Saving for retirement: a complete guide

As a reward for all the hard work and time you put into your job, retirement savings ensure that your future is secured. It’s important to start saving early, or when your circumstances allow, so you can retire without a worry and live comfortably.

In this guide, you’ll discover how to save for retirement, how much you need to retire, and why saving for retirement is important.

As life expectancy increases, it is becoming increasingly important to save for retirement. Whether it is to save for children or grandchildren, or for your own financial wellbeing, saving early for retirement can help you afford your preferred lifestyle.

According to the Pensions Authority, almost half of the working population is part of a pension arrangement. Pension contributions are one of the most effective ways to save for retirement. The qualifying age for state pension in Ireland is 66 for which you must no longer be working and meet PRSI requirements. Although, it is important to note that monthly state pension might not be enough to cover all your expenses.

Retirement is inevitable, and the best way to make the most of it is to save now. You can adjust your expectations based on your savings and live the life you envision for yourself. Financial independence is one of the key benefits of retirement savings. This is your way to reduce financial stress and enjoy your retirement without compromising. 

The earlier you start saving, the more your money will grow. It’s also a good way to prepare for unforeseen financial emergencies and build your savings.

The time you start saving for retirement can be subjective, as every person has different circumstances. However, if possible, it is advisable to start as early as you can. Your twenties are the ideal time to start putting away money in either a savings account or contributing to a pension scheme, or other savings options. It is never too early to start, as even a little bit will add up over time. 

First steps to saving for retirement include educating yourself about different types of savings options, pension schemes, and investment opportunities. 

Is it ever too late to start saving for retirement? If you start early, you have the option to save a little that goes a long way. But, at the same time, even if you put it off for later, there are always options to help you maximise your savings.

For instance, if you’re over the age of 50, you may need to put more money in your retirement fund every month. Some ways of doing this include higher pension contributions to grow your money, and working beyond the retirement age, 66 in Ireland, to save until you feel comfortable with the amount you’ve accumulated.

Personal or work pensions are some ways you can immediately start to save for retirement. You may choose to contribute as little as 5% of your income to a pension pot, which will add up over the years you work.

A part of your monthly salary can be dedicated to a retirement fund, which may be a deposit account, state savings, or Irish savings bonds.

Your retirement fund depends on how much money you think you will need to retire comfortably. This can depend on several factors such as when you start saving, when you retire, and your retirement goals. Some expenses you may think about are home improvements, medical emergencies, travel, inheritance for children and grandchildren, and the general security of a retirement fund.

Experts recommend saving 15% of your annual income before tax for your retirement. The ideal timeline for this level of saving would be from ages 27 to 66. It’s up to you to calculate the annual savings amount based on when you start and how much you need.

Once you’ve calculated how much money you’ll put into your retirement fund, you can start exploring the best ways to save for retirement in Ireland. With options such as private pensions, savings accounts, and investments, you can choose the one that works best for you.

Pensions are one of the most accessible ways to save for retirement, and you have several options. For instance, in Ireland, the personal retirement savings account (PRSA) is a long-term savings plan where you contribute to an investment account with a PRSA provider. This is one of the best retirement savings accounts because it’s flexible. You are free to change providers, or use the same account when you change jobs. More importantly, it offers tax relief for your pension contributions.

If you want high returns, investing in stocks and bonds is another option to grow your retirement fund, although these may be associated with a higher risk. You could find safer avenues to invest your money to maximise income from investments.

You may choose a savings account that offers competitive interest rates, such as a fixed term deposit or deposit account. This term can be anywhere from six months to five years. With these types of accounts, you know exactly the amount of money you’ll save at the end of the term, helping you plan for your future. Once you have the matured sum, you may even choose to reinvest it into savings bonds or your pensions.

Another way to save money for retirement, if you don’t want to lock away your funds for a specific period of time, is demand deposit accounts. These enable you to withdraw money whenever you want, and you can earn a variable amount of interest to grow your savings.

You may wish to maximise your retirement savings for financial independence in the future. Here are some ways to do that: 

Start as early as possible

Timely investments will ensure maximum returns. Starting early, whether it’s opening a savings account or a pension plan, will help ensure you have a substantial nest egg by the time you retire. 

Pay off your debts

Paying off your debts when possible allows you to free up your money for savings. It may not be easy to clear debts all at once, but a step in the right direction could potentially help you achieve your goals and avoid paying high interest rates. 

Diversify and prioritise your investments 

Diversification of your investment portfolio and prioritising where you put your money can serve you well in the long run. Whether you open a deposit account or buy savings bonds, invest in a PRSA or a different pension plan, you can make your investments work for you. 

Set retirement goals

Having clearly defined goals for retirement will help you stay motivated and on track with your savings. You may even wish to adjust your retirement funds and the amount you save regularly based on your circumstances. 

Choose the best retirement savings account 

Since there are several good options to choose from, the best retirement savings account will be one that allows you flexibility in terms of amount and time. In addition, you may also consider tax benefits when picking the right account for you.

With banks across Europe at your fingertips, we give you more choice to find the most competitive interest rates. Register for free today and start your retirement savings journey.