Early retirement in Ireland

Are you one of the 60% of workers in Ireland who would retire at the age of 50 or 60 if you could afford it*?

On this page, you’ll discover what early retirement in Ireland means, how it could affect your pension, and how much you might be able to retire on. We’ll also look at steps you can take today to improve your chances of retiring early, like setting up a high-interest savings account.

Early retirement means stepping away from work before you reach the average retirement age, usually around 65. The early retirement age in Ireland can range from 50 to 65. This could be because your job mandates retirement at a certain age, or because you choose to retire early, or even if you’ve been let go unexpectedly.

If you retire early without planning for it, it can put extra pressure on your retirement savings, since you’ll need them to last for a longer period of time.

In Ireland, many employment contracts set a retirement age, typically around 65. However, some employers allow for early retirement, giving you the option to stop working at 60 or even as early as 55. What’s more, early retirement in the public sector has different rules to the private sector. So if you’re wondering how early you can retire, a first step might be to check your employment terms to see what’s possible for you.

You might also be a follower of the Financial Independence Retire Early (FIRE) movement, which suggests that by aggressively saving and investing, you could retire as early as your 40s.

Regardless of your retirement goals, it’s worth considering your options. In certain cases, you may be able to access your pension benefits before reaching the minimum pension age.

Early retirement on health grounds in Ireland

Sometimes, early retirement isn’t a choice you make, but a decision taken out of your hands if you become ill while still employed. If you’re under 66 and are unable to work, you can apply for Illness Benefit, which is calculated based on your PRSI contributions.

If you’re in this situation, you may also be thinking about early retirement due to ill health. This option allows you to receive your pension immediately, and in some cases, you may even receive “notional added years.” These are additional years credited to your pension record, even though you didn’t actually work them.

Keep in mind that the option of early retirement due to ill health varies by pension scheme. In a defined benefit scheme, you may receive full benefits at normal retirement age, providing immediate financial support. However, in a defined contribution scheme or personal pension plan, retiring early could reduce your annual income.

What is cost-neutral early retirement?

Cost-Neutral Early Retirement (CNER) is a way for public servants to retire early in Ireland and get their pension before their “preserved” (standard) pension age, which is typically 60 or 65. Under this arrangement, eligible employees can retire between the ages of 50 and 60, depending on when they started working. The pension amount will then be reduced to account for the early payment and longer payment duration.

To be eligible for CNER, you have to meet certain requirements. Firstly, you should be working for a public service organisation and be a member of their pension scheme. CNER is an option open to most standard public servants, including teachers, nurses, and clerical officers. Secondly, you must have the right to receive your pension at either age 60 or 65, depending on your scheme. Finally, you should have applied for CNER and completed the HSE early retirement form before you retire.

If you’re considering early retirement in Ireland, you may be wondering whether you can cash in a pension early. The main requirement is that you must have left the job where you built up your pension. Also, you must have been employed in the private sector.

The rules for early access to pensions vary depending on the type of pension scheme you have:

• Defined benefit pension schemes: Accessing these pensions early can be difficult, as they typically have strict rules around early withdrawals, and benefits are usually based on a set formula linked to your salary and years of service. You may need to meet specific criteria, such as ill health, to access funds early. If you meet all the criteria, early pension access may be possible from age 50.
• Defined contribution pension schemes: With these occupational pension schemes, it might be possible to cash in your pension early, in some cases from age 50 or 55, but this is also subject to certain conditions. You might be able to access a portion of your pension early if you are having financial difficulties or experiencing poor health.
• PRSAs (personal retirement savings accounts): PRSAs tend to offer more flexibility when it comes to early access compared to defined pension schemes. You can typically withdraw funds from your PRSA at 50 if you are retired from PAYE employment and have no other work. If you are still employed with the same company, you will have to wait until 60 before taking out any money from your pension.

With most pension schemes, you can access up to 25% (up to a maximum of €200,000) of your pension fund as a tax-free lump sum, but income tax applies to the rest. Occupational pension schemes let you take a lump sum based on your salary and years of service.

After taking a lump sum from your pension upon retirement, you have options such as paying for an annuity or transferring the rest of your pension into an Approved Retirement Fund (ARF). An annuity offers payments over a specific period of time, providing a guaranteed income stream. On the other hand, an ARF can provide more flexibility in managing retirement funds compared to traditional pension schemes or annuities.

You might find it helpful to get advice from a financial advisor to understand the specific rules around early pension withdrawal in Ireland and what it would mean for you.

Taking early retirement is a big decision, and it can be helpful to weigh up the pros and cons. While the idea of more free time might be appealing, it’s important to keep in mind that retiring early could drain your savings faster than if you waited until later, closer to the state pension age. So, it’s not a decision to rush into.

Deciding whether to take early retirement is a highly personal choice, and there are several aspects to consider. You might start by thinking about how you plan to live your life as you age, and whether your savings will be enough to sustain that lifestyle. Looking ahead, you might also factor in unexpected expenses, healthcare costs, and inflation over a potentially longer retirement period.

Ultimately, only you can decide if early retirement is right for you, but by carefully considering and planning for it, you’re more likely to ensure your future financial security.

Pros and cons of early retirement in Ireland

Advantages of early retirement

• You’ll have plenty of time to enjoy travel, exploring hobbies, and undertaking new projects.
• You’re more likely to be in better health compared to the typical retirement age, so you’ll be able to fully enjoy activities such as travel, sports, or quality time with grandchildren.
• You could use this time to pursue other ventures, such as consulting, volunteering, part-time work, or further education. You might even set up your own business.

Disadvantages of early retirement

• You might need to make sacrifices, like cutting living expenses or working harder for additional income, to build up enough savings for retirement, especially considering the potentially smaller Social Security benefits.
• Risk of boredom and decreased activity levels, as well as reduced structure to your day and social interactions that can impact mental and physical health.
• Retiring early means there’s less time for your retirement savings to benefit from compound interest, potentially limiting the growth of funds for your future.

If you’re considering early retirement, you might firstly consult your pension provider for precise details on exactly how your pension fund would be affected. Taking early retirement in Ireland without continued employment may create PRSI contribution gaps, impacting your entitlement to the state pension. However, you might be able to bridge this gap by obtaining credits or making voluntary contributions, so you would still qualify for the state pension.

There are some useful tools like pension calculators to calculate whether you are on track to meet your target pension payment based on your current contributions and the age at which you are aiming to retire.

If you choose to retire early in Ireland, you might still qualify for jobseeker’s benefit or jobseeker’s allowance, and you could also take advantage of back to work or back to education schemes. However, you may face a slight delay to your payment after leaving work if you choose early retirement.

Because the rules around eligibility vary based on individual situations, it’s helpful to get in touch with your local social welfare office or a financial advisor.

Here are some ways you might begin your journey towards early retirement in Ireland:

• Plan and create a budget: Start by setting clear retirement goals and creating a detailed budget that considers your desired lifestyle, including travel, hobbies, and healthcare expenses.
• Try not to withdraw from your pension early: It might be tempting to take out a lump sum for a big purchase, but the longer your funds are left untouched, the larger they are likely to grow.
• Review saving and investing strategy: If possible, consider increasing your contributions to retirement accounts such as pension plans, ISAs, or personal savings accounts.
• Factor in Social Security benefits: Take into account the impact of early retirement on your Social Security benefits when planning your retirement savings strategy.
• Diversify investments: If you’ve invested as part of your retirement planning and have a while to go until retirement, you might consider diversifying your investments to ensure long-term growth potential. Be aware that this strategy isn’t without risk, and the value of your investments might go down.

If you’re considering early retirement in Ireland and looking for ways to boost your savings, consider signing up for a Raisin Account. With a variety of partner banks offering attractive rates on savings accounts, including fixed term deposit accounts and demand deposit accounts, you have plenty of choices to meet your financial goals.

Once you’re registered, simply log in to apply for free in just a few clicks.

*https://www.independent.ie/business/personal-finance/only-one-in-three-irish-workers-can-afford-to-retire-at-66-and-most-expect-to-work-until-70-survey-finds/a554762606.html