An important aspect you need to take into account when you are planning for retirement is determining when you will actually retire. Do you wish to retire on your statutory date of retirement? Do you know your statutory date of retirement? If you do not, these are presented in Table I below.
Table I– Understanding the Statutory Date of Retirement
|Age||Statutory Retirement Age|
|Born between 1956 and 1958||63 years|
|Born between 1959 and 1961||64 years|
|Born on or after 1962||65 years|
Alternatively, you can opt to retire early – at the age of 61 years.
To retire early, you need to take into account the following:
- You must be 61 years of age and you need:
- A 35-year history of fully paid social security contributions if you are born between 1956 and 1961.
- A 40-year history of fully paid social security contributions if you are born between 1962 and 1968.
- A 41-year history of fully paid social security contributions if you are born on and after 1969.
- By deciding to retire early, you are choosing personal leisure as against continuing to be economically active in the labour force. For this purpose, if you retire early, you are not allowed to work during your retirement until you reach the statutory age, table above. You can always re-enter the labour force and forego your early retirement.
You may wish to note that if you continue to work beyond the early retirement age of 61-years, the Government will increase your pension income, as shown in Table II below.
Table II – Increase to your Pension Income if You work beyond 61 one years of age
|Age||Increase in Pension Income|
Thus, if you work up to 65 years, you can earn an additional 23% on your pension income. Furthermore, this increase in pension income will also be enjoyed by your spouse in the event of your death.
When to retire is an important factor as this may see you earn additional income as well as increase your retirement pension income. Also, working beyond 65 years of age, can earn you further income, receive your pension, and pay no further social security contribution on income earned. Later retirement is likely to improve your quality of life as you are earning a wage or generating income. A later retirement also means that the period of time when you will be receiving just your state pension will decrease and thus, your accumulated savings and retirement are likely to take you closer to the quality of life you want to enjoy during retirement.
So make sure that you take into account the date you wish to retire when you are planning out your retirement plans.
It is important that if you are in a position to do so, you start saving for your retirement at an early age. Also important is that you educate your kids so that they too start saving for retirement early. Note that saving €83 monthly for 40 years from the age of 25 years will, as a result of a cumulative interest rate of 2.5%, give a person a retirement nest egg of €70,000 or so.