You are ignoring the significant impact on career, future earnings, pension provision, promotions, bonuses etc., faced by a parent if they are not working for an extended period.many people returning to work only to pay child care, into a role where career progression/pay is not going to change massively by going back.
Your savings seem very high - they are too high if they have been built up over time via income - those funds would have been better off inside your pension. But maybe you sold another asset in which case the cash pile was "unavoidable"?
Your mortgage rate of 2.4 is relatively low - the incentive to pay it off is not massive, you would "only" need an average return of ~6% from investment to warrant putting those funds into the stock market. It is 3 years before you will get a new rate - it is impossible to know where rates will be. I would not pay the mortgage off, and review that decision only when it comes to end of current term. Others will know more about how you can retrospectively direct some of it into pension, if possible at this stage (I think it is for this tax year), otherwise I'd put it in the stock market - understanding the risk is that in 3 years the amount may not have grown. I have a similar sum of funds and am looking to invest in a business, but that is a very different route/choice.
Kids and childcare are expensive - you are right to reserve judgement on where your future outgoings will settle.
There is obviously a personal preference and individual circumstances regarding your partner returning to work, but it is also a financial decision - financially, I see too many people returning to work only to pay child care, into a role where career progression/pay is not going to change massively by going back.
In your shoes, I would throw the bulk of your €130k savings at your mortgage (leaving the term as it is) and you should definitely both increase your tax-relieved pension contributions to the maximum allowed for your ages (employer contributions are ignored for this purpose).
You could look at buying additional life cover and/or PHI cover for your wife. But it’s expensive and, IMO, it’s not critical in your circumstances.
Age | % of Earnings | Maximum contribution |
---|---|---|
Under 30 | 15% | €17,250 |
30-39 | 20% | €23,000 |
40-49 | 25% | €28,750 |
It just maximises flexibility should your circumstances change.@Sarenco Can you help me understand the logic re paying more off but keeping the term the same. Is it to reduce my mortgage payment so I can increase pension contribution?
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