Dagny Juel
Registered User
- Messages
- 21
Thanks for this, interesting perspective. However, I'm not sure if including the savings from reduced term is accurate in this example. You are not actually saving any money; the mortgage amount is fixed, you're just repaying the capital sooner. The only actual saving is the cost of credit, i.e. the interest rate. Whereas the pension tax break is an actual saving.
I think I need to look into this some more!
€23k I invest this year will be worth €184k 30 years (basically compounding at 7% on average).
And what good is extra "after tax" money to me down the line, when if I invest it, I get hammered for income tax and CGT on any return?
Boss sums up the financial aspect of this decision succinctly. Of course, there is the emotional dimension as well which has been well articulated by LS. But I will stick to the financial question thus recast. If the answer is "no" then you should pay down your mortgage but by the same token if the answer is "yes" you should be constantly remortgaging to fund your pension which seems a bit counter intuitive.It may be helpful to recast the question: Would you borrow money at 3.3% to contribute to a pension fund? I think that most people would not do so.
Brendan
Definitely worth watching.
It would not be unreasonable to hope that the €23k I invest this year will be worth €184k 30 years (basically compounding at 7% on average).
Your question should be - "Should I pay €100 today into my pension or pay the net amount off my mortgage?"
What return will you get on the €100 after expenses? It's very unlikely to be 3.3%. Maybe do the numbers at 2%. Then ask how will it be taxed when you retire? Probably reasonable to assume 25% tax-free and the rest taxed at your marginal rate.
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?