Retirement should feel like freedom.
But for many people, it begins with uncertainty.
You’ve built up your pensions. You’ve stopped working. And for the first time in decades, there’s no monthly paycheque arriving.
Now the big question hits:
Where should you start drawing your income from?
For many, the decision seems simple: take it as you need it. But in reality, the order you draw down your assets can make a huge difference. Get it wrong, and you could quietly lose tens of thousands of euro in unnecessary tax over your lifetime — or worse, increase the risk of running out of money too soon.
As a Certified Financial Planner, I help clients solve this exact problem every day. You may have a mix of pensions, an ARF, a lump sum, savings, or other investments. The key is knowing how to structure withdrawals in a way that reduces tax, avoids surprises, and keeps your plan sustainable.
In this article, I’ll walk you through:
Why the “old world” of retirement is gone
How the bucket strategy gives structure and peace of mind
Where to draw from first, and why tax bands matter
How to plan for multiple pensions and even inheritance
The Retirement Shift
Not long ago, retirement was simple.
You stopped working at 65, received a defined benefit pension, and the payments arrived every month for life. No decisions. No drawdowns. No stress.
That world is gone for most of us.
Today, we’re in the era of defined contribution pensions: PRSAs, AVCs, buyout bonds. These don’t promise income — they give you a pot. And turning that pot into a reliable, tax-efficient income stream is now your job.
That brings flexibility, but also responsibility. Draw too much, too soon? You risk running out. Draw without a plan? You could pay far more tax than necessary.
The foundation of your retirement strategy starts with one question:
What’s your income baseline?
This includes income sources that arrive without touching your pension or investments, such as:
Rental income
Part-time work
A defined benefit pension from a past employer
The State Pension (from age 66)
From there, you calculate your lifestyle needs and the gap you’ll need to fill from your retirement pots. And how you fill that gap — in what order, and with what assets — makes all the difference.
The Bucket Strategy
The bucket strategy is one of the most effective ways to structure retirement withdrawals. It protects you against short-term shocks while keeping your long-term money working.
Bucket 1 – Immediate (Years 1–3)
Covers your near-term spending needs.
Held in cash or short-term bonds.
Certainty is the goal, not growth.
Bucket 2 – Medium-Term (Years 4–10)
Balances stability and moderate growth.
Often a mix of income-focused funds, bonds, or dividend equities.
Each year, you refill Bucket 1 from here.
Bucket 3 – Long-Term (10+ Years)
Growth-focused assets like equity funds or global ETFs.
Designed to beat inflation and sustain your plan over decades.
Rebalances back into Bucket 2 as needed.
This system creates a conveyor belt of income. When markets fall, you don’t panic-sell equities — your short-term cash is already covered. And when markets recover, you refill the buckets in order.
The result? Clarity and calm in the face of volatility.
Where to Draw From First
Here’s the surprising part: in many cases, it’s smart to start drawing from your pension or ARF before age 66 — even if you don’t need the income yet.
Why? Because of Ireland’s income tax bands.
At present, you can draw income within the 20% band. But once the State Pension begins at 66, that band fills quickly. Any withdrawals above it may be taxed at 40% instead of 20%.
The strategy:
Draw just enough each year from your ARF to fully use your 20% band.
Avoid large withdrawals that push you into 40% unnecessarily.
Leave the rest invested for later.
It’s a simple adjustment that can save tens of thousands over a retirement.
Multiple Pensions: Consolidate or Coordinate?
Many clients have several pensions from different jobs — PRSAs, AVCs, buyout bonds. The question is whether to consolidate.
Often, consolidation into one ARF makes sense: fewer accounts, one investment strategy, simpler administration. But it’s not always best. Some pensions have unique access rules, fund options, or lower fees.
The rule of thumb: simplify when it adds value, not just convenience. Even if pensions remain separate, your withdrawal strategy should be unified — pulling the right amounts, from the right places, at the right times.
Thinking About Inheritance
Finally, don’t overlook what happens to your pension after you’re gone.
For example, ARFs can be passed to adult children — but they’re subject to Capital Acquisitions Tax (CAT) above the €400,000 threshold, at 33%. That means a €500,000 ARF inheritance could trigger €33,000 in tax for your child.
Sometimes, drawing more now at 20% tax can be smarter than leaving a large taxable pot later. Other times, preserving the ARF makes sense if legacy is your priority. The key is balancing your lifestyle needs today with your estate goals tomorrow.
The Retirement Drawdown Blueprint
To recap, here’s a clear roadmap for Irish retirees:
Map your income floor – identify guaranteed income like rental income, DB pensions, and State Pension.
Calculate your gap – lifestyle spending minus guaranteed income.
Use the bucket strategy – short-term cash, medium-term income, long-term growth.
Draw ARF income early and smartly – fill your 20% band before the State Pension starts.
Top up strategically – with tax-free lump sum, investment accounts, or cash savings.
Refill buckets annually – keeping the conveyor belt running.
Plan for inheritance early – balance today’s withdrawals with tomorrow’s legacy.
This is how you turn a collection of pensions and savings into a structured retirement income plan.
Final Thoughts
Most people put huge effort into saving for retirement — but far less into planning withdrawals. Yet this stage is where mistakes are most costly.
The good news? With the right structure, you can reduce tax, create stability, and build a retirement income plan that actually lasts.
If you’d like clarity on your own plan, I offer private consultations for business owners and high-income professionals. We’ll map your pensions, test your drawdown strategy, and give you a joined-up plan covering tax, cashflow, and legacy.
Retirement isn’t about guesswork. It’s about strategy.
So, where will you draw from first?
I empower people to take full control of their finances, guiding them step by step towards building, growing, and preserving true wealth.
About the Author
Kevin Elliott is a Financial Planner and quantitative finance expert with over 18 years of experience in global financial markets. He has worked with top-tier institutions such as Bank of New York, Bridgewater Associates, RBS, CIBC, UniCredit, and Bank of America, where he served as Director in New York.
Holding a BSc in Economics and Finance and a Graduate Diploma in Financial Planning from University College Dublin, along with an MBA from Imperial College London, Kevin combines deep technical expertise with a passion for personal finance and wealth building.
Kevin is committed to helping individuals take control of their finances, invest wisely, and build long-term wealth. With a knack for simplifying complex financial concepts, he provides actionable insights on investing, retirement planning, and financial independence.
Whether you’re a beginner looking to start your wealth journey or a seasoned investor fine-tuning your strategy, Kevin offers practical guidance, expert analysis, and proven strategies to help you achieve financial freedom and security.
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