Somewhere in the retirement plan you were shown, there is a number you never chose. It is probably 95. It might be 90. Whatever it is, an awful lot of people have never been asked whether they agree with it, and yet that single figure is quietly setting your equity allocation, your drawdown pace, and what eventually lands with your children.

There is a strand of American commentary that makes a confident case here: planning to 95 causes people to save too much and spend too little, because very few of them will get there. The evidence they lean on is real enough. The TIAA Institute and the Global Financial Literacy Excellence Centre found in their 2023 Personal Finance Index that only 35% of adults could correctly identify how long a 65-year-old lives on average, so most people are working from a poor sense of their own longevity.

Now, that is American research, and I want to be careful here, because the American conclusion does not travel to Ireland. Their argument is that planning to 95 makes people save too much. In Ireland, Revenue has already taken that decision out of your hands. So the question is not whether you are over-saving. It is something more interesting, and rather more expensive if you get it wrong.

What the Irish Numbers Actually Say

The CSO’s most recent published Irish Life Tables, No. 17, covering 2015 to 2017, put life expectancy at age 65 at 18.3 further years for men and 21.0 for women. So a 65-year-old man reaches roughly 83, a woman roughly 86. At birth the figures were 79.6 and 83.4.

Right. So plan to 83 and spend the difference?

No. And this is the part that matters, because it is where a lot of commentary on this topic goes badly wrong. The CSO says it plainly in their own methodology: period life expectancy “is not the number of years someone of that age could expect to live, given that deaths rates are likely to change in the future.” These tables freeze the mortality rates of the period they cover and roll them forward. They do not allow for the medical improvements that have added years to Irish life expectancy in every single set of tables since 1926. A man at 65 gained 5.5 years between 1926 and 2016. Nobody sensible builds a plan on the assumption that improvement stopped.

There is a second caveat. That series covers 2015 to 2017 and remains the latest published, with the next one in development, so it is describing a period now some years behind us. The honest position is this: 83 and 86 are the floor of the conversation, not the answer to it. Add your own health, your family history, whether you smoke. Two men of 62 in the same room can have a decade between them, and the plan should know that.

What I am not going to do is tell you to plan for a shorter life. That is a genuinely dangerous piece of advice and I have no interest in giving it.

Why the American Argument Falls Apart at the Irish Border

Here is where it gets Irish. In the United States, someone who plans to 95 can choose to leave their pot untouched and let it compound. That is what makes over-saving possible over there.

You cannot do that here. Once you have been 60 or over for a full tax year, which in practice means from the year you turn 61, Revenue’s imputed distribution rules mean 4% of your ARF is deemed to have been taken and taxed, whether you take it or not. Once you have been 70 or over for a full tax year, that rises to 5%. And where the combined value of your ARFs and vested PRSAs is greater than €2m, it is 6%, applied to the whole fund rather than just the excess above €2m. The rules are set out in Revenue’s Pensions Manual, Chapter 28.

To call a spade a spade: Revenue decides when your drawdown starts. You do not. Which means the Irish version of this question is not “am I saving too much?” It is: where does the money go once Revenue has forced it out of the pension, and what is my plan for it?

An awful lot of people have no answer to that. The money lands in a deposit account and sits there.

Danny, 62, and €1.2m

Let me put numbers on it. Take the fictional scenario of Danny, 62. Recently retired from a senior engineering role. €1.2m in an ARF, plan built to 95 because that is what the software does. He is drawing the imputed minimum and nothing more, because he has been told the pot needs to last.

The projections below assume a nominal 5% annual return net of charges, with the imputed distribution applied to the fund value at the end of each year and drawn from age 62 onwards. That is an assumption, not a forecast. Every figure was recomputed independently in code.

By age 83, Danny has drawn €1,269,521 out of that ARF. More than the fund was worth when he started. And the fund is still sitting at €1,251,068, because the growth and the forced withdrawals have been running at roughly the same pace.

Now push it to 95. He draws €2,046,946 in total, and the fund is worth €1,214,048.

Look at those two closing figures again. €1,251,068 at 83. €1,214,048 at 95. Twelve extra years of life, and the pension pot is essentially unchanged.

That is the finding, and I did not expect it when I started running the numbers. The age assumption in the plan barely moves what is left in the ARF at all. The imputed distribution flattens it. What the age assumption actually changes is Danny’s behaviour: how cautiously he invests, how little he spends, and what he does with more than €1.2m of drawn income that he never had a plan for.

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What This Means for What’s Left for the Family

The pension side is straightforward, and the rules are in Chapter 23 of the Pensions Manual. If Danny’s ARF transfers to an ARF in his spouse’s name, there is no income tax and no CAT at that point. She simply steps into his shoes and pays income tax on what she draws.

On the second death, or where there is no spouse, it changes:

• A child under 21 pays no income tax, but the inheritance falls within CAT

• A child 21 or over pays income tax at a ring-fenced 30%, and no CAT, regardless of the size of the fund

• Anyone else pays income tax and CAT

So Danny’s fund of €1,251,068 at 83 carries a 30% charge of €375,320 on its way to adult children. At 95, the fund is €1,214,048 and the charge is €364,214. Barely different, which tells you, again, that the age assumption was never the lever.

Here is the lever. Had Danny drawn €85,000 gross a year from 62 instead of the bare minimum, funding a decent standard of living and helping the children while he was alive to see it, the ARF at 83 would be €307,019 and the charge on death €92,106 rather than €375,320. He would have drawn €1,785,000 over those years and used it.

Same fund. Same man. A €283,000 difference in what Revenue takes at the end, driven entirely by whether he spent his own money.

None of that is an argument for draining the pension. It is an argument for the plan having a view. Alongside it sit the ordinary levers: the small gift exemption lets each parent give each child €3,000 per calendar year, CAT-free, without touching the lifetime threshold. Two parents, two children: €12,000 a year, €252,000 over the 21 years from 62 to 83, and the Group A threshold of €400,000 per child left fully intact. Above that threshold, CAT is 33%. A child inheriting €600,000 of non-pension assets faces €66,000. Note that the small gift exemption applies to gifts only, not to inheritances.

For a fuller treatment of the pension side, our article on what happens to your pension when you die goes deeper, and if the estate side is your concern, reducing the inheritance tax burden for your beneficiaries covers the ground properly.

So What Should You Actually Do?

Ask what age your plan runs to, and ask why. If nobody can tell you why, that is the whole point of this article.

Then plan long, genuinely long, because outliving your money is a far worse outcome than dying with some left. But stop treating the closing balance as an accident. Decide what you want to happen to it. Whether that is spending it, gifting it during your lifetime, or leaving it and accepting the 30% charge as a fair price for the flexibility, all three are respectable answers. Having no answer is not.

And build the drawdown around the fact that Revenue has already started it for you. Our piece on safe withdrawal strategies from an ARF sets out how to think about the sustainable rate once that floor is in place.

Do yourself a favour and have a think about this one. The worst thing in the world is to have a thought and not follow it up.

All figures here are subject to change and should be verified at Revenue.ie or with a qualified, independent advisor before you act on anything.

I hope this helps.

Paddy Delaney QFA RPA APA

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