The two main reasons are because you don’t get a pay cheque anymore when you retire and there is usually no more income, only expenditure.
Everyone needs to plan for retirement. People are living longer and healthier lives, so it is very important to think about how you are going to live in retirement. Retirement can last for 20 or 30 years, maybe even longer. That’s a long time to live without a pay cheque.
So, when you retire, what are you going to live on? How much do you want to be able to spend or how much will you be able to spend every week?
If you’re working, you are usually paying Pay Related Social Insurance (PRSI). This means you are building up the right to get a basic State Pension when you reach the State Pension age, currently at age 66 and the basic rate is just about €12,000 per annum.
If you haven’t been working or if you have been working in unpaid employment (working in the home for example) you may be entitled to a means tested non-contributory State Pension. The Basic State Pension may not be enough to live on and give you the standard of living you want.
If you were retiring tomorrow and the mortgage is paid; your children are grown up, have left home and are self-sufficient; you have no outstanding loans or major expenses; could you live on the equivalent of €240 per week? If you need a higher income in retirement then you will need another source of income as well.
If your retirement spending is likely to exceed your retirement income then you will not have a financially secure retirement and you need to do something about this now. Like saving some of the money you earn every week/month until you retire. You can then add these savings to what the State gives you every week and this way you will have a more financially secure retirement.
It’s never too early to start saving for your retirement but it can get too late.