Is it wise to stop saving for retirement to deal with high prices?

Q The cost of living crisis is really making it difficult for me to make ends meet. I have a reasonably good salary, but my commute now costs me significantly more. I run the risk of falling behind on my mortgage or car loan if things continue as they are. I currently pay 5 percent of my salary into my company pension – my boss pays a corresponding contribution. To free up some income I’ve decided to stop these pension contributions – is that a good idea? I’m in my early forties. Sean, Co Kerry

A Maintaining your current lifestyle while meeting your financial obligations should be your top priority.

They have made financial arrangements with financial institutions for a car loan for transportation from a rural area and a mortgage for housing. Default on these loans can have a significant impact on your future borrowing ability and make future borrowing more expensive. Therefore, making the possibility of these loans defaulting less likely is the right course of action.

If you stop paying your pension contributions entirely, you risk getting used to having extra disposable income every month. Also, by stopping contributions, you lose the tax credit on pension contributions, and you also lose the employer’s contribution of 5 percent of salary. That’s important, and that money properly invested over 20 years or more would be important to sustaining your lifestyle when you stop working.

Rather than stopping all contributions, discuss with your employer the minimum employee contribution required to receive the matching employer contribution. You may only need to fund 3 or 4 percent of your salary to receive the equivalent employer contribution. This would keep the investment in your pension going and allow you to take advantage of the tax breaks – while freeing up income.

If you’ve lowered your pension contribution—or if you decide to stop contributing entirely—do a comprehensive budget. There are online budget tools at and that can help you put together a workable budget. This budgeting exercise is designed to help you identify areas where you can save income on your current expenses so you can get back to a pension contribution of at least 5% of your salary as soon as possible.

Stick with critical illness insurance when switching mortgages

Q I am considering switching my mortgage to another bank. I have mortgage protection insurance on my current mortgage – and due to a health issue, serious illness protection is built in. How can I make sure I don’t lose the critical illness coverage of my mortgage insurance if I switch? Could I expect a higher premium for my mortgage protection insurance after switching mortgages? I would no longer borrow from the new lender when I switched, so the outstanding mortgage would be the same. Niall, Co Dublin

A As a condition of your loan with your existing lender, you had to obtain mortgage protection. In fact, you’re covering the risk to your lender that you die before you pay off your mortgage.

Under your policy, the amount of life insurance would have been at least equal to the loan amount. Likewise, the term of the policy would have at least equaled the term of the loan.

In the event of your death during the term of your mortgage, the life insurance benefit of the policy would pay the outstanding mortgage – and ownership of the property would pass to your estate, debt-free.

They have also integrated critical illness insurance into this policy.

While this is unlikely to be a condition of the mortgage offer, if it’s affordable and within your budget, adding a serious illness to the mortgage protection policy is always good planning. When you switch mortgages, you pay your current lender the outstanding amount of your mortgage, eliminating the need to transfer the mortgage protection policy to your current lender.

As long as you stop borrowing from your new lender and you don’t extend the term of the mortgage, your existing mortgage protection policy can be transferred to the new lender and all the benefits you currently have remain. There are no premium increases or changes to benefits currently applicable to your existing policy. Is it wise to stop saving for retirement to deal with high prices?

Fry Electronics Team

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