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Time is money

Last week we took on our youngest client, a young man of twenty two years of age who had the wisdom to start his pension early, this time last year we also took on a young client twenty four years of age, who also had the wisdom to start pension planning early. This is a positive step for both of these clients,  the benefits of using tax relief for gathering wealth for later in life just makes sense.  With our guidance in a short number of years both of these clients will be in full control of their investments, they will also have a good understanding of financial planning.

From research we've done on generation Y they seem to be a little bit more financially literate than generation x,  I'm not sure if this is down to the internet and all the  information available or if gen X are providing guidance to gen Y  based on some of their own mistakes. One thing for is sure the younger a person is when they start their pension the better off they will be in the future, the saying youth is wasted on the young didn't make much sense to me when I was young but I understand it now.  We all know that time is money, these young people have given themselves a great advantage for they have a wealth of time and little money, so by leveraging their time and with the effects of their contributions and compound interest they should retire with some comfort.

The young people who inspired me to write this article should have little problem accumulating a fund of €500,000 + with little effort, now this is a very rough guide that doesn't take inflation or other factors into account, there is some time to pass between this and retirement for both of them, that said any quality financial adviser or guide will also address the virtues of starting early.  It is fantastic to see such wisdom in a young person when there are so many people out there in their thirties & forties who think they are too young for pension planning, only to come up to their fifties and believe they are too old, this is also a wrong assumption.

Currently the income tax threshold for an over sixty five year old is €18,000 and the state pension is roughly €12,000 this means extra income of €6000 per annum can be achieved without tax, so for someone in their fifties they can fund their pension and get tax relief on contributions, grow the fund tax free, at retirement take out 25% tax free and if their income is under the €18,000 threshold will pay no tax.

I can explain this all day long and people will look for the catch, there is no catch, its basically down to self discipline.  To find young people who are not taken in by the negative press is refreshing, these people have bright futures ahead.  Simply because they have deferred gratification for some point in the future so their money can serve them better.  Understand time is money and invest your time wisely.

Post Author: Stephen Fallon

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