Moneymakeover Couple late 40s, how best to set up for upcoming expensive years with children

[Eleanor67]

Personal details

Your age: 49
Your spouse's age: 45


Number and age of children: 3 children aged 6, 7, 10


Income and expenditure
Annual gross income from employment or profession: €26k
Annual gross income of spouse/partner: €70k

Monthly take-home pay: €4,000 partner, €1800 me

Spouse is self employed (Ltd company) and does contract work Has been in steady employment and working for same company for several years now. I left full time employment in 2019 to look after young family. I am now working for spouses company part time (since 2024) doing a few hours from home when I can while kids in school. We are both company directors. Company takes in approx. €150k annually which we use to pay both salaries and fund pensions. No real other expenses associated with running the company. In reality my work is a small bit of accounting/ admin and Im close to a full time stay at home parent getting well paid for my few flexible hours. I do have equivalent qualifications to spouse so in theory could be doing same work or could swop out if needed down the line.




In general are you:
(a) spending more than you earn, or
(b) saving?

Saving but as kids get older the saving is reducing


Summary of Assets and Liabilities
Family home value: Approx €700k
Mortgage on family home: None
Net equity:

Cash: Approx €50k spread across a few close to zero interest deposit accounts





Pensions



Me

PRB worth €640k – no longer contributing to this. Invested at medium to high risk in global equities

Small DB pension worth €7k annually in todays terms payable from age 65

PRSA opened in 2024, current value €45k, contributing €1k/ month with end of year top up lump sum of approx. €10k as company funds have allowed this last 2 years and would hope to continue with this.



Spouse

Executive pension worth currently €950k. Contributing €2500/month and additional end of year lump sum top up of approx. €20k as company funds have allowed


Company shares : I have approx €70k worth of shares, about 80% of this is for a single US multinational bought through employee share purchase scheme – all are matured.


Buy to Let Property value: None


Total net assets:


Family home mortgage information
None


Other borrowings – car loans/personal loans etc

No loans. 1 car 16 yrs old so will likely need to be replaced in next couple of yrs, other car 7 yrs old.

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


Buy to let properties
None

Other savings and investments:
Irish life investment product with cash in value of €135k

Other information which might be relevant

Life insurance: Me approx. €150k, Spouse €300k.


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

We are very lucky to be in very good financial position for our ages. I would love to not have to return to paid employment outside of spouses company and spouse would love to retire early (60 latest) wondering what we need to do now to set ourselves up for this future. Main areas we are looking for advice are

(1) The Irish life investment fund was originally a Quinn life fund opened in 2008 with a split of high risk funds. Started with €500/ m and with indexing is now at €1100/ month. Ive only just realised it has not been performing half as well as I thought – mea culpa. Total invested was €170k over 18years. We withdrew €100k 10 years ago for house purchase . Current cash in value is €134k – is this a pretty brutal return for a high risk fund over 18 years? This is probably kids college fund - they will hopefully be able to live at home as plenty options close by but one or more may chose to go elsewhere and need accommodation. Want to move this money as these funds are dinosaurs from what Ive recently learned. Trying to educate myself on where we should move it to but my brain is struggling to take in the information. Options are to move to another Irish Life Multi asset portfolio fund or withdraw from Irish life and move to Zurich or other provider? Is it foolish to withdraw it all in one go ? I have fears of mis timing the market and losing a huge chunk of this in a few days with current volatility. Attitude to risk with this money is lowering as kids get older but still would like it to work hard for us for next 10 years. Advice welcome

(2)I know we need to address the €50k on deposit and just keep a 6mth spend accessible and get the rest of it working better for us. Have done a number of expensive home improvements over last few years so we were wary of putting money out of reach but these are complete now and we can put it somewhere to generate better return

(3)Should I start selling my matured shares and diversify a bit? I have never sold any of them. We are probably way over exposed to this one stock? Don’t really have a plan for this money -probably some can be used for a holiday fund – now kids are older foreign travel is becoming more doable but expensive as a family of 5 also. We have a mobile home on a site in West of Ireland that we enjoy using for 6 months of the year so don’t spend massively on holidays but it is probably something we will spend more on in the next 10 years.

(4) Pension situation - we have aggressively been funding pensions since our mid – late 20s after taking some very good advice about the beauty of compounding and tax free growth. Our attitude was we should pump as much as we could in while young and we had spare cash. Might reach a point in the future where we need to stop contributing if life gets very expensive or we run into health complications or life throws us curve balls. Accountant warned spouse that he was close to exceeding max funding at end of last year which wasn’t something we had thought about. Need to educate ourselves more about the draw down side of pension and all that entails. If spouse wants to retire early does he need to have a decent salary in last 3 years of employment to maximise the tax free lump sum? Is targeting a 2 million fund for him a realistic prospect if he works for another 10 -15 years.

(5) Life assurance. This is light for both of us I think ?

Thanks so much for reading. All advice welcome

 

[gurubob]

Possible things to consider (my situation has many similarities but a few years ahead)

- balance your gross incomes to €43k each to maximise take home pay for household, but you may as well just do €44k to use tax bands (or 53/35)

- Shift pension funding to yourself from spouse. This would reduce chance of exceeding 2m, and increased income would allow you fund more into PRSA. You are also older and can access pension sooner. Your pensions are excellent and you could likely retire sooner than 10-15 years if you wanted

- You have cash/shares/investments worth c250k plus likely some money building up in business, from income/pension figures. if turnover c150k. You pensions are so well funded you won't really need this for retirement (you can retire in 10/11 years and fund younger 2 college with your PRSA lump sum).

So options for 250k (I would do one of the first 2 myself)

- Investment accounts for kids with €6k small gift exemption. I'd say this is best option and they get the power of start early and compounding like you have in your pension. Gives them a nice house deposit in their mid/late 20s and removes a stress for you later in life.

- Think long and hard is your house what you need for 3 teenagers/young adults in next 15 years. Second living area/ garden room is a big plus with teens (and you'll have 3 at same time!). You can afford to trade up for more space, and if hit buffers with pension, PPR a good store of wealth too. You could then trade down in 20 years once kids move on and gift house deposits (or use pension lump sums from large pots)

- Third option is keep it invested. If you do that I would liquidate company shares and underperforming investment fund (that fees are possibly eating performance). Avoid life companies, use low cost broker, directly buy a diversified range of ETFs. This doesn't just mean MCSI World as often suggested (which is US concentrated) but getting say 8 funds of €25k in diverse sectors and geography. Keep 50k to upgrade car if less than a year or so away, otherwise sell investments for car if 2+ years

You have an excellent financial position and due to this have loads of options and flexibility, so enjoy it.

 

[Bronte]

Need to also think about death, divorce or loss of employment. Can you run the business? I don’t think the life insurance is high enough, and given your husband is at near max pension, concentration should be made to yours.

Don’t know the rules, but seem to recall revenue not liking the use of companies to pretend hire spouses. (Might have been the UK) . Hard to prove though. I’d be maxing all tax reduction strategies.

I presume your PRSI record is ok for 2019-2024 as that’s covered for stay at home spouses, just double check your records.

 

[_OkGo_]

Spouse is self employed (Ltd company) and does contract work Has been in steady employment and working for same company for several years now. I left full time employment in 2019 to look after young family. I am now working for spouses company part time (since 2024) doing a few hours from home when I can while kids in school. We are both company directors. Company takes in approx. €150k annually which we use to pay both salaries and fund pensions. No real other expenses associated with running the company. In reality my work is a small bit of accounting/ admin and Im close to a full time stay at home parent getting well paid for my few flexible hours. I do have equivalent qualifications to spouse so in theory could be doing same work or could swop out if needed down the line.

Your overall financial position is good but I think from your description that you already know that the employment status of both of you is questionable, especially yours.

Your spouse works for one company probably doing the same job at the same desk for years... he's an employee

And you are not really an employee.

It's up to you to take that risk but it could come back to haunt you.

 

[Eleanor67]

Thank you all for taking the time to read my post and for your replies and suggestions. I can't figure out how to reply to posts individually

gurubob appreciate your suggestion that we drop spouse salary and raise mine but this wouldnt be reflective of the work split so wouldnt be comfortable doing this. Im interested in the suggestion of investment account for kids - is this straightforward to do ? so we would be putting in up to €3k each per child per year in an account in the name of each child so up to €18k anually? Can you recommend any particular comapny to do this? The house is fairly well set up for 3 teens/ young adults living at home - we have made improvements over the last few years with this in mind and yes maybe would downsize in 20 years but no plans to move in the medium term. Can you calrify what you mean by 'avoid life companies'? Im fairly green when it comes to the investment side of things

Bronte - I will check PRSI but Im pretty sure I sorted that - thank you for your reply

OkGo_ I'm not sure what you mean about taking a risk that will come back to haunt me - can you elaborate please? We have recently switched accountants and neither former nor current accountant have flagged any concerns to us - what do you think might happen?

thank you

 

[gurubob]

'Avoid life companies' is with regard to you investing a lump sum in your own names, that is to avoid products like the Irish Life (or Zurich etc) product you have. These companies will charge a management fee on your investment (checked Irish life Smart Invest is 1.1%) that will have the potential to significantly reduce your returns. Some quick sums indicate you have made a net return (after management fees) of approx 2.5% per year on your investment of 170k taking into account drawdown of 100k. If you didn't have a 1.1% management fee, you would have approx €175k instead of the €133k. Management fees, of the like charged by life companies, can cause a huge drop in returns.

Life companies can be useful in some cases, e.g. if you are making regular contributions or have a small amount to invest, but my view (and looking at your returns) is that it is a very poor option for someone with a large lump sum investment. You can use an online broker such as DeGiro or Interactive brokers to buy ETFs and avoid the life companies taking a cut of your money!

I'd be inclined to invest €150k this way and keep some cash to start funding kids investment accounts. Various routes for this have been discussed on previous threads (and in this case life companies can make sense despite % charges) but I use Davy, who allow you to open bare trust account for minor if parents have account with them. Davy charge a quarterly flat fee of €50 on this which, rather than a %, this is poorer value on small investment accounts but better value longer term if grow to >20k

Hope that helps

 

[Savvy]

OkGo_ I'm not sure what you mean about taking a risk that will come back to haunt me - can you elaborate please? We have recently switched accountants and neither former nor current accountant have flagged any concerns to us - what do you think might happen?

While your spouse can pay you any amount, if audited Revenue will look at whether this is bona fide and commercially reasonable.

From the Revenue tax appeals cases I've seen, Revenue normally allow 1/2 day a week at a rate not much more than min wage for these scenarios(they are very common).
They usually add a discretionary amount (2k is what I've seen). So we are talking about a few thousand and nowhere near 26k.

If audited revenue could treat ~€20k a year as his income and calculate tax/prsi/usc on that. Plus up interest and penalties on that. This could be done for each year going back to 6 years I believe.
It doesn't say much for the accountant , but they will just make sure you make valid statutory returns.
At the very least, raise it as a concern and see what they say.

Maybe the vast majority of people will not have an issue but I know personally of 2 people that had tax 'compliance' issues in recent years. One had 70k repayment of taxes/penalties and the other went to prison(it was actually in the papers about 3 years ago).

 

[_OkGo_]

In reality my work is a small bit of accounting/ admin and Im close to a full time stay at home parent getting well paid for my few flexible hours. I do have equivalent qualifications to spouse so in theory could be doing same work or could swop out if needed down the line.

OkGo_ I'm not sure what you mean about taking a risk that will come back to haunt me - can you elaborate please? We have recently switched accountants and neither former nor current accountant have flagged any concerns to us - what do you think might happen?

I didn't think I would have to spell it out so bluntly but as you have described it, your employment sounds fraudulent. You do a couple of hours a week at tasks that are slightly above minimum wage but you are getting €27k for it.

There are professional companies out there that offer all the payroll, admin, time sheets and accounting for fees of €1.5-2.5k depending on your specific setup. Kind of hard for your husband to justify paying you €27k for the same work.

Why would your accountant have a problem with it? It's not their job to verify your employment status. They can take whatever you tell them at face value and do your returns accordingly. For all they know you could actually be doing real work.

 

[Eleanor67]

Thanks again for replies.

gurubob some very helpful advice there - much appreciated - I will look into online broker for ETFs

Savvy and OKGo_ I realise I have probably understated the work I complete under 'Admin' in my original post . In this I am preparing/ reviewing technical documents and proposals that I am qualified to do with 20+ yrs experience in the relevant industry. After taking some time out from work its not unusual to have a reduced confidence in ones ability so I am guilty of playing it down. I'm confident the value of this work could be comfortably defended in an audit situation and take note that we need to be mindful of this. Thanks for your input

 

[Bronte]

Maybe the vast majority of people will not have an issue but I know personally of 2 people that had tax 'compliance' issues in recent years. One had 70k repayment of taxes/penalties and the other went to prison(it was actually in the papers about 3 years ago).

Which case was in the papers? I do recall reading something about it, but thought it might have been in the UK who are pretty similar on tax laws.