By Cleona Kinahan M.SC CFP® QFA FLIA
Retirement longevity planning in Ireland is a conversation that should be happening far more often than it is. Because the reality is that a healthy 65-year-old in Ireland today has a meaningful probability of a retirement that runs to 85, 88, or beyond. For couples, the likelihood that one partner reaches 90 is not remote. A retirement income plan only built on a 15-year assumption is not a retirement income plan. It is a partial one. There is a real retirement identity shift Ireland…
That gap between assumption and reality is where most retirement strategies start to break down.
The three phases nobody plans for
A long retirement does not unfold in a straight line. It moves through distinct phases – each with a different financial profile – and a plan that treats all three as interchangeable will not serve clients well across the full span.
Early retirement, roughly 65 to 75, tends to cost more than people expect. Travel, leisure, home improvements, supporting adult children. This phase is frequently more expensive than the final working years.
Mid-retirement from 75 to 85 sees some discretionary spending ease – but healthcare costs begin rising meaningfully. GP visits, specialist appointments, medications, home adaptations. These are not small numbers accumulated over a decade.
Later retirement from 85 onwards is where long-term care can become the dominant financial consideration. Nursing home costs in Ireland vary significantly by location and level of care. Based on available market data, indicative weekly costs currently range from approximately €1,200 to over €1,500 per week.
The Fair Deal Scheme provides a degree of protection, but it does not remove the need to plan. Where the Nursing Home Loan is used, part of the contribution may be deferred and recovered from the estate.
The home contribution is calculated at 7.5% per year for a maximum of three years – capping the home’s contribution at 22.5% of its value – and is recovered from the estate after death. For families with a legacy plan in place, this matters enormously.
A retirement income plan that models all three phases explicitly looks very different to one built on a single projected spending figure from age 65. Retirement identity shift Ireland.
What a 30-year retirement actually requires from an ARF
For most Irish retirees with a private pension, the Approved Retirement Fund is the central income vehicle across retirement. And the demands placed on an ARF across a 30-year retirement are significant.
Revenue’s imputed distribution rules require a minimum annual withdrawal of 4% of the fund value while you are under 70 for the full tax year. This rises to 5% where you are aged 70 or over for the full tax year, and to 6% where the combined ARF fund value exceeds €2 million.
Each withdrawal is treated as taxable income. Layer inflation on top of that. At a conservative 2% per annum, €4,000 per month at 65 has the purchasing power of roughly €2,700 at 85. The bills do not reduce themselves to match.
Add sequencing risk – the danger that poor market returns in the early years of retirement, combined with ongoing withdrawals, can permanently damage the fund’s long-term sustainability – and the case for active, ongoing ARF management becomes clear.
Retirement longevity planning in Ireland requires an ARF strategy built for the full distance. That means appropriate investment structuring for the long term, a drawdown strategy that manages Revenue obligations efficiently, and an annual review that covers more than investment performance.
The legacy consideration
For people who have accumulated meaningful wealth, the question of what happens to that wealth across a long retirement – and after it – deserves to be planned as carefully as the income.
The Group A CAT threshold in Ireland currently stands at €400,000 for transfers from parent to child (applicable from 2 October 2024). Everything above that figure carries Capital Acquisitions Tax at 33%. With property values where they are across much of Ireland, a significant number of estates sit above this threshold without any structured plan in place.
The strategies that reduce this burden most effectively all operate during your lifetime. Under the Small Gift Exemption, each parent can gift up to €3,000 per child per calendar year with no CAT implications. For a couple with two adult children, that is €12,000 per year passing outside the CAT system entirely.
A Section 72 policy is a Revenue-approved whole-of-life policy, taken out specifically to fund an inheritance tax liability. The policy must meet Revenue’s qualifying conditions – including that annual premiums are paid by the insured and that proceeds are used for the relevant tax liability within the required timeframe.
Provided these conditions are met, the proceeds are exempt from CAT. Unused proceeds may be liable to CAT and should be planned for accordingly.
A will is essential. It directs where assets go and provides legal clarity. But a will alone does nothing to reduce what Revenue takes. Retirement longevity planning in Ireland, done properly, includes the lifetime strategy that sits behind the final document.
A plan and a strategy are not the same thing
A retirement income plan is a snapshot. It captures the position at a point in time and sets a direction. A retirement income strategy is ongoing – it assumes the plan will need to adapt, because across 30 years it absolutely will.
Markets move. Tax rules evolve. Health changes. A family member may need support. The strategy that responds to each of these in real time, with annual reviews and proactive adjustments, consistently produces better outcomes than the plan that is set in motion and left largely unchanged.
The clients at O’Leary Financial Planning who feel most settled about their retirement and legacy are the ones who treat their financial plan as a living thing – reviewed, adjusted, and kept aligned with both their financial position and their intentions for the people they care about.
That is the kind of planning conversation we are here to have.
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Disclaimer: This content is for informational purposes only and does not constitute financial or legal advice. Always seek professional guidance before making decisions.