Excuses for not having a pension

The CSO published their latest update on pension coverage in Ireland . The survey was taken in the last quarter of  2015 and shows a fall in those who had a pension from when the last survey was carried out in 2009.

What interested me most was the reasons given for not having a pension. 21% have other provisions but what about the others?

  1. Never got around to organising a pension – 22.1%
  2. No scheme available through work – 9.3%
  3. Can’t afford a pension – 38.9%
  4. Don’t understand pensions – 4.9%
  5. Too much financial risk involved – 3.8%

Lethargy is not an excuse

31.4% of those who don’t have a pension don’t have one because it either isn’t done for them or they couldn’t spend a couple of hours to get it put in place. Pensions tend not to be urgent but they are important. When they do become urgent, it is usually too late.

A pension of €30,000 a year at age 65 will cost you around €772,000. If you start funding for it at age 35, it will cost you €765 per month. If you wait until you are 50, it will cost you €2,642 a month.

If you understand the power of compounding, you will know that not getting around to it is costing you money.

Can’t afford a pension

For lots of people this is true. You may not earn a lot of money and have little disposable income to fund a private pension. The Old Age Pension of €12,000 may be a sufficient income in retirement.

But what if you are on €100,000+ a year and have no pension. Your lifestyle for decades has been based on having a large income. How are you going to cope with going from bringing home €5,000 a month to receiving €1,000 a month?

Is it not better to make the adjustment to  your spending habits now and going with a little less now so that you can maintain that lifestyle until warmth and comfort is all you want?

Don’t understand pensions

There is so much information available on the internet, this is not a valid excuse. There are 47 different articles on pensions on my website alone! There are lots and lots of great advisors who are experts in pensions who will give good advice on the different types of pensions and which one is most suitable to you.

The same goes for risk. There is such a vast choice of investment strategies, that you do not have to take lots of risk if you don’t want to. It is important to understand what financial risk is though. Most people think of it as danger; that all their money will disappear forever. A fund managers job is to distinguish between good risk and bad; avoiding the bad and investing in the good to make you money. Again, there are lots of great advisors who will educate you on risk when they are helping you.

If you are part of the 21% who already have other provisions for retirement, fine. If you are part of the 79% who have an excuse, ask yourself what will life in the future look like on €12,000 a year?

If you have any questions, you can contact me directly at steven@bluewaterfp.ie