Moneymakeover Couple mid-40s, property, pension, investment advice.

louislouis22096

New Member
Messages
3
Personal details
Your age: 44
Your spouse's age: 45
Number and age of children: 2: 7 and 11

Income and expenditure
Annual gross income from employment or profession: €93k
Annual gross income of spouse/partner: currently career break, if full-time, €65k
Monthly take-home pay: 4,300 net approximately (one income)
Type of employment/Employer type: Both public sector, one considering leaving public for private as highly stressful working environment.

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

Saving, without trying to. We don’t really socialise hugely, and don’t do foreign holidays.
Our son our priority.

Summary of Assets and Liabilities

Assets


Family home value: €800k
Savings: €330,000 (all in current accounts).
AVCS/PRSA’s: €227,000 between two of us, €160,000 for one, and €80,000 approximately other.
Second property, value: €650k and potential rental yield of €2,500 per month.
There is a potential inheritance at some point from one set of parents.


Liabilities
Mortgage on family home: €0

Family home mortgage information
N/A

Other borrowings – car loans/personal loans etc

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

Pension information

Both-public servants, but both late entrants, hence the AVCs/PRSAs from previous private sector roles as further up the page.
One is post 2013 scheme, and
One of us worked in UK, and has 27 years of UK state pension, by doing ‘buy back’ annually, if we continue to buy back a year, annually, one of us will have circa €13,000 UK state pension upon retirement.
In addition to UK state pension, there is 5 years of NHS pension too.

Other information which might be relevant

My spouse and I both work in public sector, my spouse works in especially stressful role, and is on career break. So current income is €93k for one of us.
However, a variety of good fortune, inheritance etc and pure fluke means we have our mortgage paid off, have a second property worth circa €650k, and substantial savings in the bank.
One of our two children has additional needs so long term we foresee either they will stay with us indefinitely, in to old age, or if they are independent enough, they could reside in the second property we have.
We’ve saved money without trying, but we clearly don’t spend big, and neither of us grew up with much money, so this is all very unfamiliar.

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

What do we do with the €330 in savings?
What do we do with the second property? We don’t need to rent it out, and conscious there are risks associated with tenants, and also fact that 50% of rental income goes to tax-man, so part of us inclined to leave it empty.
How do we best plan to set things up for our son with additional needs? Is planning to hand him a house at 18 the best/wisest? Or sell it and keep the cash for him and sibling?

Pensions

My wife got two public sector pension estimates, retire at 60 and pension of €12,000 per year, or work to 65 for pension of €13,600 per year (today’s money). No brainer based on that to go at 60, or have we missed something.
On the pensions, and years people can retire at, have we got below correct?

Person one

Post 2013 scheme - Retire when? I’ve heard cost neutral early retirement? Does mean retire early as in 60 on reduced pension/lump, or does it mean retire 60 and don’t get lump/pension until later?
Plus PRSAs in place


Person Two

Pre-2013 scheme – In terms of superannuation entitlements as listed above, retire at 60/65, these would be, be able to draw down from 60/65? Or as presented are they actually drawn down 65?
Plus PRSAs in place

Our financial goals
Retire as early as possible, certainly both of us want to be able to retire at 60 or before.
We do not want to be over-pensioned in retirement and pay too much tax, so the optimum on pensions is what?
A couple retired can earn €88,000 while paying 20% tax, and anything over it is 40% right?
Travel like mad, now with children at the age they are, and again in years to come, conscious that health is wealth, and time to travel if feasible is always now.
We appear to have property worth €1,5 mil circa plus €330k savings, plus €227 in AVCs.
We want to be able to set our two kids up as best we can.

Our current strategy
  • Continue maxing out pension contributions each year?
Overall, we are fairly directionless and aware lump sum in bank account not smartest thing to do.
 
One of us worked in UK, and has 27 years of UK state pension, by doing ‘buy back’ annually, if we continue to buy back a year, annually, one of us will have circa €13,000 UK state pension upon retirement.
I am not in the same hurry to be paid up early. I intend to have 35 years voluntary NICs just in time for my 68th birthday. There are no survivors’ benefits and if you die before 68 it evaporates. And you could have other uses for your income in the meantime.
What do we do with the second property? We don’t need to rent it out, and conscious there are risks associated with tenants, and also fact that 50% of rental income goes to tax-man, so part of us inclined to leave it empty.
I would not leave a property idle. If you’re not letting it out just sell it and invest elsewhere. Likewise if your son needs a house as an adult it’s highly unlikely that the second house you own today is the right one for him.

We do not want to be over-pensioned in retirement and pay too much tax, so the optimum on pensions is what?
That is fallacious thinking. Marginal tax rates are not 100% and the higher your gross income the higher your net income.

Within the constraints of your family situation I would spend money on things that bring you joy. You will never be financially uncomfortable even if you spend a lot more.
 
Savings: €330,000 (all in current accounts).

Your money is being eaten away by inflation, stick it in a passive index fund, a low cost etf on trade republic or Lightyear...and max out AVCs for your age

Second property, value: €650k and potential rental yield of €2,500 per month.

Gross yield of 4.6%.is pretty poor but you're not even getting that as property is vacant.

Sell it and if you want to continue renting buy a 2 bed apt in Smithfield or similar for 285k and rent it out for max of 2,500? pm.

Invest the remainder minus capital gains...suggest AVCs/ passive low cost fund of diversified shares.
 
Last edited:
Dr Strangelove
I didn't realise there were no survivors pensions benefits, and yes we really need to think on the second property, for one it is not near where we currently live as family. Maybe, selling, investing and buying him something closer to where we currently live might work.
And so true on spending money on things that bring joy.
Persia
Noted on the AVC, I've read its possible to over-fund pensions? Is this possible? Or myth.
Niceoneted
Yes, will made in case anything occurs to us, and nominated adults would take over responsibility.
Thanks all for input
 
You can get tax relief up to the relevant age-related percentage limit of your earnings in any year. Employee contributions are not counted toward this percentage limit. Ensure that you're hitting these for both annually,

Limits: https://www.raisin.com/en-ie/pensions/pension-contribution-limits/


AgePercentage limit
Under 3015%
30-3920%
40-4925%
50-5430%
55-5935%
60 or over40%

 
I've read its possible to over-fund pensions? Is this possible? Or myth.
 
Sell it and if you want to continue renting buy a 2 bed apt in Smithfield or similar for 285k and rent it out for max of 2,500? pm.
Smithfield, Dublin 7? €285K for a decent 2 bed apartment in a development with a properly functioning management company in that area sounds extremely optimistic. And the frictional costs of selling one property and buying another are not insignificant.
 
Might worth speaking to independent financial advisor and tax advisor around the possibility of child their possible be dependant on you into adulthood to make sure optimised for tax. Just some ideas to talk about . Setting a trust for the dependant child . Setting a "deed of covenant" in effect transfer some of your income up to 5% . This is tax efficient as the income becomes theirs. The fees in getting such advice might very helpful.
 
Smithfield, Dublin 7? €285K for a decent 2 bed apartment in a development with a properly functioning management company in that area sounds extremely optimistic.

Here you go. 275k for a 2 bed, Excellent management company, I own a property there for many years.


Sounds nuts to me to have a 650k asset not generating an income.Something needs to be done and a 4% gross yield isn't it while being exposed to weekly changing regulatory environment.

Personally I'd sell it and load up on a passive index.
 
ClubMan

Thanks for links to pension information, I had a look at the thread and the various calculations and genuinely I’m going to study it a few times, and some more, as I can’t make sense.

But my overall read is as a late entrant, mid-late 30s to Single Scheme there is little chance I will over fund it, based on below comment in that very useful thread.

“Generally speaking there’s a large scope to invest in AVCs as a Single Scheme Member. You don’t really have to worry about caps 2 / 3 above unless you expect your AVC to be worth €500,000+ in today’s money or unless you have a very large pension from a former employer. “

irbx


Noted on the need for Financial Advisor, I am actively looking for same as this is very complex stuff.
 
I'd start with some basics and given the value of your assets and a child with special needs, to ensure you have wills and guardianship and anything else squared away properly, especially given a child with special needs

Secondly, given the fact one of you is on a career break, have you reviewed your taxes to ensure you are being taxed in the most effective manner and secondly, that you have claimed for everything you have.

Have you reviewed your life assurance position?

in regards the 2nd house, you need to ask 3 questions
  • Do you want to be a landlord? I get the impression is no
  • Is the house suitable for your childs needs in the future or will it need an investment?
  • If you leave the property empty, how much will you need to invest to bring it up to spec in the future? The house is only going to deteriorate over time
You could be better selling it now and then investing the funds for a period of time until you know what you want and need to do

You could also do worse then take a portion of your cash and invest it longer term for Uni costs for the other 2
 
Back
Top