Meet Jack – A Business Owner Planning for Retirement
Jack is a 60-year-old Irish business owner who has spent decades building a successful business. He has €1,000,000 in his pension and wants to decide how to turn that into a reliable income for himself and his family.
The Strategy: An Approved Retirement Fund (ARF)
Jack chose to invest in an Approved Retirement Fund (ARF). Here’s how it worked:
Lump Sum
Jack received €250,000 as a lump sum. (The first €200,000 was tax-free, and the remaining €50,000 was taxed at 20%).
ARF Investment
The remaining €750,000 was invested in an ARF, allowing Jack to manage his funds and draw income as needed.
Annual Income
Based on the funds that Jack has chosen, he has decided on 4% drawdown for the moment. Jack now receives a gross annual income of €30,000, with flexibility to adjust as his needs change. This income is subject to Income tax, PRSI and USC.
Death
If Jack dies before his wife, the value of his ARF will become an ARF for his wife so that she can continue to receive an income. On his wife’s death, the remaining value of the ARF can be passed to their children.
Even though Jack has decided on the above plan, every case is different and requires advice to help to make the best decisions.
I hope the above case study can help you to understand pension access a little better.
Of course if you have any questions, please feel free to contact me on 01 5267770 or email jfenelon@arfireland.ie.
Warnings:
These examples are for illustration purposes only
Past performance is not a reliable guide to future performance
The value of your investment may go down as well as up
There is no guarantee that the accumulated retirement fund will provide any specific level of retirement income
