Worked hard / 350K cash - Taking time now to plan forward.

D

dub45trying

New Member
Messages
4
Personal details
Age: 45
Spouse's age: 42
Number and age of children: 0

Income and expenditure
Annual gross income from employment or profession: €160K
Annual gross income of spouse/partner: €50K
Monthly take-home pay: €9,900

Type of employment - Employee in Tech & and Spouse in semi state

In general, are you:
(b) saving? Approx €4k a month. Generally top up savings with any disposable income.

Summary of Assets and Liabilities
Family home value: €650K
Mortgage on family home: €250K
Net equity: €400K

Cash: €350K
Site in west of Ireland: €50K (we may build on this in five years' time)

Total net assets: €800k Approx

Family home mortgage information
Lender: Haven
Interest rate: 3.5%
Type of interest rate: tracker, variable, fixed. Fixed
If fixed, what is the term remaining of the fixed rate? two more years.

Remaining term: 20 years
Monthly repayment: €1,400

Other borrowings – car loans/personal loans etc
None
Car Value: €15K

Pension information
Value of pension fund:
Defined contribution pension fund: €140K (Irish Life)
Spouse Defined Benefit: €15K per Anum at retirement

I do intent to make a AVC for 2023 and 2024. Maybe €20K

Buy to let properties
None

Other savings and investments:
Bought €10K Gold ETF and this has done well over the last year +30%

Other information which might be relevant
Mortgage protection insurance: €40 a month

What specific question do you have or what issues are of concern to you?
I have worked quite hard over the last ten years, as GFC wiped me out financially, I was self-employed during 2006 to 2012 and had very little income in this period. I had to start a career in private sector and work my way up in salary level. I am in the current role less than one year, all things been equal, both our jobs are as secure as they can be, we are both happy in the roles. We are active and enjoy life with a couple of holidays, keep healthy.

We are saving for a potential house purchase; however, we like the area here and do not need to move or spend on our current home. We upgraded the interior four years ago and don't envisage significant outlays in the next three years. There are certain houses that if they came up for sale in our area, we would likely want to purchase. Approx value of these would be €1M to €1.2M. (I would not like to do this if it put us under any pressure financially to do so).

Question 1.
I have cash in deposit interest bearing accounts (not beating inflation, I am considering moving some cash to money market accounts on Degiro, however, I am not 100% clear on the return with these, this is the one I am considering, Lyxor Smart Overnight Return - UCITS ETF C-EUR.

Question 2.
I am open to share ownership and ETFs, though see the stock market as quite high now. I have explored Trading 212 where they have Pies you can invest weekly. I am willing to start a weekly fund purchase about €500 a week.

Question 3.
I am open to paying for independent financial advice, however, I find it hard to identify someone to work with. Any recommendations on best way to seek out someone. Time poor for research.

Question 4.
I didn't see paying off the mortgage as a sensible thing to do, but now maybe this is a good way to go. Longer term I would like to have a second property that produces rental income, however, I also am more aware of dividends as an income source now as well.

Essentially, worked hard to get to this point, have considerable experience in my sector, enjoy the challenge of this role. I now want to continue this progression, at this time, I am willing to spend a bit of time on some financial planning, which I have never really done up to now as I was quite focused on self-development and progression in my take home pay and improving our home.
 
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Your pension is very low for your age/salary level. IMO you should prioritise maximising your tax-relieved pension contributions for 2023 and going forward.

Does your spouse have any scope to make AVCs or to purchase notional service?

Do you really need a €1+m house if there’s just two of you? If your house is suitable for your needs, why wouldn’t you just pay off the mortgage and make any energy efficiency improvements, where relevant?

I would forget about making any investments with after-tax money until you (a) are maxing your pension contributions; and (b) have cleared all debt, including all mortgage debt.

Building up significant cash without maxing pension contributions is a mistake.
 
In my opinion there’s no greater financial feeling than being mortgage free & owing nothing to anyone. You have the ability to do this tomorrow. I know what I would be doing were I in your shoes
 
Steve00 said:
In my opinion there’s no greater financial feeling than being mortgage free & owing nothing to anyone. You have the ability to do this tomorrow. I know what I would be doing were I in your shoes
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I would challenge that. The pension must be a focus. The way our rules work here, and assuming I’d a decent job, I’d much prefer to have a €500k mortgage and €500k in my pension versus no mortgage and no pension.
 
dub45trying said:
Question 1.
I have cash in deposit interest bearing accounts (not beating inflation, I am considering moving some cash to money market accounts on Degiro, however, I am not 100% clear on the return with these, this is the one I am considering, Lyxor Smart Overnight Return - UCITS ETF C-EUR.

Question 2.
I am open to share ownership and ETFs, though see the stock market as quite high now. I have explored Trading 212 where they have Pies you can invest weekly. I am willing to start a weekly fund purchase about €500 a week.

Question 3.
I am open to paying for independent financial advice, however, I find it hard to identify someone to work with. Any recommendations on best way to seek out someone. Time poor for research.

Question 4.
I didn't see paying off the mortgage as a sensible thing to do, but now maybe this is a good way to go. Longer term I would like to have a second property that produces rental income, however, I also am more aware of dividends as an income source now as well.

Essentially, worked hard to get to this point, have considerable experience in my sector, enjoy the challenge of this role. I now want to continue this progression, at this time, I am willing to spend a bit of time on some financial planning, which I have never really done up to now as I was quite focused on self-development and progression in my take home pay and improving our home.
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Question 1: I did some research on money markets recently. The general assumption is money will begin moving out of the MMs once interest rates start to fall, meaning fund managers will need to sell then buy more short term bonds at a potential less favorable rate. This along with the tax situation made me decide against MMs at this stage. My personal solution was 30% of my cash into a ten year tax-free 2.1% AER bond for security, an emergency fund in an instant access account and the rest invested.

Question 2: I would recommend opening multiple brokers as each come with up to 20k investment protection in case the broker goes bankrupt. Be aware of the tax situation around ETFs. But the standard advice is max out your pension contributors before investing.

Question 4. There are good arguments both ways on the mortgage vs investing question. I opted to pay off my mortgage before investing. I found myself tolerating more risk and having more peace of mind knowing I wasn't in debt and I owned my own home.

Definitely max out your pension contributions as they save you money on your tax bill. Instead of investing 500eur a week into an ETF where the gains are taxed at 40% , you could invest that into your pension (up to your yearly age cap allowance) availing of the tax savings meaning the gov is taking less of your income. It's also worth spending some time researching how your pension provider is investing your pension and the fees they are charging you. My New Ireland pension plan for example will allow me to allocate a given percentage towards riskier funds if I choose too.

You could consider making retirement plans perhaps before a new house purchase. Maybe you will find you want to retire somewhere warm and sunny in 10-15 years then that becomes a life and financial goal.

Max out pension, pay off debt, make sure you have an emergency fund you can easily access, split your portfolio between bonds and equity, (say 20% bonds / 80% equity) and consider how your pension is invested and how it feeds into your overall goals.
 
Small point, but do you understand how the gain on the Gold “ETF” will be taxed?

I strongly suspect it’s not really an ETF at all and you will have to make a CGT filing when you sell

Gold has certainly had a very good run of late. But historically it has been extremely volatile so I would suggest you tread carefully,

Again, I wouldn’t bother with after-tax investments until you max your pension contributions and clear all debt.
 
If you are seriously looking to move house then it makes sense to have a significant cash build-up to allow you to leverage the best possible purchase and move. If it is something you are just toying with I would use that cash to max out both of your pension contributions and pay off the mortgage. You could probably stagger it over 3-4 years.

After that invest your spare money, there are several independent financial advisors who post regularly here so spend a few hours with one of them.
 
I really appreciate all the advice here.
The pension piece mostly stemmed from working a role for several years that was stressful and not long term viable, so needed to have options if I choose not to continue with it. Now I see things stable, role is good and now better able to plan ahead. Pension is the first action.... THANK YOU!

Living in Dublin, I did see a house as the primary way to grow wealth and that is why if you can afford an expensive house and with hopeful appreciation over 10 to 15 years you can trade down, I would then plan to move elsewhere. I have a site in the west of Ireland.
 
I really appreciate all the advice here.
The pension piece mostly stemmed from working a role for several years that was stressful and not long term viable, so needed to have options if I choose not to continue with it. Now I see things stable, role is good and now better able to plan ahead. Pension is the first action.... THANK YOU!

Living in Dublin, I did see a house as the primary way to grow wealth and that is why if you can afford an expensive house and with hopeful appreciation over 10 to 15 years you can trade down, I would then plan to move elsewhere. I have a site in the west of Ireland.
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I do understand the cash situation in terms of period of uncertainty. We kept excessive cash for a period of 2.5/3 years when we had a lot going on as it gave us options. However, we got rid of some as soon as we could. Personally, I don't really see my house as an asset because, while I am not excessively attached to it, I don't know how I would feel about selling it if I purely needed the money. I must also say that its value probably increased only by 8 per cent over the past 18 years. So I would not be to kin to put all my wealth in it.
 
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dub45trying said:
Summary of Assets and Liabilities
Family home value: €650K
Mortgage on family home: €250K
Net equity: €400K

Cash: €350K
Site in west of Ireland: €50K (we may build on this in five years' time)
Click to expand...

dub45trying said:
There are certain houses that if they came up for sale in our area, we would likely want to purchase. Approx value of these would be €1M to €1.2M.
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You need to decide your overall objective. It seems a bit muddled at the moment.

You are planning to build on a site in 5 years.

You might like to buy a house for €1.2m in your area - presumably Dublin?

You are well off, so it is absolutely valid to spend your money on a nice house costing €1.2m.

Let's assume that is your objective.

You have €750k in equity and cash. So you would need to borrow €450k which is twice your income. So it's perfectly affordable.

You are saving €50k a year, so your mortgage would be cleared in about 10 years.

You would have to sell your current house to buy another house. So clearing the mortgage makes sense as you will be clearing it anyway.

Maxing the pension won't interfere with your ability to buy house, so you should max your pension as already advised.

Brendan
 
dub45trying said:
Site in west of Ireland: €50K (we may build on this in five years' time)
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I don't think you can afford to build on the site and trade-up to a €1.2m house. So you need to clarify your priorities.

Where you live most of the time should be your highest priority. So you should park the idea of building on the site.

However, if you do decide to build on the site, then you may be better off holding onto the cash instead of paying down your mortgage. The interest rate on a mortgage to build a holiday home would be a lot higher than the interest rate on your family home.

Brendan
 
Thank you everyone for the advice here. It all makes a lot of sense and greatly helps in sequencing steps to planning ahead.
- Pension maxed out
- Location, health and happiness as a priority, as well as continued personal development
- Second home outside of PPR can be expensive and a burden
- Grow income level, be able to adapt if too stressful.
- Aim to review finances with a professional.
- The gold that I own is an ETC, I have no problem holding this over the ups and downs and understand the taxable elements.
- I do aim to invest in quality public dividend companies over time but only after other priorities are met.
- Life can throw you lemons at times! So prepare to adapt accordingly.
 
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