Here at Moneycube, we help our customers to take control of their money. So we’ve set ourselves a target to put away a million Euros by age 50.
Why age 50? Well, that’s the earliest age most people can take benefits from a Personal Retirement Savings Account, or retirement fund to you and me (terms and conditions apply though!).
And why a pension? Simple – it’s the best tax-saving gig there is to be had. Because of tax relief, for every Euro you put in, the state adds 66c on top. Add to that the possibility of employer pension contributions and this is looking interesting.
50 – seriously?
Now, we’re not saying most people should plan to retire at 50, or that a million Euros is enough to pay for all the fun you’re going to have once you finish working. But the rewards of saving need to feel like they’re worth the effort, so we’ve deliberately gone for an early fantasy retirement.
So what does it take?
To make our million, we’ve made a handful of assumptions. Let’s assume you start paying in aged 22, when your salary is €28,500 (that’s the average according to The Journal).
On top of that, we’ve anticipated annual pay rises of 6% as you climb the career food chain.
We’ll also assume your investment fund grows at an average of 7% each year over the life of the plan.
Let’s say your employer will contribute 6% of your salary (this is in line with Irish averages according to the Irish Association of Pension Funds, IAPF). What would you need to add in to hit the jackpot?
Moneycube found that you could amass a savings pot of €1.025 million by age 50 by contributing 6.5% of your salary, based on our financial model.
With your employer’s contribution, that means a total contribution of 12.5% of salary going into your pension pot.
Sure, to retire at 50 you might need to start early, and whether €1 million is enough to live on from age 50 is a question for another day, but our model shows these kind of savings are within reach if we get into the habit of regular savings and choose the right investment plan.