Mid 40's: how to maintain/max wealth + retire early

[iceblue]

Personal details
Age: 44
Spouse's age: 45
Number and age of children: 7 & 11


Income and expenditure
Annual gross income: 127,000 + 15% Bonus
Annual gross income: 145,000 + 20% Bonus

Monthly take-home pay: 5,500
Monthly take-home pay: 6,500

Type of employment: Employee (both)
Employer type: Private company (both)

In general are you: Saving 4,500 per month.

Summary of Assets and Liabilities
Family home value: 600,000
Mortgage on family home: 200,000
Net equity: 400,000

Cash: 120,000

Company shares : n/a

Family home mortgage information
Lender: BOI
Interest rate: 3% fixed.
Term remaining of the fixed rate: 3.5yrs

Remaining term: 22yrs
Monthly repayment: 1250 incl 10% overpayment

Other borrowings – car loans/personal loans etc
No other borrowings
Credit card balance paid each month.

Pension information
Value of pension fund me: <100,000 tbc. Only joined occupational scheme approx 2yrs ago. No pension prior to this.
Value of pension fund spouse: ~400,000 tbc.

Pension me: Employer 10%, Employee 15% + lump sum AVC each year to max 25%
Pension spouse: Employer 10%, Employee 10% + lump sum AVC each your to max 25%

Buy to let properties
Property 1
Value: 250,000
Mortgage: 135,000
Rental income per year: 15,000
Rough annual expenses other than mortgage interest: 2,000
Lender: ESB
Interest rate: Tracker + 1.25%
Originally PPR

Property 2 (50/50 with sibling)
Value: 300,000
Mortgage: 190,000 tbc
Value: As above. Originally PPR
Rental income per year: 14,000
Rough annual expenses other than mortgage interest: 2,000
Lender: PTSB
Interest rate: Tracker + 1.15%
Originally PPR


Other savings and investments:
Cash savings as above in various AIB, Revolut, Credit Union accounts.


What specific question do you have or what issues are of concern to you?

• We have had large expenditure over last few years - house deposits, house upgrades, car upgrades, disneyland etc,
• So all large expenditure has settled now, bar may car upgrade in next 2yrs
• We max pensions and pay ad-hoc lump sums off the PPR mortgage each year. Aiming to have it done by 2030.
• Assuming we will have school/college fees and the kids will likely be "dependents" for some time yet.
• This will be off-set as at some stage both childminding fees and mortgage will fall away and kids will fend for themselves.
• Given we have a healthy income and savings ability how should we best use our money to maintain/maximise wealth?
• Both jobs can be stressful at times. A "nice to have" would be one or both of us stepping back or retiring in mid-late 50's. Although, no doubt with more time on our hands we would also spend more. What would we need to do better to achieve this?

 

[Ben147]

Sell the second property.
Pay off your mortgage.
Max pension contributions.
Put 100k of your cash in stocks.. [ college fund]
Keep remaining cash on hand for Car, emergency fund etc.
Then just continue to save into investments with surplus cash to live off when you retire early and avoid pulling employee pensions until closer to age 65

 

[aristotle]

With combined income of over 300k per year where has all the money gone over the years? Or has the income gone up recently?

You need to look at your spending. You say a net income of 12k per month (doesn’t account for bonus?) and saving 4.5k, spending 7.5k seems high for family of 4 with young kids?

You haven’t saved 4.5k consistently over the last 5 years for example if you have cash of 120k?

You have a net wealth of about 1.25m which based on your big incomes and age seems lower than it should be?

How much for example have you spent on cars over the last 6-7 years?

 

[Freelance]

In general, you appear to be in control and in good shape. Definitely stick to the plan to clear the PPR mortgage. And continue maxing out the pension contributions.

Just a few comments:

You mention: A "nice to have" would be one or both of us stepping back or retiring in mid-late 50's. - Depending of course on circumstances and relationship status, it often makes a lot of sense if both retire at the same time, or in reasonably close succession (a year or two apart). Not much fun if one is retired and the other continues the daily drudge - limits your opportunities to do things together, travel together, holiday together etc. Appreciate that you will still have a teen in the picture at that stage, but maybe firm-up on a goal such as "both retire between 59 and 61, future circumstances permitting".

Given your substantial bonuses, is there any possibility of having these treated as employer contributions to you pension ? It is sometimes possible to do this without running foul of the salary sacrifice rules.

Are you sure that you are maxing out your pension contributions. I've seen people assume that the age relates pension contribution % rates to salary, whereas revenue actually allow this to be calculated based on Net Relevant Earnings including salary, bonuses and value of many benefits in kind including many allowances. The difference can be significant.

Fitness, strength and wellbeing. All other things being equal, your 60s could well be some of your best years. Based on your current earnings trajectory, you shouldn't have too many money worries. You family will be raised(ish) and you should have a lot of freedom. But to maximise the benefit you need to be in good health when you get there. Now would be a good time to start including (if you both haven't already) fitness in your plans. Diet, gym, strength and fitness coaching, Pilates, Yoga, hillwalking etc etc. the list is endless. It doesn't have to become an obsession, but get started and keep it going. It will pay dividends, now as well as in the future.

 

[DublinHead54]

You're in a really good position. You seem to be in a position that you can plan to retire early, but maybe not really sat down and planned what that means? E.g. what lifestyle do you want to have.

Based on cash, monthly savings and bonus you could comfortably pay off your mortgage by the time the fixed rate ends.

 

[Brendan Burgess]

Both jobs can be stressful at times. A "nice to have" would be one or both of us stepping back or retiring in mid-late 50's.

When people are thinking of retiring early, it suggests to me that they are in the wrong job.

You are very well paid and you have plenty of assets.

One or both of you could change careers or employers to do a job you really want to do. You can afford to do so.

Brendan

 

[DublinHead54]

When people are thinking of retiring early, it suggests to me that they are in the wrong job.

You are very well paid and you have plenty of assets.

One or both of you could change careers or employers to do a job you really want to do. You can afford to do so.

Brendan

Depends on your point of view.....do we work to live or live to work?

I'd imagine the primary motivation for most is maximising salary and then getting out of the rat race as early as possible. It is easy to say to find a job you love, but are there really that many out there?

Maybe it is more retire from their career at 55 and do something else defined by their own choice?

 

[DublinHead54]

Fitness, strength and wellbeing. All other things being equal, your 60s could well be some of your best years. Based on your current earnings trajectory, you shouldn't have too many money worries. You family will be raised(ish) and you should have a lot of freedom. But to maximise the benefit you need to be in good health when you get there. Now would be a good time to start including (if you both haven't already) fitness in your plans. Diet, gym, strength and fitness coaching, Pilates, Yoga, hillwalking etc etc. the list is endless. It doesn't have to become an obsession, but get started and keep it going. It will pay dividends, now as well as in the future.

I now think health is far more important than financial health, to take a quote I saw recently.

"You can have 1000 problems in your life until you have a health problem. Then you only have one problem."

 

[Freelance]

When people are thinking of retiring early, it suggests to me that they are in the wrong job.

You are very well paid and you have plenty of assets.

One or both of you could change careers or employers to do a job you really want to do. You can afford to do so.

Brendan

Depends on your point of view.....do we work to live or live to work?

I'd imagine the primary motivation for most is maximising salary and then getting out of the rat race as early as possible. It is easy to say to find a job you love, but are there really that many out there?

Maybe it is more retire from their career at 55 and do something else defined by their own choice?

I'd agree 100% with @DublinHead54 take on this.

My father retired at 58 and always said it was the second best decision of his life. I set emulating this as my target when I was in my 40s. I wasn't unhappy in my career generally, and any time I was I changed jobs. Certainly enjoyed my final 15 years which were challenging, sometimes stressful but rewarding personally and financially. I missed my target by two years, retiring when I reached 60. I eschewed all pressure and inducements to stay for a couple of years, stay part time, stay on a consultancy basis and other outside offers. I had done my stint, satisfied my personal ambitions and was ready to move on and enjoy my time. A decision I haven't once regretted.

So while for some people early retirement may be an escape from hell, and for others an anathema, I think giving it serious consideration is to be recommended. For me it was a very positive step.

 

[Brendan Burgess]

do we work to live or live to work?

That really is the point.

If you are working in a stressful job which you don't enjoy, then making a lot of money doesn't justify it.

I think that it's worth asking yourself the question why are you working so hard and why do you want to retire?

It might be because they want to spend more time beekeeping and that is fine.

But it's often a symptom of the wrong job.

Just make sure to ask the question.

Brendan

 

[DublinHead54]

That really is the point.

If you are working in a stressful job which you don't enjoy, then making a lot of money doesn't justify it.

I think that it's worth asking yourself the question why are you working so hard and why do you want to retire?

It might be because they want to spend more time beekeeping and that is fine.

But it's often a symptom of the wrong job.

Just make sure to ask the question.

Brendan

How do you define stressful? I think we often confuse a stressful job with a busy job.

Maybe a high paid job is stressful, so you leave it for a lower paid job and replace the work stress with financial stress. Stress can be a personal issue and two individuals in the same environment handle it differently. It is 2024, nobody should be feeling undue longterm stress in a job, and if they do they should raise it internally, seek external help etc. There should always be a solution that isn't just "find a lower stress job".

There are times in my career where I have disliked my job, it has been incredibly busy and tough to manage with young kids etc. I think it is normal that it can ebb and flow, but overall I have still really enjoyed my career thus far.

But regardless of that at the end of the day I work for a company, so I plan to 'retire' early and have the freedom to do as I please. I do think the mindset is entirely different if you work for yourself.

 

[thunderin_eejit]

When people are thinking of retiring early, it suggests to me that they are in the wrong job.

You are very well paid and you have plenty of assets.

One or both of you could change careers or employers to do a job you really want to do. You can afford to do so.

Brendan

Getting a big salary often involves having some sort of specific or niche skills, it's not so easy to "change careers" - even if you are willing to accept the salary decrease and uncertainty, which is itself another form of stress. Accepting the stress, pocketing the salary and aiming to get out early is a valid strategy.

 

[Sarenco]

There’s around €115k equity in Property 1, earning around €2,500pa, after tax. Financially, it would make more sense to realise the equity and pay it off the PPR mortgage @3% (which is likely to rise when your fixed-term is over).

You’ve around €55k equity in Property 2, earning around €300(!)pa, after tax. Again, it makes more sense financially to realise the equity and pay it off the PPR mortgage.

So, I think you should sell both rentals and pay down your PPR mortgage. Actually, I think you should just clear the PPR mortgage.

Otherwise, keep maxing out your pension contributions and stick with a 100% allocation to global equities.

Once the mortgage is gone, any after-tax savings can be kept on deposit.

Keep it simple.

You might also think about starting bare trusts for your kids and utilising the small gift exemption to fund same.

 

[iceblue]

@aristotle

With combined income of over 300k per year where has all the money gone over the years? Or has the income gone up recently?

Wasn't always this level. Significantly increased in last 2 - 5yrs

We have had large expenditure over last few years - house deposits, house upgrades, car upgrades, assisting familly, one off holidays like disneyland. Circa 500k over last 6 years. This was done from savings.

You need to look at your spending. You say a net income of 12k per month (doesn’t account for bonus?) and saving 4.5k, spending 7.5k seems high for family of 4 with young kids?

When put so plainly this does cause me to question spending. However we keep a fairly detailed log of annual expenses and can account for all of the expenditure.

 

[iceblue]

In general, you appear to be in control and in good shape. Definitely stick to the plan to clear the PPR mortgage. And continue maxing out the pension contributions.

Just a few comments:

You mention: A "nice to have" would be one or both of us stepping back or retiring in mid-late 50's. - Depending of course on circumstances and relationship status, it often makes a lot of sense if both retire at the same time, or in reasonably close succession (a year or two apart). Not much fun if one is retired and the other continues the daily drudge - limits your opportunities to do things together, travel together, holiday together etc. Appreciate that you will still have a teen in the picture at that stage, but maybe firm-up on a goal such as "both retire between 59 and 61, future circumstances permitting".

Given your substantial bonuses, is there any possibility of having these treated as employer contributions to you pension ? It is sometimes possible to do this without running foul of the salary sacrifice rules.

Are you sure that you are maxing out your pension contributions. I've seen people assume that the age relates pension contribution % rates to salary, whereas revenue actually allow this to be calculated based on Net Relevant Earnings including salary, bonuses and value of many benefits in kind including many allowances. The difference can be significant.

Fitness, strength and wellbeing. All other things being equal, your 60s could well be some of your best years. Based on your current earnings trajectory, you shouldn't have too many money worries. You family will be raised(ish) and you should have a lot of freedom. But to maximise the benefit you need to be in good health when you get there. Now would be a good time to start including (if you both haven't already) fitness in your plans. Diet, gym, strength and fitness coaching, Pilates, Yoga, hillwalking etc etc. the list is endless. It doesn't have to become an obsession, but get started and keep it going. It will pay dividends, now as well as in the future.

Thanks Freelance

Wise comments on the timing of retirement and health. Better diet and exercise is definitely an area for improvement.
Yes we max pensions at 25% of €115k+ the employer contribution on top.

 

[iceblue]

Maybe "stress" is a word that is bandied about too easily.

Work certainly takes commitment and can be demanding to all-consuming at times. While it feels tough going at certain periods you usually come out the other side with more ability and experience. This translates to progression and improved salaries over the years....which is the bit of the job we all like

I am of a mindset that I would prefer to stick with this career and bank the salary for say 10 yrs, than change to something else with a lesser salary and need to work for 20yrs. I could always find a new hobby to love with the spare time!

I think that it's worth asking yourself the question why are you working so hard and why do you want to retire?

Food for thought.
Partly because it's "in me" to work hard. Maybe that's a bad habit that should be broken!
I like the salary and financial security and independence it has brought
If we acccumlate wealth now we can retire early

 

[iceblue]

There’s around €115k equity in Property 1, earning around €2,500pa, after tax. Financially, it would make more sense to realise the equity and pay it off the PPR mortgage @3% (which is likely to rise when your fixed-term is over).

You’ve around €55k equity in Property 2, earning around €300(!)pa, after tax. Again, it makes more sense financially to realise the equity and pay it off the PPR mortgage.

So, I think you should sell both rentals and pay down your PPR mortgage. Actually, I think you should just clear the PPR mortgage.

Otherwise, keep maxing out your pension contributions and stick with a 100% allocation to global equities.

Once the mortgage is gone, any after-tax savings can be kept on deposit.

Keep it simple.

You might also think about starting bare trusts for your kids and utilising the small gift exemption to fund same.

I have only started a pension recently, and feel it is low for my age. I had viewed the properties as long term holdings that would provide monthly income during retirement. Is this foolish?

I think we could continue to max pension and clear PPR in next 4-years without selling.

 

[Sarenco]

I think we could continue to max pension and clear PPR in next 4-years without selling.

Fair enough.

I wonder would it be worth fixing the mortgages on the rentals? The interest on the trackers is really hurting your net returns.

 

[iceblue]

Fair enough.

I wonder would it be worth fixing the mortgages on the rentals? The interest on the trackers is really hurting your net returns.

Thought about that when tracker started to rise. Landed on riding it out for a while, tracker might fall again and if keeping property for the longterm the current rates might be just a 3 or 4 year blip.

 

[Annieindublin]

You seem to be in a good place.
However I’d have a think about the kids aspect. Childcare and time with them. How is the work life balance at the moment? Will that work with 2 teens?
We found childcare for teens much harder than for younger kids, 3 months holiday.. and I know there are a gazillion summer camps. It wasn’t so much finding places for them to go (they were sporty musical and arty) but taking 2 months off to learn to sail with them, a week to go skiing, these things weren’t going to fly with my then employer so I moved and “downsized” my career, then my partner did the same. We can’t retire early but we all had a blast.

Just another angle. Ignore if by all means