The goal of this article is to assist you in planning for early retirement and to gauge how far, or how close you are to a number that works for you.

We all have different wants and needs. Therefore, it is hard to give an exact figure for how much you may need to retire early. 

The term early retirement is also subjective, what is early to you may be late to the next person. It is for this reason we have looked at retiring from age 50, 55 and 60.

For most people, you will likely retire around age 67. However, for some, retiring early may be an option. Hopefully, this article provides some clarity and assists you in the planning process.

Early Retirement In Ireland

We make it easy. Click to go to the relevant section.

Pensions also play a huge role in whether an individual can retire early. We examined several types of pension arrangements and discussed at what age they can be accessed along with a potential tax-free lump sum.

It is worth noting that there will be nuances and differences for each individual’s personal circumstances. There is no one-size-fits-all approach to planning for early retirement.

If you would like to discuss your situation in more detail, feel free to contact our team. We provide a complimentary consultation where you can assess potential options and ask any questions you may have.

Table of Contents

Early Retirement in Ireland

In Ireland, you can essentially retire at any age. However, having sufficient savings to live the lifestyle you would like may be a separate conversation.

Depending on your date of birth, you may not qualify for the State Pension until age 67. This is also set to rise over the coming years.

Early Retirement in Ireland map

Therefore, after retiring early you will likely have many years ahead where you will need an income. Whether that is for basic living expenses or holidays abroad, money will be required either way.

For many, it is unlikely such a lifestyle will be attainable without assistance from a private pension arrangement. Whether it is from a personal pension or an occupational pension scheme you were a member of, their importance will likely be significant.

BOOK YOUR NO OBLIGATION CHAT

Can I retire at age 50?

Yes. There is no single retirement age in Ireland. Your retirement age is usually set out within your contract of employment. In general, most people retire at age 65. However, you can retire earlier and in some pension arrangements, benefits can be accessed from age 50.

Although, planning to retire at age 50 will likely take a good deal of preparation. Luckily we are living longer than ever before. However, this also means you will have more years to fund in retirement.

Average pension at age 50

We have written in-depth about the average pension in Ireland across various age groups. A general rule of thumb is  5 x your current salary.

In this example we have taken the average wage in Ireland which is approximately  €41,600 according to the Central Statistics Office.

Average Salary in Ireland Multiply By Average Pension at age 50
€41,600 5 €208,000

With the aim of having  5 times your salary in your pension pot by age 50,  this would equate to €208,000.

How much do I need to retire at 50?

How much you need to retire will likely vary dramatically depending on your situation. We will each have different needs and spending habits.

Calculating how much you need to retire will also depend on several assumptions. A good way to calculate how much you may need is by using your current salary as a yardstick.

This is beneficial because we all know how much we currently earn and whether a portion of that may be enough to live comfortably.

It is also worth noting that we hope as we get older our mortgage may reduce and eventually be cleared. This will also make living on a smaller amount easier.

Case Study - Early Retirement at age 50

Below we look at some ballpark calculations for an individual retiring at 50. Please bear in mind that we have purposely omitted several assumptions.

This was done in an attempt to simplify the calculations. We have created a list below of important  assumptions that should be included for more exact calculations.

Current Salary €60,000
Percentage of salary you would like 50% = €30,000
Current Pension(s) €208,000
State Pension (€12,912 x 35 years)
See assumptions 
€451,920
Total Pension Entitlements €659,920

In this example, our target is to have an income of €30,000. If we retire at age 50 and live until age 85, that is 35 years.

Years in Retirement Annual Income Required Total Amount Required
35 €30,000 €1,050,000

Now we have the total amount of pension entitlements including a full State Pension, we can calculate any shortfall that may occur.

Total Pension Entitlements Total Amount Required Shortfall
€659,920 €1,050,000 €390,080

It is also worth noting we have not taken any savings into account. These calculations are difficult without using several assumptions and knowing your personal circumstances.

For example, you may have significant savings or investment income. These should be accounted for. If you are unsure of where you stand, it may be best to contact our team to discuss and ask any questions you may have.

Accessing a pension lump sum at 50

Eligibility to a pension tax-free lump sum plays an important role in many people’s retirement plans.

Within pension arrangements, many people will be eligible to access 25% of their benefits tax-free. However, this is subject to certain limitations and conditions.

If eligible, releasing these benefits provides additional funds to allow people to plan the retirement lifestyle they would like.

Total Pension Benefits 25% Tax-Free Lump Sum Remaining Benefits
€280,000 €70,000 €210,000

In Ireland, the maximum you can access as a tax-free lump from a pension arrangement is €200,000. Once you pass this threshold, you will be taxed at a rate of 20% until you reach €500,000.

Anything over the €500,000 threshold will be taxed at your marginal rate.

Lump-Sum Total Amount Tax Rate
Up to €200,000 0%
€200,001-€500,000 20%
Over €500,000 Taxpayers Marginal Rate

There are also lifetime limits and a Standard Fund Threshold to account for.

What pension arrangements can be accessed from age 50?

Eligibility for early access to a pension arrangement will depend on certain factors. Your age and the type of pension scheme being two of the most important.

Pension Scheme Eligible for Access from Age 50 (if all criteria are met) Yes/No
Defined Benefit (DB)Pension Schemes  Yes
Defined Contribution (DC) Pension Schemes Yes
Executive Pension Plans Yes

It is worth noting that age is not the only criteria. In the case of DB & DC schemes,  you must have left the employment where the benefits accrued to be eligible.

BOOK YOUR NO OBLIGATION CHAT
Early Retirement at age 55

Can I retire at age 55?

Yes. Ireland allows you to retire at any age you would like. However, having the funds to live a lifestyle you would like at an earlier age may be the issue.

It often takes many years to build up sufficient funds to retire early. Retiring at age 55 is still approximately 10 years earlier than what most people strive towards.

Therefore, it will likely take considerable planning from a financial perspective. There are many variables to be accounted for.

It is worth noting that there is a maximum limit of contributions allowed while receiving tax relief. The current limit is €115,000 per year.

Average pension at age 55

There is no universal answer or one-size-fits-all when it comes to planning an early retirement. Pension pots also vary depending on what type of scheme you may or may not have been a part of.

However, aiming for approximately 6 x your current salary at age 55 is a good starting point.

We take the average wage from the Central Statistics Office (CSO). These figures show the average salary in Ireland in late 2021 was €41,600.

Average Salary in Ireland Multiply By Average Pension at age 55
€41,600 6 €249,600

Having 5 times your salary in your pension pot by age 55 would equate to €249,600.

How much do you need to retire at 55?

In order to calculate how much you will need to retire you will first need to decide on how much it will cost you to live.

Whether it is retiring at age 50,55 or 60, you will need to assess your overall situation. Just because you are retiring does not mean your bills or expenses are. If you are lucky you will be mortgage-free.

However, you may have other recurring expenses such as:

  • Loans/Debts
  • Mortgage
  • Property tax
  • Food
  • Transportation
  • Family car
  • Other

These are just some of the expenses that may occur in retirement. Therefore, it is important you have a sizable pot built up and have discussed various scenarios whether unlikely or not.

Case Study - Early Retirement at age 55

Below we have created a case study for an individual looking to retire at 55. The figures are rough estimates and should not be taken as advice.

We have also left out several assumptions that should be included when looking for an exact figure. This has been done for the purposes of simplicity.

However, you can see a list of important assumptions below.

Current Salary €60,000
Percentage of salary you would like 50% = €30,000
Current Pension(s) €249,600
State Pension (€12,912 x 30 years)
See assumptions 
€387,360
Total Pension Entitlements €636,960

In this example, our target is to have an income of €30,000. If we retire at age 55 and live until age 85, that is 30 years.

Years in Retirement Annual Income Required Total Amount Required
30 €30,000 €900,000

Now we have the total amount of pension entitlements including a full State Pension, we can calculate any shortfall that may occur.

Total Pension Entitlements Total Amount Required Shortfall
€657,360 €900,000 €242,640

It is also worth noting we have not taken any savings into account. These calculations are difficult without using several assumptions and knowing your personal circumstances.

You may have significant savings built up or some form or regular rental income. When financial planning, all income, and expenditure should be accounted for.

If you need to discuss certain nuances, it may be worth contacting our team for a more in-depth conversation.

Accessing a pension lump sum at 55

The age at which you can access your pension benefits is often the first question asked by clients.

Discussing eligibility and potentially accessing benefits tax-free is a close second place. Your ability to access part of your benefits tax-free and from what will depend on different factors.

The ability to access 25% of your benefits tax-free is an incentive for many people to contribute to a pension.

If eligible, the calculation may look similar to the below.

Total Pension Benefits 25% Tax-Free Lump Sum Remaining Benefits
€400,000 €100,000 €300,000

As we touched on earlier, there is a maximum tax-free lump sum from a pension arrangement. This is currently €200,000.

There are further thresholds which you can see here.

What pension arrangements can be accessed from age 55?

Eligibility for early access to a pension arrangement will depend on certain factors. Your age and the type of pension scheme being two of the most important.

Pension Scheme Eligible for Access from Age 50 (if all criteria is met) Yes/No
Defined Benefit (DB)Pension Schemes  Yes
Defined Contribution (DC) Pension Schemes Yes
Executive Pension Plans Yes

It is worth noting that age is not the only criteria. In the case of DB & DC schemes,  you must have left the employment where the benefits accrued to be eligible. 

BOOK YOUR NO OBLIGATION CHAT

Can I retire at age 60?

Yes. There is not a set age at which you must retire in Ireland. Most people aim to retire at age 65, although your ‘normal retirement age’ will be outlined in your contract of employment.

As the State Pension age looks set to rise to 67 and beyond in the coming years, people may start to retire later than ever before.

However, if you are in the position where retiring at 60 is a possibility, we have outlined some considerations below.

Average pension at 60

Calculating the average pension pot can be difficult due to so many variables. Another aspect to be considered is the fact you can contribute more to your pension as you get older while still receiving tax relief.

For example, at age 60 you can contribute 40% of your earnings.

Age Contribution limits for tax relief – Percentage of net earnings
60 40%

Pension contribution limits are age-related and increase as you get older. These contribution limits max out at age 60.

It is worth noting that while completing our calculations, we used the figures from the Central Statistics Office (CSO) for Ireland’s average salary.

As of 2021, the average salary was €41,600.

Average Salary in Ireland Multiply By Average Pension at age 50
€41,600 8 €332,800

Having 8 times your salary in your pension pot by age 60 would equate to €332,800.

How much do you need to retire at 60?

As per above, deciding that X times your current salary can be a decent target for your pension pot.

However, retirement will mean different things to different people. There is no universal magic number.

We conducted our own survey in 2021, where we asked respondents how much would they like to retire in Ireland?’

PSL Survey - How much will I need at retirement

The results of the survey showed that on average, we would like €433,000 in our pension pot at retirement.

This is excluding any State Pension entitlements.

Case Study - Early Retirement at age 60

At this point it may be useful to look at another ‘real-life’ scenario. Again, the below is only an estimate and does not contain some important assumptions.

Early Retirement at age 60 chart

As we have done previously, we will use a current salary as a baseline for calculating how much may be required in retirement.

Current Salary €60,000
Percentage of salary you would like 50% = €30,000
Current Pension(s) €332,800 (€41,400 x 8 years)
State Pension (€12,912 x 25 years)
See assumptions 
€332,800
Total Pension Entitlements €665,600

In this example, our target is to have an income of €30,000. If we retire at age 60and live until age 85, that is 25years.

Years in Retirement Annual Income Required Total Amount Required
25 €30,000 €750,000

Now we have the total amount of pension entitlements including a full State Pension, we can calculate any shortfall that may occur.

Total Pension Entitlements Total Amount Required Shortfall
€665,600 €750,000 €84,400

In certain circumstances you may have savings built up. Such savings may reduce or even cover the above shortfall.

This is why it is important to outline that there are many variables and assumptions to be considered when calculating for retirement.

These figures are estimates and should be considered financial advice.

If you would like to discuss your retirement in more detail and put a concrete plan in place, it may be worth booking a consultation.

Accessing a pension lump sum at 60

Accessing a pension lump sum at 60 is slightly different to at age 50 or 55.

Firstly, there are more pension arrangements that can be accessed. After reaching age 60, you may be eligible to access a Personal Retirement Savings Account (PRSA).

In certain circumstances, the normal retirement age in occupational pension schemes may start at age 60. However, this will be scheme-dependent.

If accessing your pension benefits, you will likely be eligible to access a portion of your benefits tax-free. Most people can access 25% of their funds tax-free.

It is worth noting that factors such as redundancy may affect eligibility around receiving a tax-free sum.

Total Pension Benefits 25% Tax-Free Lump Sum Remaining Benefits
€800,000 €200,0000 €600,000

As we outlined earlier, €200,000 is the maximum you can access tax-free from a pension arrangement. 

What pension arrangements can be accessed from age 60?

Eligibility to access a pension arrangement will depend on that specific arrangement. Each has its own set of rules. Below we outline the different pension arrangements that can be accessed from age 60.

Pension Scheme Eligible for Access from Age 50 (if all criteria are met) Yes/No
Defined Benefit (DB)Pension Schemes  Yes
Defined Contribution (DC) Pension Schemes Yes
Executive Pension Plans Yes
PRSA Yes

Options when accessing a pension arrangement

After accessing a lump sum from a pension arrangement, you will have a couple of options.

As we see above, in most cases, you will have two options although in certain circumstances you will have three.

Once you take your 25% tax-free lump sum, you can choose either:

1. Take remainder as taxable cash

This option is also known as a trivial option. This is for individuals with small pensions funds at retirement and allows them to take the balance after their retirement lump sum as taxable cash.

2. Approved Retirement Fund (ARF)

Before the change to the legislation at the beginning of 2022, after taking a 25% lump sum, the next €63,500 would have to be ringfenced.

However, due to this change, the full balance post-tax-free lump sum can be transferred to an Approved Retirement Fund (ARF). From here, the individual can invest their ARF as they see fit.

Any withdrawals from the ARF will be liable to income tax, PRSI, and USC. There is also a minimum withdrawal each year within an ARF.

Age of ARF holder Minimum withdrawal of fund as a percentage (%)
61 4%
70 5%

There is also a minimum withdrawal of 6% per year if your ARF fund is over €2,000,000.

Advantages of ARF

3. Annuity

The alternative option to an ARF is choosing an annuity with the remainder of your benefits.

An annuity is essentially a pension for life. The insurance company will pay you a fixed amount until death in return for your pension benefits. The two most popular types of annuities are:

  • Single-life 
  • Joint-life

Similar to an ARF, choosing the annuity option comes with its set of advantages.

Advantages of Annuity

Still unsure? We have written a more in-depth blog explaining both ARF’s and annuities.

Early retirement from different pension arrangements

The ability to retire early and access a tax-free lump sum is a huge incentive for many. It is one of the biggest advantages of contributing to a pension arrangement.

However, the age at which you can access these lump sums is also important. Below we look at the different types of arrangements and what access you can access each.

Pension Arrangement Age you can access benefits from
Defined Benefit (Occupational) 50
Defined Contribution (Occupational) 50
Executive Pension Plan 50
Personal Retirement Savings Account (PRSA) 60
Personal Pension 60

As with anything, there are some nuances with the above. Below we break each down in further detail.

Early retirement from Defined Benefit (DB) Occupational Pension

As per the table above, members in these arrangements can potentially access their benefits from age 50.

However, it will be dependent upon the specific scheme rules. A Defined Benefit Pension (DB) arrangement is designed to provide you a pension for life after retirement.

The amount you’ll receive is calculated through a combination of salary and length of service. Alternatively, it may be calculated as 1.5 x your final salary.

Each DB scheme may have a different ruleset, it is important to analyse your personal situation before making any decisions.

Early retirement from a Defined Contribution (DC) pension

Early retirement from a Defined Contribution (DC) will be allowed from age 50 once certain criteria have been met.

Similar to a DB arrangement, the criteria will be scheme-specific. However, in most cases, once you have left the employment where benefits accrued, and are 50 or over, you will likely be eligible to access your benefits.

The amount you receive will depend on your level of contributions along with the fund performance.

Early retirement from an Executive Pension Plan

An Executive Pension Plan is designed for company owners and directors. These plans come with certain advantages with regard to the allowable level of contributions while receiving tax relief.

You will be eligible to access your Executive Pension Plan from age 50 onwards. However, this is generally not advised without consulting an advisor.

An Executive Pension Plan can also be an efficient way of extracting wealth from your business.

Recommended reading:  Our Executive Pension Plan Guide

Early retirement from a Personal Retirement Savings Account (PRSA)

As a general rule, you will be eligible to access a PRSA from age 60. Although, should you be retiring from employment, you may be able to access benefits from 50.

Similar to other pension arrangements, this will be scheme-specific. If you are unsure of your eligibility, contact your scheme administrators.

Early retirement from a Personal Pension

A Personal Pension arrangement follows similar rules to a Personal Retirement Savings Account (PRSA) when it comes to early retirement.

Benefits can be accessed from age 60

At this point, it should be noted that early retirement or accessing a pension arrangement early is not a decision that should be made lightly.

As you begin drawing down your funds, you run the risk of bombing out. This means you may not have sufficient funds within your pension in the future.

Enlist the help of a qualified advisor and discuss your long-term plans and financial goals.

Retiring early as a business owner or director

Early retirement is something many business owners and company directors strive towards. However, in some cases, it may not be as simple as just exiting the business.

If you have other partners or major shareholders, they will also need to be considered. As we touch on below, extracting wealth from a company can be a complicated process.

There are several factors that must be taken into account before departing a business as a major shareholder.

The percentage of shareholding you have will also directly impact on what age you can access your benefits.

Normal retirement age for 20% directors

As a director holding a 20% or more shareholding, there are certain stipulations with regard to early retirement.

In general the normal retirement age will be between 60-70. However, in some cases, exceptions are made subject to Revenue approval.

Early retirement for 20% directors

Early retirement as a 20% director comes with some caveats. One being that you must sever all links with the company in question.

This includes disposing of all shareholding held within the company. A disposal to a spouse or children will not be sufficient.

Although, a disposal to a child working within the business may be permitted.

This area requires a specific skill set when receiving guidance. We offer a complimentary consultation for those who may need assistance.

Wealth extraction from a company

The ability to efficiently extract wealth from a company may be a major part of your plan to retire early.

However, extracting wealth from a company must be a thought-out process. When considering extracting wealth, you have three main options. Although one of the options we have outlined involves leaving money in the business.

1.Leave profits in the business

This option comes with the issue of corporation tax. This means that any profits left in the business will be taxed at 12.5%.

Gross Profits €200,000
Less Corporation Tax (12.5%) €25,000
Less: income tax, PRSI and USC €0
Balance €75,000

2. Take profit as a salary

Extracting wealth from your business via a salary is another option. However, this method will have hefty tax implications.

However, paying yourself through company dividends will leave you liable to income tax at your marginal rate, PRSI and USC.

Example €100,000
Less: Income tax, PRSI and USC €52,000
Balance €48,000

3. Extract wealth via a pension plan

Using a pension plan to extract wealth from your business is often a popular option. It allows you to do so in a tax-efficient manner while also saving for the future.

An Executive Pension Plan is often the arrangement of choice for company owners and directors. This will have two major tax advantages:

  1. Tax relief for the company – Any contributions made to an Executive Pension Plan can often be offset against corporate tax.
  2. Tax relief for the director – Contributions to a pension arrangement will be eligible for tax relief within certain limits.

If you are a company director or shareholder and are looking to assess options regarding extracting wealth, a consultation may be a worthwhile exercise.

Retirement Relief

When looking at extracting wealth from a company, retirement relief is another potential outlet.

As you plan an exit from the business, it is important to look at minimising tax implications. Utilizing retirement relief may significantly reduce the tax bill.

Retirement relief is a relief from Capital Gains Tax (CAT), which can be applied in certain circumstances where an individual is disposing of some or all of their ‘qualifying assets‘ within their business.

There are also qualifying conditions and thresholds within retirement relief. 

retirement relief

If retirement relief is an area of interest, it may be worth checking out our blog where we have covered the topic in more detail.

Entrepreneur Relief

Entrepreneurial relief works similar to retirement relief in that in can be applied to offset a Capital Gains Tax bill.

If eligible for entrepreneurial relief, your Capital Gains Tax bill may be reduced by 10%.It is worth noting that this relief only applies to the first €1,000,000 of gains.

How can I prepare for early retirement?

Retirement will involve different things for different people. Some many plan to holiday frequently while others will enjoy a more settled life.

Either way, it is important you understand the lifestyle you would like and how much it may cost to sustain. Thankfully, we are living longer healthier lives than ever before, but this also means planning has increased in importance.

Budgeting is an excellent way to become more efficient with your money. By monitoring income versus expenditure, you can gain a better understanding of your spending habits.

For this reason we created a free budget calculator.

This interactive budget allows you to track your spending and income over a 12 month period. It is also broken into subcategories to simplify the calculations. Lastly, the information is displayed in chart format on the ‘summary’ tab.

Will, I be subject to taxes in retirement?

In retirement you may pass less tax but you likely will not be completely exempt.

Once you pass age 65, you can earn up to €18,000 tax-free as a single person, or €36,000 as a married couple/civil partnership.

Once you turn 66, you will stop paying PRSI which is currently at a rate of 4%.

From a pensions point of view, your tax liability will depend on your arrangement. In general, income arising from pensions in taxable.

For example, if you have an Approved Retirement Fund (ARF), withdrawals are treated as income and taxed under the PAYE system. This means you will be liable to income tax, PRSI and Universal Social Charge (USC).

Early retirement due to ill health

If you need to retire due to ill health, you may be able to access your benefits early. However, your ability to access your benefits early will likely depend on the specific scheme rules.

Whether you are part of an occupational pension scheme or the owner of a personal pension, it may be worth contacting your broker or pension provider for more information.

These circumstances are judged on a case by case basis.

Next steps to plan appropriately for early retirement

We hope this in-depth article has provided you with useful information and clarity around early retirement in Ireland and what it means for you.

As we touched on above, there are many variables when it comes to financial planning and there is no one-size-fits-all approach.

What you may feel is a considerable retirement fund may be trivial in the eyes of the next person.

We also all have different lifestyles and spending habits. Having €400,000 in your pension might last one individual a lifetime whereas the next person may require a larger fund.

If you are considering early retirement, there is no substitute for talking with a qualified professional.  Somebody who has experience guiding clients through this process and planning their retirement.

If you would like to discuss potential options, you can contact our team at the below.

We would be happy to assist and answer any questions you may have.

Book Your Early Retirement Consultation

Join over 2,000+ clients who have availed of our service

how much do i need to retire in ireland

Don’t Get Left Behind!

Enjoy this blog?

We send out a short email every Thursday with some tips and information we think may be useful.

Join over 2,000 subscribers who enjoy our weekly tips!

pension and property

*This blog should be used for information only and not taken as financial advice.

Assumptions

When calculating our figures, in the interest of simplicity, we decided to leave out some aspects that should be accounted for. If you organise a consultation with our team, at this point these aspects will be taken into consideration. Some of these include:

  • Inflation rates
  • Fund growth/performance
  • State Pension of €12,912 per annum
  • Contribution and annual management charges
  • Life expectancy (85 was used in this blog)
  • Tax relief on pension contributions

Experience, combined with a friendly approach

Leave a Reply

Join over 1,000 subscribers

We send an email out with tips and tricks every Thursday.

Don't Get Left Behind..

Sign up for our weekly email!

Different Topic Covered Each Week

how much do i need to retire in ireland

Exclusive Access To Guides & Resources