Moneymakeover 38 years old - Excess Cash + retirement planning

[Billy Valentine]

Personal details

Your age: 38
Your spouse's age: N/A
Partner's age if not married: N/A

Number and age of children: N/A


Income and expenditure
Annual gross income from employment or profession: 80,000
Annual gross income of spouse/partner: N/A

Monthly take-home pay: 4K

Type of employment : Employee
Employer type: Private Company

In general are you:
(b) saving


Summary of Assets and Liabilities
Family home value: N/A
Mortgage on family home: N/A
Net equity: N/A

Cash: 115K
Defined Contribution pension fund: 105K
Company shares : N/A
Buy to Let Property value: N/A
Buy to let Mortgage: N/A

Total net assets: 220K

Other borrowings – car loans/personal loans etc

Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card?

Pension information

Value of pension fund: 105K

Buy to let properties
Value: N/A
Rental income per year: N/A
Rough annual expenses other than mortgage interest : N/A
Lender
Interest rate
If fixed, what is the term remaining of the fixed rate?

Other savings and investments:
Crypto value ~ 5K

Other information which might be relevant

Life insurance: N/A


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

I am just looking for advice on cash usage. I will likely buy the family home at some stage for around 150K (or else I will buy elsewhere and need a mortgage) which is why I am currently saving cash.
85K is in savings accounts with Irish banks earning 2% and the other 30K is in N26 earning .35%. Revolut offers 1.5% but did not really trust it to store large amounts so need to look into a better savings offering for the 30K or maybe invest it.

In terms of my pension I have 3% company matching with Irish life (current value 5K) and the other 17% I am paying into a PRSA as an AVC (current value 100K). My PRSA has a 100% allocation with 1% fee with New Ireland Assurance but thinking as it is now over 100K it could be wise to switch to a passive Vanguard fund with lower fees.

My goal is to to really have a passive financial plan in order to own a home + retire as early as possible. Currently my plan is maxing out my pension and I save the rest to eventually buy a house but I'm not sure if this is the best strategy right now. Maybe I should slow down my cash savings and start investing in ETFs or Investment Trust in order to be able to retire earlier as I wont be able to access my PRSA until 60 so would need something to bridge the gap.

I was also considering putting a lump sum into an ETF right now and although I don't want to try time the market I think a large lump sum right now would be a bit risky for me but I would be happy with maybe 250-500 per month and then if things do take a downturn having the lump sum ready to go.

My current job is quite stressful so there is a chance I will be taking a paycut next year if I can find a job with a better work life balance but I'm hoping to have a strategy based on excess over expenses every month. My current take home is 4K and current expenses including pension contributions are around 2200-2500 per month. So that extra 1500 a month I'm looking for a plan for other than pure cash savings. If I take a paycut and the 1500 diminishes then I can just adjust the plan accordingly.

I would just like to get some outside perspective as I know I'm in a fortunate position so just want to make the most of it. Thank you.

 

[noelÓm]

Great salary at age 38 and you clearly have the discipline to build up pension and cash savings to those levels.

Maxing pension contributions is a fine strategy, but settling your housing situation is also very important.

I will likely buy the family home at some stage

My goal is to to really have a passive financial plan in order to own a home + retire as early as possible.

Can you clarify, do you mean own a home as early as possible?

The advice you will receive here will depend heavily on when you want to buy. If you want to do so within 5 years, say, then holding your savings in easy-ish access deposits makes sense. But if you aren't going to be buying for many years to come, then you likely ought to invest in something riskier through an ETF/fund/investment trust.

So, decide what you want to do regarding a property. You have the income and savings to buy now. Is that what you want?

If you decide to buy with a mortgage and want to switch jobs, consider waiting until you have the keys in your hand first before handing in notice. Lenders will insist on you passing probation before giving you funds.

 

[ClubMan]

I will likely buy the family home at some stage for around 150K (or else I will buy elsewhere and need a mortgage) which is why I am currently saving cash.

Currently my plan is maxing out my pension and I save the rest to eventually buy a house but I'm not sure if this is the best strategy right now.

You should probably read this key post.

Key Post - Overpay mortgage or contribute to pension or do something else?

This comes up in a lot of different threads, so I will set out some principles here to kick off the discussion. I will edit it in the light of feedback. There are many options with your savings in excess of your emergency cash fund Pay down your mortgage Build up a fund to enable you to trade...

www.askaboutmoney.com

 

[Billy Valentine]

Thanks for the considered response noelÓm!

I'm hoping to retire as soon as possible. In terms of home ownership I have cheap rent at the moment so really the home place purchase will be whenever my parents pass which hopefully is a good few years down the road.
In terms of a mortgage myself it really depends on meeting a partner etc, my current rental is cheap and secure so no pressure that way.

So I'm stuck in a kind of limbo at the moment which is less than ideal. If I keep maxing out my PRSA I should be ok to retire by 60 as if I buy the home place that will be paid for too so expenses will be low. This is the main scenario I'm planning for as partner kids etc is not on the horizon at the moment so I cant plan too much for it.

I think if I just save a little less now and start investing in an ETF I could get to my retirement goal by 55 ish while still saving cash towards the home place purchase.

If I meet a partner and I decide to get a mortgage then I still have a big cash deposit and an ETF in reserve if I need it though ideally I could just leave that grow in the background and still hit my retirement early.

Thanks ClubMan (sorry don't know how to quote on mobile). I will of course have a read

 

[Brendan Burgess]

This is a very difficult "limbo" to solve.

I presume your parents could live another 20 years? Do you really want to have a life and finance plan based on that?

When you say you will buy the family home, are you planning to buy it from them or from the estate when they die? Do you have siblings who might also like to buy it? Or who might think it's worth more than it is?

I think that you should buy your own home now or get ready to do so.

It is very tax-efficient. Any gain will be tax-free, unlike equities. You can rent a room tax free up to €13k(?) .

And if you meet someone you want to share a home with, they are unlikely to be happy waiting around for your parents to die. It is very likely that you will buy a house with them.

For all these reasons, I am pretty sure that the right answer is to get ready to buy your home.

 

[Brendan Burgess]

Annual gross income from employment or profession: 80,000

Cash: 115K

How much would a decent home cost in the area you want to live. You will get a mortgage of about €300k , so you have a budget of €400k. Is that enough?

If so, then make sure you don't put any of your money in fixed term deposits where you won't be able to get it if you need to move fast.

So access deposit accounts or equities if you think that it might not happen for a few years.

 

[PandPs]

I think if I just save a little less now and start investing in an ETF I could get to my retirement goal by 55 ish while still saving cash towards the home place purchase.

Note that you can access your PRSA from age 50 if you’re retired from all employment. You can also resume employment later on (while keeping your pension income, eg part-time working) so it’s not a one-way door.

Since you mentioned looking for another job, you might be able to find one at a company that offers a better pension match-funding rate. 7-10% is common enough in large enough companies - at least in some industries - and would offset some of the pay cut you’re considering.