50 Now, out by 55??

Discussion in 'Money makeover' started by MG Midget, Jan 9, 2018.

  1. MG Midget

    MG Midget Registered User

    Posts:
    12
    Hi All,

    I would appreciate the forum's views on the following question:

    Could I leave my job at 55 (in 5 years) and allow my family live primarily on our rental income while enjoying a nice style of life? Nothing extravagant, but able to go on nice holidays if we want to (as an example).

    I don't mind the notion of spending income earned from assets but for some reason I don't like the notion of spending my capital for everyday expenses

    Our current position is as follows:

    Me: 50, employed private sector, salary is €92,500. Net €3,500 pm (after €2k net paid into AVC each month)
    OH: 45, works part time primarily from home, salary is €12,000

    2 Kids: ages 10 and 8

    Assets are:

    €275,000 in cash - €240k of which is in 10 year state savings, maturing in 2026. Net interest in 9 years will be €38,000. This interest is earmarked for first child's college expenses
    €90,000 in direct shares
    €26,000 in equity savings from children's allowance, plan is to continue to invest the €280 per month and this will build to a sufficient fund to send second child to college)
    €870,000 in investment property assets (spread over 5 properties) which generates €50,000 total in gross rental income each year. Loans of total €190,000 against these properties. All will be paid off by 2023.
    €360,000 PDH - loan of €190,000 against it (tracker ecb + 1.25%) - will be paid off in 10 years
    Currently €330,000 in AVC fund (contributions of €2k per month) also guaranteed hybrid pension of approx €14k per annum if I stay for next 5 years from employer (from age 65).
    OH has €170,000 AVC fund and a guaranteed retained benefit DB pension of €12k per annum at NRA (65)
    Sufficient protection in place for both of us.
    Annual household expenditure budget is currently €45k per annum (excluding loans)
    Me, company car, OH 6 year old car which is paid for
    No short term debt or loans
    Planned expenditure is €20k for home improvements in the next 6 months

    I appreciate we are in a fortunate position, however, have worked very hard to get to where we are and for my own 5 year plan I need to start thinking about my exit from work.

    In 5 years, I would hope to find a job working 2-3 days a week at something that really interests me (money not overly important) but also allow more time to just enjoy life a little more. Hopefully paying the standard rate of tax on all income at that stage.

    Appreciate your views....
     
  2. Brendan Burgess

    Brendan Burgess Founder

    Posts:
    33,607
    Hi MG

    Is this a correct summary?

    upload_2018-1-9_21-41-43.png
    As a couple with an income of €41k and €2m in assets, you would be very comfortable.

    The problem really is the two kids. You might want to help them to buy houses, to set up in business, to fund higher education, whatever.

    Even still, I would say that you are probably in a good position to retire at 60.

    I would be concerned that you are overexposed to property - it accounts for 60% of your wealth.

    And you have a very low exposure to equities.

    Having said that, if you have capital gains in the investment properties, you are probably better off keeping them rather than paying CGT.

    Are you maxing your pension contribution? This would seem like a good strategy.

    It probably makes sense to pay off the tracker on your family home unless it's with one of the lenders which is no longer open for business. It's much of a muchness. But you are paying 1.25% and earning close to zero on the deposit. So it's costing you €2,500 a year unnecessarily.

    Brendan
     
  3. MG Midget

    MG Midget Registered User

    Posts:
    12
    Hi Brendan,

    Thanks for your response.

    I think that looks like a good representation. I would hope myself and my wife would qualify for the state pension (as long as it is not means tested by then). Which would give us a pension €50k combined (excluding rental income) from age 66.

    I suppose I prefer the old bricks and mortar and the missus prefers cash rather than equities. In my mind we have €500k combined currently in pension funds that have full exposure to equities along with our direct shares.

    I am comfortable with my AVC's at €24k per year at present.

    We will want to be able to help the kids where we can, then at the same time we don't want to give them the expectation that the bank of mam and dad will sort it out. They will need to make their own way in life like their parents had to.

    To clarify, I am 50 now and would like to step back from full time work at 55 if possible.

    I understand your point on paying off mortgage, the missus would prefer to keep our current cash in one lump sum rather than debt reduction. Our bank is with one of the pillar banks.

    Thanks for your input.
     
  4. Gordon Gekko

    Gordon Gekko Frequent Poster

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    2,420
    You are in a good position; well done.

    I do think that the Bank of Mum & Dad is becoming of greater relevance. It certainly occupies my thoughts; it will be very tough for future generations to buy in a decent part of Dublin unless they’ve a stellar career (money-wise which isn’t the be-all and end-all).
     
  5. RedOnion

    RedOnion Frequent Poster

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    703
    You're in a pretty enviable position. The only thing I'd have a look at is if you can clear the PDH mortgage before 55. The Mortgage payment after will either eat into savings, or your reduced income. It's just a timing thing to use your cash and pay it off sooner.

    Get good tax advice re pensions in the year before you retire.
     
  6. Bronte

    Bronte Frequent Poster

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    12,133
    Last edited: Jan 10, 2018
    Your 5 investment properties seem to have a low rental income given their value.

    Could you break them down individually.

    Make sure you have top notch health insurance. And money for care in old age if it will be needed.

    What is NRA?

    You should get a confirmation from the pensions office of your current future entitlements. State pension starts at 67, not 66 I believe. And that date is set to go out further. So plan for that.

    What happens in 5 years if you can't get a job you like for a couple of days. Will you go out if your mind with boredom.
     
    Last edited: Jan 10, 2018
  7. mtk

    mtk Frequent Poster

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    365
    May Not do easy to get role in 50s particularly part time unless you go self employed route ( if applicable )

    Things can get boring in my experience

    Schools fees ? Very popular at moment
     
  8. Evie1962

    Evie1962 Registered User

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    14
    Pension age is 68 for me and I'm 55, so it will very likely go out as far as 70 in the next few years.
     
  9. MG Midget

    MG Midget Registered User

    Posts:
    12
    Hi All,

    Thanks for your responses and views.

    You are correct, neither myself or my wife will qualify for the state pension until 68. So I will need to take that into consideration. I was hoping to be able to live off the rental income to defray most of our monthly living expenses supplementing it by ad hoc income as and when I could pick it up.

    NRA (normal retirement age for my pension scheme) is 65.

    Thanks again for any other views
     
  10. The Horseman

    The Horseman Frequent Poster

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    82
    Just one comment on the above, you will be entitled to the State pension assuming you have the required level of contributions. It is not means tested rather you will have to include it in all other income and pay income tax at the appropriate level.

    A lot of existing pensioners are not aware they are liable to pay income tax on their pensions if the total value of their pensions brings them into the tax bracket.

    You are in an enviable position, you are to be congratulated on what you did to get yourself to this position.
     
  11. elacsaplau

    elacsaplau Frequent Poster

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    246
    Hi MG,

    What would you like to do at 55 (....you mentioned something that really interests you?). Have you some ideas?
     
  12. MG Midget

    MG Midget Registered User

    Posts:
    12
    Hi Elacsaplau,

    Good question, to be honest I am not really sure.

    Work 3 days a week perhaps something to do with the tourism industry
    Working with a local enterprise office or IDA to help support small start up companies in some mentoring capacity would be of interest
    Whatever I do, the money generated from it would be of secondary importance. Helpful for defraying day to day expenses but not required for additional capital accumulation

    The other 4 days could include:
    1 day volunteering
    1 day golfing
    1 day walking/hiking
    1 day household jobs

    When the kids are up and gone, myself and the OH have often talked about spending the months of November, January and February’s abroad - someplace warm. Seville and the very south of Italy look good and interest us as an example. But that is a little further down the line.

    All I know is that corporate life is beginning to lose its appeal.....
     
    elacsaplau and galwaypat like this.
  13. DCD

    DCD Frequent Poster

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    221
    MG congrats to your family you have worked hard and done well. I think that you will be able to achieve your goals by the age of 55.
    You might very well need to tidy up and adjust your portfolio but you are in good shape.
    I had to retire this year under medical grounds actually 55 next May. I really wonder how I had the time to work. I would not have a portfolio of your worth. After 38yrs working I am enjoying life. The OH has 3yrs to go and she cant wait:(
    "Corporate life is beginning to lose appeal"
    Unfortunately its getting hard to find people that are happy in work and thats across all walks of life. Again well done.
     
    elacsaplau and HollyBud like this.
  14. elacsaplau

    elacsaplau Frequent Poster

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    246
    I hear ya! My job is ok - there's just so much B/S that goes along with the world of work in many work environments.

    Thanks for sharing your thoughts - sounds pretty good. I'm probably ok on the finance side - just need to work out what would truly be fulfilling.

    My understanding regarding FIRE (financial independence, retiring early) is that it's not usually enough to retire from something - you need to retire to something.