If you're over 50 and thinking about retiring, then you've probably already started to consider your options. The good news is that there are many ways to access retirement income: from buying an annuity or even taking out a loan. However, before making any financial decisions it's important that you first understand what type of pension plan best suits your needs. This article will compare the two most common types of pension plans available in Ireland today: Defined Benefit (DB) pensions and PRSAs (Personal Retirement Savings Accounts).
Defined Benefit (DB) pension plans
You may have heard of DB pensions, but you might not know how they work. A defined benefit plan is a type of pension plan where the employer promises to pay you a certain amount when you retire. This means that your retirement income will be guaranteed and there are no risk factors involved.
In contrast, with a defined contribution (DC) scheme, your employer contributes money into your DC pension fund; this could be either pre-tax or after-tax depending on which country's tax system applies to your business. This means that at any point in time the amount they have invested in their employees' DC plans cannot exceed their liability towards providing these employees with benefits during their lifetime - meaning if an employee leaves before reaching age 65 then they won't get anything back from this investment!
PRSAs
The PRSA is the most flexible option, but it comes with some downsides.
If you want to move jobs and take your pension with you, then the PRSA may not be for you. It's only portable if it's been transferred from one employer to another. If this happens and your new employer doesn't offer a PRSAs, then there are no options for transferring funds between employers until retirement age (which can be as early as 60).
If flexibility is important to you, then this type of pension plan shouldn’t be an option for any job-hopper who wants their money invested in stocks or shares when they start working again after leaving their last job behind at 65 years old.
How to choose the right pension plan for you?
- Consider the type of pension plan you want.
- Look at the benefits of each pension plan.
- Check that you can afford to make monthly contributions, and how long you have until retirement.
Takeaway:
So, what's the best option for you? It depends on your personal situation and what kind of risk you're willing to take. If you have a high-earning job and are worried about losing it in the next recession (or if you're just generally concerned about protecting yourself), then a PRSA might be right for you. On the other hand, if having money set aside for retirement is more important than being able to retire at any point in your life, then a DB pension plan may be more appropriate.
Conclusion
Overall, this article has been designed to help you choose the right pension Ireland plan for your needs. We’re confident that we have covered all the key points in this post and will be able to provide you with a high level overview of each one. If there is anything else that we haven’t covered here, feel free to contact us and we will be glad to answer any questions that may arise from reading through this guide! Happy savings!
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