Moneymakeover 30s couple, retirement planning and redundancy

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dublin86

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As the title suggests, I'm being made redundant and looking for a sanity check and some advice on finances and future plans.

Personal details
Your age: 39
Partner's age if not married: 33
No children and we won't have any

Income and expenditure
Annual gross income from employment or profession: 110k, currently single income
Monthly take-home pay: 5k (after AVCs etc.)
Type of employment: employee
Employer type: private company

In general are you: saving about 2k per month towards wedding, home renovations / energy upgrades, and car within next 12-18 months

However, I'm being made redundant next month and need to revisit previous plans.

Summary of Assets and Liabilities
Family home value: 450k
Mortgage on family home: 0
Net equity: 450k

Cash:
- 60k (on deposit at 3% for next 6 months) + 2 months expenses in current account
- 125k redundancy payment due next month

Defined Contribution pension fund: 260k

Company shares:
- (25k in RSUs due to vest over next 2 years, now forfeit due to redundancy, no option to negotiate on this)
- 10k in APSS available over next 2 years
- I always sell immediately in both cases

Other borrowings – car loans/personal loans etc
None

Do you pay off your full credit card balance each month?
Yes

Pension information
Value of pension fund: 260k
6% employer contribution, my contribution maxed at 25% (turning 40 this year)
Invested in the default long term growth fund (lifestyle strategy)
0.12% AMC
8.1% net average return over 5 years
~70% equities, ~15% bonds
Mix of developed world + emerging market equities, property, corporate bonds, etc.

Partner eligible for a UK state pension from age 68. Currently at 14/35ths and approved to make voluntary contributions so could get full pension at retirement age.

Other savings and investments:
Minimal cash in credit union due to savings caps and poor rates

Other information which might be relevant
Life insurance: death in service cover of 4x salary with employer + spouse's pension

Obviously I'll lose this due to the redundancy.

What specific question do you have or what issues are of concern to you?
Prior to the redundancy I was a bit more confident but things feel more uncertain now, although I'm hopeful of finding a new job this year on similar money.

Three questions I had been looking to answer:
1. Is early retirement feasible from here?
2. If not, do I need to get more out of my pension?
3. Should I be investing outside my pension to bridge gap from retirement to imputed ARF distribution / state pension age?

1. Early retirement
I was a bit slow starting my AVCs but they're maxed out now for the past few years and I think I've grown my pension to a reasonably healthy level. We're also very lucky to be mortgage free which certainly helps.

My problem is that I've looked at too many pension calculators, spreadsheets, and YouTube videos. They all make different assumptions, recommend different targets, etc., and I keep second guessing myself. I'm not sure anymore if I'm even aiming for the right goals or if they're achievable.

I would like to retire before 65, currently thinking 57ish could be doable but would love to hear if I'm being even remotely realistic with that. We'd like to travel more while we can, go on a few big trips, treat ourselves a bit more but nothing too lavish.

I should have enough PRSI contributions for about 90% of state pension by 57, or 100% by 61. I've seen conflicting information about options for making up any shortfall:
- class S contributions arising from ARF withdrawals. Some sources state withdrawals of at least €5k pa are sufficient for 52 credits, others suggest a €650 minimum PRSI payment is required
- voluntary contributions. Assuming class A contributions during employment, 6.6% of reckonable income in previous tax year seems steep, at least for the first year. Can this be avoided / reduced by skipping a year for example so it would be subject to the €650 minimum instead?

Any clarity on these options would be much appreciated.

2. Pension investment choices
Given current trajectory and the goals above, is my pension investment choice reasonable or should I consider switching to a more aggressive approach, such as moving closer to 100% equities split between something like MSCI Developed Markets and MSCI Emerging Markets for higher potential return? I understand this comes with increased risk, but if I'm falling a good bit short of the goal, it might be something to at least consider while I still have time on my side (18+ years).

Any additional company pension investments would have to wait until I find new employment, but I can still change fund choices etc.

3. After-tax investments
Specifically to handle the bridge between retirement and the state pension kicking in, should I be investing outside my pension to delay drawing down my pension or is it still more effective to continue investing solely in the pension and maybe take a portion of the tax free lump sum to cover part of this period?

I initially wrote most of the above before learning I was being made redundant, so now I also have the redundancy lump sum to consider. I need to balance security in the short to medium term while I find a new job, and longer term planning towards early retirement and enjoying life.

Thanks in advance for any feedback.
 
I think you're in a great position presuming you get work quickly. This far out i'd say go 100% equities, I personally favour a tilt towards emerging markets but who knows really.
With after tax income, the more the merrier. I tend to think all after tax savings should be invested and then used to prevent your ARF withdrawals breaching the 20% band. That way you protect the fund by getting good value in front of the taxman.
Will your spouse/partner retire at the same time? Are things in place for them to have a decent fund so that their tax credits are being used etc?
 
dublin86 said:
I should have enough PRSI contributions for about 90% of state pension by 57, or 100% by 61. I've seen conflicting information about options for making up any shortfall:
- class S contributions arising from ARF withdrawals. Some sources state withdrawals of at least €5k pa are sufficient for 52 credits, others suggest a €650 minimum PRSI payment is required
- voluntary contributions. Assuming class A contributions during employment, 6.6% of reckonable income in previous tax year seems steep, at least for the first year. Can this be avoided / reduced by skipping a year for example so it would be subject to the €650 minimum instead?
Click to expand...
As you are nearly 20 years away from retirement, I would think that any of these rules or amounts could somewhat change before that.
 
dublin86 said:
I should have enough PRSI contributions for about 90% of state pension by 57, or 100% by 61. I've seen conflicting information about options for making up any shortfall
Click to expand...
This thread covers most or all options available:

Key Post - PRSI and planning retirement

This Key Post is in the form of a FAQ where I don't know many of the answers. I will update the post as I get answers. 1. PRSI payable on reaching state pension age Answer: 0 (Class M) 1a. Does this relate to the start of the tax year in which you become 66? Or to after your birthday? Answer...
www.askaboutmoney.com
 
dublin86 said:
class S contributions arising from ARF withdrawals. Some sources state withdrawals of at least €5k pa are sufficient for 52 credits, others suggest a €650
Click to expand...
The minimum €650 Prsi contribution fee does not apply to ARF drawdowns. This is because PRSI is deducted under the PAYE system.

The minimum €650 fee only applies under the self assessment system.

Even if you are self assessed because of other income sources your ARF remains under the PAYE system.

You must drawdown a minimum of 5k per year. This will cost approximately €230 per year for 52 class S contributions.
 
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dublin86 said:
voluntary contributions. Assuming class A contributions during employment, 6.6% of reckonable income in previous tax year seems steep, at least for the first year. Can this be avoided / reduced by skipping a year for example so it would be subject to the €650 minimum instead?
Click to expand...
You will not need to pay voluntary PRSI. ARF drawdowns and (or) Jobseekers credits will suffice.

You should use both of these methods for reasons explained in the link on post #4
 
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I think you are also in a very good place financially as well, if you get more employment at the same level of salary as you are currently confident about. What I see as an imbalance is your future spouse pension - maybe you just wanted to concentrate on yourself in the info but it reads to me that they are currently not working and only have a small level of UK contributory pension. If you continue to work at the same salary level, would it be possible for them to take up employment in Ireland and start to fund a personal pension.
 
dublin86 said:
Partner eligible for a UK state pension from age 68. Currently at 14/35ths and approved to make voluntary contributions so could get full pension at retirement age.
Click to expand...
How is someone not working at age 33 able to get a full UK pension at retirement age?

Sorry to hear about your redundancy, at least you're still young enough at 39 to get rehired. I'd concentrate on that and then revisit pension planning. You're in a good position as you've no debt and are mortgage free.
 
Your own finances are in good shape but what is striking to me is the lack of information for your spouse-to-be. Personally I don't see how you can be planning for retirement as an individual while also planning to get married in the near future. Do you keep your finances completely seperate?

dublin86 said:
Three questions I had been looking to answer:
1. Is early retirement feasible from here?
2. If not, do I need to get more out of my pension?
3. Should I be investing outside my pension to bridge gap from retirement to imputed ARF distribution / state pension age?
Click to expand...
Making the assumption that your spouse will be self sufficient then:
1. Yes of course. You are mortgage free and child free. Everything you earn and accumulate in the next 15-20 years will support you in retirement. You just need to keep your expenditure under control
2. Personally I think you should be 100% in equities
3. Yes, anything extra should be invested to build your overall wealth but I wouldn't treat it as "bridging the gap" money. You have loads of time to figure it out but it can be a lot more beneficial to use a blend of ARF & non pension funds to support early retirement to use up tax credits

dublin86 said:
In general are you: saving about 2k per month towards wedding, home renovations / energy upgrades, and car within next 12-18 months

However, I'm being made redundant next month and need to revisit previous plans.
...
Cash:
- 60k (on deposit at 3% for next 6 months) + 2 months expenses in current account
- 125k redundancy payment due next month
Click to expand...
A few points on the redundancy:
- Make an AVC for this year (2026) as soon as possible. You cannot do this after you leave this employment. The redundancy payment will include a considerable amount that is still taxable and therefore eligible for tax relief on the contribution. Work out what your gross income from this employer for the year will be and make the AVC accordingly
- Sign on for the jobseekers pay-related benefit the day after you leave the company. Many people forget to do this
- Have some perspective. You will receive close to 2 years net pay in one go. Without changing a single thing in your expenditure pattern you will be perfectly fine. It shouldn't change your plans for the wedding. Depending on the size of the renovations it might delay it slightly and finally the car can probably wait unitl you get your new job.
- Even if it takes a whole year to find a new job, you are likely to be much better off financially because of the redundancy

Back to retirement planning, you should really think about how this impacts your future spouse. If they are terrible with money or a much lower earner than you, how will that work when you are 56/57 and announce that you are retiring. They will be ~50 by then so do they also expect to retire and if so, can you afford that?

Age gaps can be troublesomes especially when the older partner is more sensible with money. Your partner may not like the idea of working for another 15 years to 65 while you are already retired.
 
As some previous posters have said, I would be 100% equities in my pension at your age. In fact, I still am 100% equities and I'm a good bit older than you. I don't see the point in investing in bond funds in your pension, especially this far out from retirement.
To balance that, you could be more conservative in your investment approach for your money that's not tied to your pension.

Assuming you get a similar new job, I would not transfer the old pension to the new employer's scheme. Normally I would say to get the old pension out of the employer's scheme into a PRB. But which such a low AMC, it might be worth leaving it there until you get closer to retirement. Having separate pension pots gives you flexibility, especially if planning to retire early, as you can start drawing down from one while the other remains fully invested.
 
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