund of €763,000 will provide you with over €38,000 every year. Big difference.

And yet we are inclined to focus all our attention on how much we can contribute, ignoring growth potential.

If you pay attention to both those factors, you’ll get a fighting chance of a stress-free life in retirement.

Investment paralysis

Q. I have a large lump sum sitting in a deposit account with a rubbish interest rate and with no sign of rates rising any time soon. So my mates have been on at me to invest in this, that or the other. All of them seem to be in something, but I’m a sceptical person by nature and I think I just love the security of cash in the bank. The last time I invested in anything was Telecom Éireann shares and needless to say, that didn’t work out well. How can I get over this hump?

Paul, Dublin 22

You were burned by a bad experience and you weren’t the only one. Telecom Éireann shares were recommended by the very people who shouldn’t be giving investment advice, including Government ministers.

I don’t blame you for being slow to take your mates’ advice.

You have learned from your mistakes, but your experience is also paralysing you.

Let’s consider first what would happen if you yielded to the warm, fuzzy feeling of cash in the bank.

Say you have €100,000 saved. Over 10 years, at 2pc inflation per annum, you’ll be losing close to €20,000 in real terms over the term.

The rubbish interest rate is not your only niggle when it comes to money on deposit. Even a bad investment strategy is better than leaving cash in the bank.

It’s clear to see that you are in a good position to invest.

The hard work is accumulating the lump sum, and you have already done that. Now comes the easy part – investing it long-term.

This is the bit that you’re finding difficult, partly because of your bad experience with Telecom Éireann, but also because I suspect you do not truly understand risk.

Risk increases where you are unduly exposed to the fortunes of one company (Telecom Éireann or AIB), one country (Ireland), one sector (construction), one asset class (property). In addition, the more complex a proposition is, the more risky it is.

To mitigate risk, I recommend a globally diversified fund which has a broad spread of securities in many sectors, in many asset classes and in many countries.

Look for passive (or hands-off) funds, which mean fees will be lower and, more importantly, transparent.

This is not shares in AIB. This is not a structured product with the potential for capital loss over a term. This is not a kick-out bond. You need something that is open-ended and invested across global markets.

Such funds are now available to Irish investors at very reasonable prices. Consult with a fee-only financial planner on the options available.

Property punt?

Q. I Recently came across a company called Property Bridges, which sells itself as a peer-to-peer investing platform. Like many, I’m attracted to the idea of investments linked to property, but what’s the catch?

Amelia, Caherciveen, Co Kerry

The Irish love affair with investing in property needs to stop. I’ll sum up the problem in one sentence: there are too many fingers in the pie.

Let’s list them: the estate agent, the solicitor, the seller, the buyer, the lender, the ECB, the insurance company, the letting agent, the tenant, the accountant, Government, Revenue, tradesmen and the Residential Tenancies Board.

If there is a breakdown with just one of these parties, your investment becomes too much like hard work.

By investing in Property Bridges, you do not have to deal directly with most of these parties but are still joining the ranks of the property speculators.

The difference is you have no control over what type of property your money is invested in or where.

Property Bridges has two full pages on risks.

To be fair to the people behind the company, they give an honest account of many of the risks associated with the type of investment.

Risk number one: loss of capital. Risk number two: illiquidity. Risk number three: security risk. There are 11 risks listed overall.

Source: independent.ie

10/11/2019

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Ethical investing: How to fund your pension while staying true to your values

Would you be happy to sacrifice part of your future financial wellbeing in order to make the world a better place? That is the question asked, ahead of a London conference last month, of users of an app aimed at becoming the TripAdvisor of financial investments.

Almost two-thirds of the mostly millennials who use the Finimize app and responded to the question said they would be happy to accept lower returns tomorrow if it meant the investments they were making today were more socially responsible.

The message of altruism chimes with our times and the attention being focused on the catastrophic impact of climate change and the consequences of global capitalism’s endless determination to squeeze infinite returns from a finite planet.

It would seem that at least some people are now starting to seriously look at their investments to make sure they are not contributing to the problem.

The good news which came from that Finimize event in London in July – according to a piece published by Forbes – is that returns are not automatically reduced by investing sustainably and cutting all companies perceived to have a negative impact might be counter-productive.

“We are less powerful if that is the only way we do impact investing,” the head of sustainable investing at JP Morgan Jennifer Wu told the conference. “If we simply remove companies from our portfolio, we lose our seat at the table and our ability to influence and help them through this transition.”

An investment fund expert Jamie Broderick echoed her view and said people would not “have to sacrifice returns when investing in a socially responsible portfolio. There are several different categories along the spectrum of capital, and you can choose how you’d like to invest in line with your values.”

Chief executive of Finimize Max Rofagha said there was “clear latent demand when it comes to consumers transitioning to ethical and sustainable portfolios. And yet the vast majority of people are not following through on that intent because the offering is not easy to navigate through.”

Slim pickings

Similarly in Ireland, while ethical investing is growing in popularity, when it comes to options for building a pension pot through environmentally, socially or otherwise ethically responsible funds, the pickings are somewhat slim.

There are options available, whether you’re looking to start an ethical pension from scratch, or have been paying into a fund for a number of years and discover you’ve been investing in oil companies, gun manufacturers, for-profit prisons or similar, and you’re not too comfortable with that.

Before we get into that though, a quick look at what ethical investing actually is (it is also referred to as ESG – ethical, sustainable and governance – investing). You may be surprised by the companies considered ethical – it’s not all hemp growers, vegan burger manufacturers and solar-panel makers; tech firms, for example, may be considered ethical if they play by the right rules. The simplest stage in your pension-paying life to ensure your money is going into ethical funds is before you even start

There is no international benchmark for what an ethical fund must look like. It’s down to individual fund managers to make an assessment of each fund, with most using the United Nations’ Sustainable Development Goals (SDGs) as a guide; they will assess whether the fund invests in companies that either work directly towards, or donate to projects helping to achieve one of the 17 goals.

The SDGs include such aims as no poverty; zero hunger; quality education; gender equality; clean water and sanitation; affordable and clean energy; and climate action.

There is a movement towards standardisation of this assessment process, says Terry Devitt, head of investment at Harvest Financial Services, but it is a few years off yet. Companies can’t game the system though, he adds, so “just ticking a few boxes in terms of investing money into projects related to SDGs doesn’t automatically mean a company will be considered ethical by your fund manager.”

Speak to your HR department, or the person who looks after pensions where you work, and find out about the options available with the provider. If your company is with Friends First, take a look at their Stewardship Ethical Fund; if Standard Life are the provider, the European Ethical Equity Fund is an option to look into; and if your pension is with Irish Life, their Indexed Ethical Global Equity Fund could be suitable.

But if your employer doesn’t use any of these providers, or will not make a contribution if you opt for one of the ethical funds, you may not have any option but to pay into an existing fund.

If you have been paying into a pension for a number of years through your employer and you’d like to find out more about the fund, your HR or line manager will be able to direct you to the provider, who you can then contact directly for the fund details.

If you find out your company’s pension plan isn’t investing in ethical funds, and that’s something that bothers you, there are a few things you can do to address it but it’s not the simplest of processes and it isn’t open to everyone.

If your pension provider is one of the few that has ethical options, you can find out if your employer will allow you to switch funds, and if they’ll continue their contribution. “But not all employers would because it’s messy for them,” says Devitt.

“With some providers though, there are just no ethical options, so if your company happens to be one of those – then your only option is to remain in the company pension scheme.”

But, Devitt says, this option is expensive and really only open to individuals who have large pots to play with. “You’d want to be talking a pension pot in excess of €250,000, generally people who’ve been paying into their pensions for a long time, who decide later in their career that they want to move to self-administered, but once you do that, you can invest in anything then and you’ve a lot of options globally.”

It’s worth noting that the Pensions Authority of Ireland strongly recommends that people – both starting their pension or looking to switch providers – seek independent advice on what is the best option for them given varying risk levels and individual circumstances.

The Irish market is, as Devitt puts it, “somewhat behind the curve” on ethical pension options, but he expects this to change within the next 10 years as consumer demand increases.

So the upshot is – go ethical from the very beginning; go ethical at the end; see if your employer will play ball and let you switch; or wait a few years and see what the market brings.

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Funky Shirt Friday!

Staff at IPF raised money for the Peter McVerry Trust on Friday by holding Funky Shirt Friday in our offices!

Many thanks to everyone who contributed!

 

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4th Annual Football Tournament in aid of St Michael’s House

IPF’s 4th Annual Football Tournament in aid of St Michael’s House took place on Friday 29th March 2019.

Many thanks to all who took park; New Ireland Assurance, Zurich, Aviva, Irish Life, and the winners on the day, Goodbody!

Well done to all involved!

  

   

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Retirement Planning Seminar 21/09/2018, Westbury Hotel, Dublin

Many thanks to all who attended our recent Retirement Planning Seminar in the Westbury Hotel and to our panel of speakers who provided useful information on the night.

To date, IPF have held 20 Seminars around the country for Public Sector employees.  We have had over 2,000 attendees in total to these seminars.

These events prove to massively popular and are always oversubscribed.

Our next Seminar will be in The Kingsley Hotel in Cork City on the 5th October 2018. Those interested in attending should book their places as soon as possible through sarah.connolly@ipf.ie.

 

Here is the usual agenda for the seminar:

“Retirement Planning and how your benefits work”  Claire Hanrahan, Financial Advisor

“Keeping Safe in Retirement” Sgt. Dean Kerins, Crime Prevention Officer, An Garda Siochana

“General medical guidelines for over 60’s”  Dr. Rita Galimberti, Consultant, Femplus Womens Health Clinic

“Taxation; Essential information for you pre and post retirement”  Ray McGovern, Chartered Accountant, McGovern & Associates

“Investing in a Challenging World” Stephen Dixon, New Ireland Assurance

“Active Retirement and managing your newfound free time”  Pat Murphy, Planning Consultant, Retirement & Life Planning

 

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Death and taxes: what it costs to inherit the family home

It’s something that frustrates, enrages and outrages in equal measure: inheritance taxes on the family home. For many people, having paid down a mortgage with after-tax income throughout their lives, leaving a legacy of a substantial tax bill for their children feels akin to double taxation.

And yet, despite the outrage, most of us are shockingly ignorant about just how Ireland’s inheritance tax regime works. A recent survey from Irish Life, for example, revealed that while a quarter of over 65-year-olds expect to leave estates of more than €500,000, half of adults think their family home is exempt from inheritance tax.

Unfortunately, for many families leaving homes valued at Dublin prices, having to write a large cheque to the Revenue Commissioners in the aftermath of a death can come as an unwelcome, and sometimes unaffordable, surprise.

So what do you need to know about death taxes on the family home in Ireland?

How to inherit – tax free

It is possible to transfer property to someone else – without incurring a tax bill – in a number of ways. Firstly, inheritance tax doesn’t apply if the value of the property falls within the tax-free thresholds.

“For the vast majority of people that would be the case, particularly outside Dublin, where properties wouldn’t hit the exempt thresholds,” says Darragh McCarthy, head of private client services at EY.*

This means, for example, that a property worth €400,000, shared by two children, won’t incur a tax bill, as the transfer to each is within the parent-to-child thresholds (€310,000).

Similarly, if five nieces and nephews inherit a house worth €162,500, no liability will apply, as it’s again within the thresholds (€32,500), while if you inherit a share in a property from someone who isn’t related to you, and it isn’t worth more than €16,250, again there will be no bill.

Should you go over these thresholds, however, tax at a rate of 33 per cent will arise – even on the family home. A property worth €600,000 inherited by one child will incur a tax bill of €95,700.

“Although many people intend to leave significant amounts to their children and grandchildren when they die, most of them are unaware that those family members could be liable for a very substantial tax bill on those inheritances,” says Kate Connor, protection manager with Irish Life.

For example, a property worth €600,000 inherited by one child will incur a tax bill of €95,700 (33 per cent of €600,000-€310,000), while a property worth €100,000 left by someone with whom you have no recognisable relationship with will incur a bill of €27,637 (33 per cent of €100,000-€16,250).

If you’re married or in a civil partnership, no tax is liable on asset transfers, which means that a family home or investment property can be transferred with no tax liabilities.

Remember, however, that it only refers to legally recognised partnerships; common law partnerships are not recognised by the Revenue Commissioners, which means that even if a couple have been together for 60 years, should one of them die, there will probably be a tax bill to settle. Yes, their life insurance may in fact pay off the mortgage on the property, but the surviving spouse will still incur a tax bill on the transfer of this property to their estate.

Any special cases?

Another way of passing on a property tax-free is to avail of the so-called dwelling house exemption – but its use has been restricted.

Used by thousands of people to pass on properties to their children, free of tax, the dwelling home relief was once a very popular tax exemption. However, its use was tightened significantly from December 25th, 2016.

“In practice it doesn’t have wide application,” says McCarthy. “I wouldn’t expect to see it much into the future.”

But it might still be of use to some.

The key criteria that now allow someone to inherit a property tax-free is that the property must have been the “only or main home” of the person who died. In addition, and this is where it gets tricky, is that the person inheriting must now have also lived in this property as their main residence for the three years prior to the transfer. Other requirements mean that to inherit tax-free, they cannot have an interest in any other property, and they must also stay in the house for six years after the transfer.

But there are some ways of getting around some of these points.

First of all, the three-year rule as well as staying in the property for six years subsequently does not apply where people are aged over 65.

Moreover, people can avoid this requirement in a number of ways. Firstly, if they sell the property they’ve inherited and invest all of the proceeds in another property, the relief stands. It also stands if the successor has to move either somewhere else in Ireland, or abroad, for work reasons.

Another quirk is that even if the owner of the property goes into a nursing home in the final years of their life, the person inheriting can still avail of the relief if they were living in the house.

Wait until death?

For many families, a discussion about what happens in the event of the parents’ death never really happens until after the fact.

Others, however, are more proactive, and may wish to downsize – particularly at a time of a housing crisis when children may be eyeing up enviously their parents’ home.

But according to McCarthy, while each case will be different, transferring the family home during your lifetime can be more expensive than waiting until your death. This is because Irish stamp duty applies to lifetime gifts to property, which would not apply to inheritances on death. This means, for example, that the transfer of a house worth €500,000 would incur stamp duty of €5,000, while a property worth €2 million would incur duty of €40,000 – enough perhaps to make you think twice. And the rate of duty on investment properties is 6 per cent.

And of course, if the parents pay the stamp duty on behalf of a child, this could give rise to a capital acquisitions tax (CAT) liability.

One way to deal with the transfer of investment properties would be to house them in a company structure, as the company cash could then potentially be used to settle CAT charges. As a related point, McCarthy advises families at the early stage of property investment to consider co-investing, as in the event of the deaths of the parents, the children’s CAT liabilities will be restricted to the deceased’s share rather than the entire portfolio.

There can definitely be a sting in the tail for individuals who have foreign property, as they can often completely ignore foreign estate issues

And be careful also of other implications when considering a transfer during your lifetime. While a parent can sell a home to a child at a discounted price, the difference between the sale price and the market value will be considered to be a “gift” by the Revenue Commissioners, and will thus attract CAT if the child has already exhausted their tax-free threshold.

A nifty way to approach this, says McCarthy, is to make use of the €3,000 annual small gifts exemption (unchanged since 2003, it should be noted, and thus ripe for an increase).

If the property exchange was funded via a “loan” from the parent, for example, the parents could then, potentially, pay off the loan to the order of €6,000 a year without a CAT bill arising – of course, depending on the size of the shortfall, this could take some time to pay off in this manner.

Another consideration is if capital gains tax (CGT) and CAT both arise, you can use the CGT you have paid as a credit against the CAT. In the context of the family home, this is unlikely to apply, as it won’t be subject to CGT, but may be appropriate for investment properties.

If so, McCarthy warns that the “sequence” of transfer/sale of assets is very important to maximise tax efficiency.

For example, in such cases he suggests that it can be more efficient to transfer the family home in the first instance and use up the thresholds, and then subsequent gifts that would give rise to CGT would be made after these thresholds are exhausted.

Finally, we’ve spoken so far of Irish-based properties – but property abroad can cause further challenges. Not something people think much about, perhaps, when buying a place in the sun.

“There can definitely be a sting in the tail for individuals who have foreign property, as they can often completely ignore foreign estate issues,” says McCarthy.

Settling a bill

Given people’s general ignorance of potential inheritance tax liabilities, it’s helpful to learn that the Revenue Commissioners are willing to receive CAT bills in instalments. It’s less helpful, however, to learn that they’ll charge you an arm and a leg – 8 per cent interest – on such an agreement.

“This is something we’d like to see reduced,” says McCarthy, although he adds that “at least it prevents a forced-sale scenario”.

You could also consider starting to save for any potential CAT bills now, as the Revenue still allows two tax-efficient savings schemes to enable you to do this.

Section 72 policies, for example, cover the cost of settling an inheritance tax bill in the event of your death and, crucially, don’t incur a tax liability themselves. They allow you to save towards a life assurance policy, with the proceeds going to pay off an expected inheritance tax bill. The key advantage is that the proceeds of the policy is not subject to CAT. However, there are some downsides – they’re expensive (expect to pay about €218 a month for €100,000 of cover); they need careful planning to ensure they match the tax owed; they have no cash-in value; and they need to be taken out early to be worthwhile.

You could also consider a section 73 savings plan. Again Revenue-approved, this allows you to gift the proceeds of this plan to your estate to meet any tax bills – and again, this gift is not liable to inheritance tax. Moreover, you can choose to keep the funds yourself if you so wish. However, they again need careful thought and can be expensive.

THE TAX-FREE THRESHOLDS

Between spouses  All tax free
Group A (parent to child) €310,000
Group B (relatives such as nieces and nephews) €32,500
Group C (stranger) €16,250

 

Fiona Reddan, irishtimes.ie

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Financial Advice for people in their 20’s

Build a budget

Set up a budget with three sections: essentials, savings, and social. Start allocating money to your essentials first, like rent, utilities, food, transport and loan repayments.

Next, allocate something — no matter how small — to savings. Your first priority should be an emergency fund, and you should think about your own situation (job security, health benefits at work, your personal support system) to determine a comfortable amount.

With the essentials and some savings covered, you can spend the rest however you please. Remember to update your budget periodically, since your financial picture will inevitably change.

 

Start an AVC

Retirement may seem like a long way away yet, but the earlier you start contributing to your pension, the more options you will create for yourself in the future.

IPFs Additional Voluntary Contribution Scheme for Public Sector employees offers the following benefits:

Full tax relief on contributions at your top rate
Tax-free growth on your savings
A wide range of investment options

Potential AVC Fund Value (€20 gross per week, €12 from take home pay) *

*Assumes 3% growth & higher rate tax payer. Unit prices may fall aswell as rise

It might make sense for you to save some tax now and begin to build a supplementary pot of money for your retirement.

A meeting with a Financial Advisor can help you identify your priorities and build a Financial Plan. To arrange an appointment, you can call 01 8298500 or email sarah.connolly@ipf.ie.

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Why Irish 20-somethings have it so tough financially

A guide to the financial issues facing young people and what they can do about them
Tue, May 8, 2018, 06:00, Fiona Reddan, www.irishtimes.com

It has become much more difficult for today’s 20-somethings to buy their first home.

“Generation rent”, the “lost generation”, or wasters who throw away their money on avocado toast: accurate descriptions of today’s 20-somethings or media hyperbole? The truth, perhaps, is somewhere in between.

Eoin Magee, a financial adviser with Prosperous Financial Planning, has buckets of sympathy for this age cohort. “I’d say people in their 20s have been dealt the worst cards possible,” he says, “It’s a very difficult environment to be starting out your life in.”

Magee points to the lower salaries of many 20-somethings as being a key challenge.

“When they came out of college, jobs weren’t freely or readily available, so they took whatever job they could get, but started on a lower salary than they would have otherwise done.
So while someone could have previously expected to start on 30,000, they might have started on €25,000. “And you don’t make up that gap again,” says Magee.
At the same time, house prices and rents started running away from them.

“They have got caught in a perfect storm,” he says, noting that the generation behind them might have it a bit easier. They will have auto-enrolment in their favour for one, which will help with retirement planning, and perhaps a different view of the property market.

“People in their 20s, they’ve seen house prices being decimated, so they may not work hard to save a deposit because they have a different perception of what normality is,” he notes.
But just because things are tough doesn’t mean 20-somethings should shy away from doing what they can to make their own circumstances that little bit better. The huge advantage 20-somethings have is their age though this only works in their favour if they take some steps now. So what are the typical mistakes you might make?

Not paying yourself first
How you establish your savings habits in your 20s is going to have a huge impact on your future financial health. Do you put whatever you’ve left over at the end of the month into a separate savings account? Or do you just leave whatever is left resting in your current account?
Maybe you’ve agreed a savings plan with a parent, whereby you cough up some rent and they save on your behalf. Whatever approach you take, the critical point is that this money goes into your savings when you get paid – and not at the end of the month when your accounts may have been decimated.
Magee suggests you target a figure of 20 per cent of your income, including pension savings.
“My priority is that you start to build a savings pot and you’re very disciplined in doing so,” he says, noting that this will then give you options, and can be allocated to a deposit on a house, or a masters, or whatever financial goals you may have.

Going the other route of planning a budget and trying to live by it over the month can prove challenging.
“I don’t believe in budgets” says Magee, likening them to a calorie-controlled diet – and we all know how well they work for most of us. Yes, we’re good for five days of the week and then splurge and ruin all our progress.

Relying too much on deposits
But if how you save is important, so too is where your money is saved. With savings rates on the floor – and nearly underneath it – earning less than 0.5 per cent a year can make saving an almost joyless experience.
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“You can’t save for more than five years in a bank account, as you won’t even beat inflation,” advises Magee, saying if you don’t invest in a well-diversified equity portfolio, “you’re going to have to save harder”. And that may be just too much for people already strapped for cash.
Moreover learning about investing, funds, shares, exchange-traded funds, etc, at a young age – even if you make the occasional mis-step – will undoubtedly improve your financial health over time.

Not talking to friends/family about money
One of the best financial resources you have is the people that you know. Carty gives example of people locking their savings away in notice accounts so they can’t access them – with one 20-something taking it so far as to put their savings in a credit union 20km away so it’ll be difficult to withdraw.
Magee has another tip for parents and live-at-home children alike; parents could charge the market rent to their offspring – less any savings they contribute. So if it would cost them €500 to rent a room, charge them €300 if they can put away €200 a month, and so on.
However, Carty notes that while 20-somethings might share their life on social media, they can still be shy when it comes to talking about money.
“It’s a bit of misnomer that they share so much,” he says.
But try and shrug this off as you’ll pick up some great tips long the way.

Thinking pensions are for later on
OK, so your 20s may not be the time to get in deep with pensions. But if you can do one thing, make sure you’re maximising contributions from your employer. If they match your contributions, try and put in the most you can to get the maximum contribution from them. It’s (almost) free money.
Not planning to buy a home – well in advance
As the resident financial planner on RTÉ’s Crowded House, which aims to help 20- and 30-somethings move out from home, Magee is keenly aware of the challenges facing today’s younger generation.

Whereas their predecessors may have bought their first home during this decade, it has become much more difficult for today’s 20-somethings to do so. A recent study from the UK-based thinktank Resolution Foundation found that about a third of millennials will never own their own home.
So if you want to be in the 66 per cent that do, it may require considered planning. “You may never want to buy a house; but you don’t want to wake up at 29 years of age and think ‘I definitely want to buy a house’ and have done nothing about it,” warns Magee.

Magee has crunched the numbers and found that it will take nine years for someone on the average income to save a deposit to buy the average house in Dublin, or seven years in Galway.
“So if you’re 21 years of age today, and if you’re not saving for a deposit for a house, you won’t be buying in your 20s,” he says.
Some 20-somethings are well ahead of the curve in this regard; Rory Carty, head of youth banking with Bank of Ireland, has fielded questions from second and third year college students about how they can save to buy.
“They are quite savvy and are saving quite early,” he says. And for people fearful of a preparatory chat with a lender about getting a mortgage, Carty says “don’t be”.
“People should come in and speak openly around their financial situation and get advice,” he says.
Thinking renting – and not saving – is viable
Maybe you’ll never own your own home; maybe you don’t want to. And don’t worry, never owning a home can be a legitimate financial decision. Look at the example of Germany, or France, where people are content to rent forever. Just 14 per cent of those living in Berlin, for example, own their own home.
However, years of experience have meant that these take a different view; yes they’re not forking out €4,000 to upgrade the boiler, but they are also aware that in retirement, unlike a homeowner, they will always have rent to pay on their home. So they take the money they would otherwise have spent on maintaining a property and save it for this eventuality.
And as Magee notes, while renting long-term can make sense, “you need absolute discipline for that”.
Spending what you don’t have
There are always temptations to spend more, but Magee is clear: “Don’t spend more than you earn”.
Given the proliferation of easy credit, such as through credit cards or car loans, urging us to upgrade our lifestyle, this can be more difficult than it sounds – particularly when it comes to the temptation of a shiny new (ish) car.

“There is no doubt that 20-year-olds are getting caught up with it ([extended purchase arrangements like] PCPs), and are driving better cars than they would have otherwise,” notes Magee.
He also cautions against saving, while you have a considerable balance on your credit card. Saving at 0.4 per cent while owing €1,000 on a credit card at 20 per cent, doesn’t make sense. If you use your savings to clear this debt, you can still fall back on the credit card should an emergency arise before you get a chance to rebuild your rainy day fund.

Allowing your lifestyle to inflate

This can be a major danger – or opportunity – to how your life is going to be. If you’ve just started work, you won’t be used to earning €400-€700 a week for example.
“So don’t get used to it,” Magee advises, urging 20-year-olds to try to put away 20 per cent of their net savings (this includes pension savings) each month. “And if you’ve never gotten used to spending a certain amount of money, you won’t miss it either. You’ll be just as content a person,” he says.
Not only that, but he wants you to bring this lesson with you through life.
“If you get a pay rise, don’t get used to it,” he says, cautioning against “lifestyle inflation”, whereby your lifestyle expands to fit your income. This is the biggest thing they can to help themselves financially,” he says of 20-somethings.

The challenges facing today’s 20-somethings

Soaring rents: Average Dublin city centre two-bed is €2,000
Priced out of the property market: Average age of first-time buyer 2006: 29 Average age today: 34
Unaffordability: Average house: average income 1995: 2.5 (national); 3 (Dublin) Average house: average income 2016: 4.7 (national); 6.6 (Dublin)

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Retirement Planning Seminars March 2018

This March, Irish Pensions & Finance hosted two Retirement Planning Seminars in The Glasshouse Hotel, Sligo and The Westbury Hotel Dublin.

These Seminars were greatly received by the 300+ attendees.

Speakers covered topics such as Financial Planning, Health & Wellbeing and Safety in the Home.

We would like to thank all the speakers and attendees for their participation on the night.