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For many people, retirement is very much a distant notion that is given very little consideration as they climb the career ladder while building a home, a family and a comfortable lifestyle.
However, with recent headlines detailing the future impact of our increasing life expectancy rate, much of the population has been forced to sit up and pay attention. People at every stage of their career are now being urged to begin planning for this hugely important milestone.
This is most certainly the case for those eager to take early retirement. While the vast majority of us have visions of kick-starting a relaxing retirement lifestyle at the standard age of 65 or older, there are many valid reasons for people opting to retire much earlier than this.
So, what are the motivations for making such a bold move, and what criteria must be met to allow early pension access?
The driving factors for retiring before the age of 65 are vast and varied. The most common reasons include:
Whatever your reasons, you’ll need to make sure you meet certain conditions that will allow you to access your pension fund earlier than expected.
Making the decision to retire before 65 is not an easy task. Aside from weighing up the financial implications, you will need to navigate the ins and outs of your employment contract and pension scheme in order to find out what’s actually possible and when.
While the standard age of retirement as set out by a contract of employment is 65, certain contracts will allow for retirement as early as 55, depending on the specified terms and conditions. These rules may differ if you are the director of a company or a self-employed individual.
This aside, one of the biggest factors that will determine your ability to avail of early retirement is the type of pension scheme you are part of:
In the case of Occupational Pension Schemes, you will be eligible to retire from the age of 50 onwards, provided you have your employer’s or trustees’ consent and that the rules of the scheme allow for this.
While the rules stipulate a retirement age of 60 plus for those paying into a PRSA, it may be possible in certain circumstances to take retirement from the age of 50, for example, if you are an employee leaving service.
Retirement benefits can be accessed under personal pension schemes by individuals ceasing employment from the age of 60 on.
This can also be cashed in from the age of 50 onwards.
Upon early retirement, an individual will be entitled to take up to 25% of their pension as a lump sum. The initial €200,000 of this is exempt from tax, while the following €300,000 is subject to tax at 20%.
All funds that remain in your pension pot following the deduction of both tax-free and taxable lump sums must either be:
It is an easy matter to lay out the basic rules and regulations surrounding early retirement, but there are many additional issues that should influence your decision, such as:
With so much to consider and understand in the context of early retirement, it is vital to ensure you are making the right decision that works for you and your financial future. For this reason, it pays to consult the experts.
The team at Symmetry Financial realise that retirement planning looks different for everyone. We will help you to see the ‘big picture’, outlining your retirement goals and assessing your current and future needs, taking your income and assets into account.
If you have your sights set on early retirement, we’ll review and discuss all of the possibilities with you and provide you with a roadmap that aligns with your goals and your financial circumstances.
Schedule an appointment with our team today to discuss early pension access.
If you’d like a free, no-obligation consultation for your mortgage, pension or financial needs, get in touch here, call us on 01 6831673 or email us directly on info@symmetryfinancial.ie.