Managing money: An enlightened view of your retirement fund

Enjoying your elder years isn’t so much about the money, it's about doing what makes you happy for as long as you can, advises accountant Kieran Coughlan

Whether you decide to try to keep healthy eat healthy and keep active in the mind to boost your changes of a healthy retirement, you also financial choices to consider.

As an accountant and tax advisor, it is a privilege to help people through their lives from births, deaths and marriages and one of those stages that our profession is also involved with is helping clients and their families navigate old age.

The work can encompass helping clients when it comes to setting up a pension, explaining the options for accessing their pension, claiming medial cards and GP only cards, advising clients on Will planning, the successful transfer or sale of a business or the claiming of medical and nursing home expenses.

But let’s get away from the tax compliance and tax advice part for a minute, the real story lies in the psychology of ageing.

Getting old sucks. I’m sure you don’t want to hear about losing your senses — both literally and physically — getting frail, forgetful, grumpy and tired.

In some cases, getting old can mean all of those things, and circumstances outside of your control might foist these issues on you, or — worse again — life might foist those same problems belonging to someone you love or care for on you as a partner, spouse or carer.

If you’re already in that position then my genuine sympathies to you. If you’re not at that stage, then heed some advice. One can fly blind into their elder years and hope for a good innings.

Many years ago, I learned that hope was not a strategy. Some people choose to continue working until they drop.

Some people don’t choose to continue working, but equally don’t choose not to keep working either. Huh?

This cohort keep working because that’s their default position. Sometimes the underlying subconscious reasons for continuing to work can be not knowing what else to do with oneself, a fear of not having enough savings put away or downright denial of one’s age.

We’ve all heard the story of the worker who retired only to die within x number of weeks or months, and some people cling onto that as a reason to continue working themselves.

Yet others choose to retire or more likely are forced to retire due to reaching their contractual retirement age and become isolated when no longer part of their work network.

Whatever you decide to do in your elder years is up to you, until it’s not. When your health or that of someone close to you impacts on your decisions, at that stage your choices become limited.

Whether you decide to take action and try to keep healthy eat healthy and keep active in the mind to boost your changes of a healthy retirement are yet more non-financial choices.

I hear you ask what’s the point of this seemingly fairly straightforward assessment of the actions and inactions of elderly people? My observations over the years are that people don’t give their retirement proper thought, indeed some don’t give it any thought.

Believe me, this isn’t the point where I row in trying to sell you a pension. How much income you want to continue to earn in retirement or savings you want to put away for retirement or how much of a pension you want to have access to in retirement are all decisions for you, and definitely not for me.

There is no right answer and everyone’s circumstances are different.

From my perspective, enjoying your elder years isn’t so much about the money, but money definitely helps, rather it's about doing what makes you happy for as long as you can.

Apologies in advance for the next bit, it can be a bit depressing. The life expectancy of a 65-year-old — i.e. someone reaching retirement in 2024 — is about 84 for a male and about 86 for a female; the latest figures from the CSO are from 2017 so excuse any variations.

It’s depressing if you look at it from the perspective of only having say 19 years left on the planet. Hang on a minute, it’s certainly a lot better when you consider we are pretty near the top of the world league, with Japanese and Hong Kong residents only outliving us by about two years.

Some of our other European neighbours would die for our life expectancy statistics (if you’ll excuse the pun), having a life expectancy of six or seven years less than us.

Paraphrasing the infamous Billy Connolly when referring to drinking and smoking his way through life, who wants to add on a few years at the end of their life.

Before we jump away from statistics, another worthy mention is our full employment status, which presents more options to those willing to work past “normal” retirement should one wish to bolster their spending power in retirement.

The retirement rules brought in mandatory withdrawals from activated pension funds about a decade ago, which forces a pension holder to withdraw 4%-6% of their fund per year depending on their age.

From my experience, many clients with modest pension funds (of the PRSA/RAC/AVC/DC type) almost regret drawing down that amount, perhaps harbouring some concern that they will have not have enough funds to carry them to the end. Others are simply unaware that they can step up their pension drawdowns beyond the mandatory levels.

Even if you don’t have a great pension fund, there are other options available to enhance your financial liquidity as old age creeps up, whether that’s partially selling your home to your children, downsizing or engaging in some part-time work.

How can your pension fund, your other assets and your available time best provide for your happiness as you get older?

Within that matrix, if you’re happy for your pension fund to provide you with a slow and steady stream, that’s ok; others might choose to take out a lump sum in order to help out children, or improve the comfort of their home or go on a lifetime trip.

Personally, I suggest you rebrand your pension fund as your Happiness Fund. When you consider it from that perspective, it can be enlightening.

 

• Kieran Coughlan, Chartered Tax Advisor FCCA, AITI Coughlan Accounting & Taxation Services Ltd. / 086 8678296 / [e-mail] / www.coughlanaccounting.com