Moneymakeover Early 40's, lump sum, investment and mortgage decisions

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Brego888

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Personal details

Your age: 42
Your spouse's age: 42

Number and age of children: 2 (Aged 8 and 6)


Income and expenditure:
Annual gross income from employment or profession: 95k
Annual gross income of spouse/partner: 60k

Monthly take-home pay:

Mine - 3.5k
Spouse - 3k
Total - 6.5k

Expenditure a month on average across the year including bills, mortgage, normal day to day, holidays is roughly 3k


Type of employment -

Both public sector jobs in healthcare.
Permanent full time.
Since 2005


In general are you:

Always been very good savers.
I'd save 1.8k a month
Spouse 1k

Total - 2.8k a month (1k of that currently going to a Zurich Savings investment fund)


Summary of Assets and Liabilities
Family home value: 600k
Mortgage on family home: 205k

No loans
No other debt


Cash:

A good chunk of savings in various deposits accounts - MoCo, trading 212, raisin fixed deposit account, AIB fixed savers etc.
This would total 240k
It will all be accessible by the end of 2027 as some fixed deposits accounts mature.
Currently would have around 150k instantly accessible.

Of note approximately 100k of the 240k came from profit on previous house sale 4 years ago.


Family home mortgage information
Lender - AIB
Interest rate - 2.1%
Type of interest rate: tracker, variable, fixed.
If fixed, what is the term remaining of the fixed rate? - Fixed for 5 years. This ends October 2027

Remaining term: 21 years
Monthly repayment: 950

Other borrowings – car loans/personal loans etc

Nil

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

No loads
No credit cards


Pension information:

Will both recieve the DB pension as 2005 entrants to the public sector.
Unfortunately not the silver bullet pension of pre 2004

Both have AVCs with cornmarket.
Contributing 8% each.
As it stands out projected total value of AVCs on retirement is circa 600k


Other savings and investments:

Have a Zurich savings plus plan through cornmarket.
Prizma 5.
Started December 2025.
Worth 8.4k at present.
Contribute 1k a month to this (this is 1k of my personal 1.8k of savings a month)
Aware there are probably better funds, with better returns out there but this is what I took on last year when I was beginning the process of starting to take slightly more risks with investing money.
There is no long term goal for this fund other than putting money somewhere more beneficial than a deposit account.

I'll be curious to see what the new state savings/investment scheme is like in the budget.

Have 1k in S&P 500 on lighting
Only bought this month
This is me dipping my toe it's efts, stocks, funds etc.


Other relevant information:

Partner will need a new/upgrade to car on next 48 months.

Life insurance
Basic life cover to cover mortgage.
We both have separate critical illness cover also.



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

We have a large amount of money on deposit that isn't doing enough for us.

My main priorities to use this money is:

1) Make sure our pensions are solid (should we increase contributions to AVCs? I see regular advice here to maximise contributions. How much is enough?

2) Pay off a lump some of our mortgage when fixed rate ends in a year. How much should we clear, need to keep some cash back, and ideally I'd like the reduce the years considerably as well. I'd happily increase the monthly payment to reduce years further. Ideally I'd want it cleared totally before we are 50. Aib only allow 5k overpayment per calendar year. I will probably do that this month for this year. Fixed rate is up in a year.


3) Start investing our money more and taking more risk with the idle money on deposit. What to do with lump sum money left over when mortgage and pension are addressed. And then what to do better with regular savings than we are at the minute with Zurich fund and poor returns on various deposit accounts.
I am at the position where I want to speculate more but spouse is more risk averse.

4) We would both be due to retire at 65 as per our public sector jobs but I'd like to be in a position to retire earlier than that with the decisions I make now.

Any advice welcome!
 
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Brego888 said:
Family home mortgage information
Lender - AIB
Interest rate - 2.1%
Type of interest rate: tracker, variable, fixed.
If fixed, what is the term remaining of the fixed rate? - Fixed for 5 years. This ends October 2027

Remaining term: 21 years
Monthly repayment: 950
Click to expand...
What is the outstanding mortgage balance and house value?
 
Protocol said:
What is the allocation rate and the AMC on the two AVCs with Cornmarket?

I suspect you could get a better deal elsewhere.
Click to expand...
The AMC on my plan anyway is 1.14
Not sure on allocation rate or what that refers to to be honest?

Would have paid an upfront fee 20 years ago to set it up. It's currently in The Civil and Public Sector Master Trust - Nurses AVC Scheme
 
Brego888 said:
Not sure on allocation rate or what that refers to to be honest?
Click to expand...
How much of each contribution is actually invested?
E.g. a 95% allocation rate means that €95 of every €100 contributed is actually invested and €5 is taken as a charge.
100% allocation and a low AMC is what you want.
1.14% is a fairly high AMC in my opinion.
 
ClubMan said:
How much of each contribution is actually invested?
E.g. a 95% allocation rate means that €95 of every €100 contributed is actually invested and €5 is taken as a charge.
100% allocation and a low AMC is what you want.
1.14% is a fairly high AMC in my opinion.
Click to expand...

Had a look at documents.
It's 100%
€100 out of every €100
 
Fortune said:
What are the interest rates on the deposits? If the net interest isn't greater than your mortgage interest rate, you're destroying wealth.
Click to expand...

Ranges from 2.2% to 3.5% in various accounts.
Mortgage is 2.1%
Oh totally agree it's flittering money away particular with inflation.
Hence looking for advice on what to do better with it!
 
Hold on. Let's consider further. 3.5% interest income after tax assuming a 33% tax rate on foreign income would be 2.34% (no net decline in wealth). Also, what about the benefits of having the money on hand e.g. if your home needs investment you can cover the cost of the refurb out of cash instead of a potentially prohibitively expensive loan. If the market drops 50% tomorrow you are in a very strong position to buy up assets at a significant discount. A mortgage is often said to be the cheapest money you will ever get. I wouldnt be as quick to eradicate savings if the current circumstances remained. I agree your wealth is declining to the extent you have money on deposit at a pre tax rate of 2.2% and also that if your interest rate in the mortgage increases in the future that may change things. In my mind some level of net decline is acceptable if I consider the cash on hand provides me with opportunities over the medium term for this to be overcome
 
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Other people can give better advice on your own figures - but as someone very similar to you (public sector, similar age, similar salary) - I found the best way to improve things is to read, and to encourage your partner to as well. The Psychology of Money by Morgan Housel is a great place to start, but there are many more. It'll make a huge difference to your finances. Without reading and feeling more comfortable with investing - you'll probably go safe and overpay mortgage, which is fine if after reading that's still what you want to do. You can most likely make more by investing, you'll have options then when you have a lump sum to pay off if you wish. If you listen to Dave Ramsey he would say pay off your mortgage right now with your cash. You should definitely either invest it or pay off your mortgage. I feel the 'do nothing' option you're taking at the moment is the worst of the three options. You will have to bring your partner along with you, and if you hate reading all the authors appear on podcasts so you can listen to their wisdom.

Another small thing I do that makes a difference - I have a Google Sheets with a row for each account I have. I have one lot with 'Money doing nothing' and one for my money that is working. It's good to know what percentage of your money is doing nothing. it shouldn't be the vast majority of it. You can slowly rebalance things and put a bit more over to the working hard section. And the reading will help you see that it's working hard, like it should, not speculating (which ok, maybe it is but you're not heading off on the gold rush!).

In general you're doing very well.
 
You should be maxing your pension contributions. I doubt if Cornmarket are the best way to do this. But someone else will be able to tell you the options to do it more cheaply.


Brego888 said:
Mortgage on family home: 205k
Click to expand...

Brego888 said:
This would total 240k
Click to expand...

Brego888 said:
Always been very good savers.
I'd save 1.8k a month
Spouse 1k
Click to expand...

Keep life simple.
You fixed the rate when mortgage rates were very cheap - well done.
This is unlikely to be the situation when your current fixed rate ends.

At that stage, clear the mortgage unless you have an immediate or short-term need for the money e.g. moving house or doing a major renovation.
 
A few points on your mortgage:

Brego888 said:
Aib only allow 5k overpayment per calendar year. I will probably do that this month for this year. Fixed rate is up in a year.
Click to expand...
You are wrong about the overpayments allowed. This is a bit of a marketing gimmick by most banks. The €5k is the amount you are allowed to pay without an ERC (early repayment charge). Anything over that may face an ERC. You can ring them up and ask for an ERC on a payment of any amount that you wish and they will post this out to you

However, from what you have provided, it looks like you are on the green 5 year fixed at 2.1% so you will not face any overpayment charges. If you choose to make a bigger payment then just go ahead and do it now.
See this thread for more details.

Overpayment / re-fix flexibility of AIB's green 5yr fixed rate (and some other rates)

Moderator's note: Because of a quirk in how AIB calculate their break fee / early redemption charge, you can make unlimited overpayments on some of their fixed rates without penalty. Or you can break out of your existing AIB fixed rate and re-fix on a different rate, again without penalty. (You...
www.askaboutmoney.com

Brego888 said:
Ideally I'd want it cleared totally before we are 50.
Click to expand...
This comment makes no sense. You have a mortgage of €205k and cash of €240k. You can clear it tomorrow if you wanted.

You have no immediate need for cash other than a potential car upgrade in 2 years so your decision should be very simple. As public servants, there is very little risk to your job security and income. You don't need a lot of cash lying around doing nothing.

In your shoes, I would use €120k of the easily accessible cash to reduce your mortgage balance in the coming weeks. By the time your fixed term deposits come available next year, you will have added another €30-40k savings. By the end of 2027, clear the remaining balance on your mortgage. You will be mortgage free and still have ~€70k cash available to you.

At that point, you can buy the car outright or wait a little longer. With no mortgage payment, your saving capacity will increase to €3.8k/ month.

The only change to the above would be if you have any forseeable large expenses like home improvements in the next 2-3 years. Otherwise just keep it simple and clear your mortgage at 43!!
 
OK that is interesting. I was under the impression ERCs would be punitive and I'd be put onto a new rate. You are correct we are on the 2.1% green mortgage that runs until September 2027.
Need to read that link more throughly first and I'll give AIB a call.

I'd definitely be in a position to pay off 100-120k immediately.

*update AIB are sending out a letter with possible ERC charges for a number of different amounts
 
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Brego888 said:
What makes more sense in the above scenario, let the monthly repayments drop as the principle is lower and leave the years the same? Or reduce the years to increase the monthly repayments back to what they are now?
Click to expand...
You are getting hung up on something that is essentially irrelevant for your situation.

The general wisdom is to retain the term and lower the monthly payment while continuing regular overpayments. This makes perfect sense and gives great flexibility for someone with a large mortgage who is balancing life/childcare/pensions and all other expenses

But in your situation, you will be mortgage free within 12 months. If you pay half (€100k) now, your monthly payment drops to €475. Over the next 12 months, you will have an additional ~€6k in your hand. By paying the minimum payment, it will cost you (in interest) approximately €60.

Don't worry about the minor details of maintaining the term or increasing payments, it is almost meaningless in your situation. I think the default action from AIB unless otherwise specified is to maintain the term so just go along with that.
 
Yeah you are right. I hadn't edited that question out before you had replied when I realised I was talking nonsense and the term wouldn't be changed on a fixed rate anyway
 
Back to the overall bigger picture, once the mortgage is cleared I wouldn't just redirect the monthly payment to more savings and pension contributions.

I don't know enough about PS pensions but there are lots of rules around maximum funding etc so do your research on this. Your current 8% may be sufficient to maintain going forward

You are currently saving €2.8k and spending €3.7k from your income of €6.5k. This will flip to saving €3.8k saving and €2.7k spending once the mortgage is cleared. Personally I think that is too aggressive but each to their own. And that is without counting child benefit.

What I would suggest is don't feel obliged to divert the mortgage payment to savings. Spend a bit more on family life, holidays, whatever. Use it to cover some unpaid parental leave or pay for a service to make your life easier (e.g. house cleaning that gives you more time with your kids)

The key message being that you are in great financial position to do whatever you feel like. Don't save it all just so you can retire as early as possible.

Brego888 said:
I am at the position where I want to speculate more but spouse is more risk averse.
Click to expand...
Over the next few months, this is where you both need to get on the same page in terms of what risk actually means for you.

You have 2 PS jobs so incomes and pensions are secure
You have well funded AVC's that will ensure a comfortable retirement
You are about to be mortgage free so will be saving more than €3k/m from here on
Your kids are 10 years away from 3rd level cost which you will easily cover from income

You are in a better position than most to be able to deal with volatility in the market (as opposed to risk). In a few years, you could have a large pot of money invested which could reduce in value in a market dip. But that is highly unlikely to coincide with you needing to access the entire pot all at once and lock in those losses.

Given your age and circumstances, you really should be invested in an all equity ETF. It is the best and easiest way for you both to build wealth outside your pensions
 
Where specifically should one invest surplus cash when ready to do so EFT wise? Or is the whole which EFT thing just too broad a question to be individually answered?
 
There are many apps. I have Degiro and Trading212 accounts, mostly use Trading 212 now.
 
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