Early retirement - is it possible?

S

Skellinton

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Personal details
Age: 56 (turn 57 at the end of this month)
Spouse’s/Partner's age: 57
Number and age of children: 2 - 28 and 22 both living at home. 22 year old is in final year of uni.

Income and expenditure
Annual gross income from employment or profession: Basic 72k, OTE 102k (could also earn up to another 15k depending on performance)
Annual gross income of spouse: 35k - started a new permanent job in Jan.
Monthly take-home pay: Approx 6.5k after pension and employee share purchase deductions
Type of employment: e.g. Civil Servant, self-employed - both private sector
In general, are you:
(a) spending more than you earn, or
(b) saving? Saving

Summary of Assets and Liabilities
Family Home: Value approx €630k, ECB +1%, approx €18k remaining.
Cash: approx €65k
Company shares: €10k

Other borrowings – car loans/personal loans etc
Do you pay off your full credit card balance each month? Yes - rarely use.
Car loan - paying €250 per month, will be paid off in August.

Other savings and investments:
Do you have a pension scheme? Yes
Do you own any investment or other property? No

Other information which might be relevant
Life insurance: both of us have death in service benefit - me 4 times salary, partner 3 times.
Inheritance - I should be receiving an inheritance of approx €230 - €250k in the next few months once house is sold and probate completed.
My partners' mother has told us that she will be bypassing her children and leaving her estate to her 5 grandchildren.

What specific question do you have or what issues are of concern to you?
My partner and I have been together for over 30 years but never got married. However, and who said romance is dead, for tax purposes we will probably tie the knot later this year or in 2023. It will be an extremely small affair so we won't be spending that much on it.

Ideally, we would both like to retire in our early 60s, sell the house and either move down the country or overseas and still be left with a decent lump sum.

I suppose my main concern is around pensions. For years I was self-employed and always put pension planning on the long finger. My business went to the wall in the last financial crisis and it took me a while to pay off Revenue and other debts so I didn't have any spare cash for a long time. I only started my pension when I took my current job six years ago.
My employer contributes 8% of basic salary and I contribute another 8% (2% contribution + 6% ACV).
At the moment my pension pot is only about €51k with an estimated future value of €151k. My pension is with Aon and is split 38.50% in their Global Equity Strategy fund and 61.50% in the Diversified Growth Strategy fund. I have no idea if these are any good or suitable for someone my age.
My partner was temping for a couple of years so has made no contributions to her pension for a while but the last time we checked (about 3 years ago) it was worth €200k. She also has a small pension from her time in the UK (value approx £14k).

We had a few very tight years during and after my business failed but are now back in a position where we are doing OK

Once I have my parent's house sold we will make an appointment with an independent financial advisor but for now, any thoughts/ideas would be very much appreciated.

Thank you!
 
Your first port of call is to max out your pension payments to 35% of your income. This will put all 35k into your pension till you're 60 and then 40% after that. Even 5 years is 175k without any growth but it will be gross so will only cost you 105k (60% of 175). From your current pay packet you would down about 20k a year net. This in itself is a better saving rate than if you just saved yourself so do it straight away. Email finance department straight away. You may also be able to add AVC's to this figure if you can afford some more from this year and last year (I think) but you may be left a bit tight although you're coming into a few bob soon also. You would pay the AVC's using a form 11 to get the relief back. There is talk of this incentive being changed or even got rid of by the next guv in waiting so no time to lose.
 
Skellinton said:
However, and who said romance is dead, for tax purposes we will probably tie the knot later this year or in 2023
Click to expand...
I would do it sooner!

If you dropped dead she would face a six-figure CAT bill.


Skellinton said:
She also has a small pension from her time in the UK (value approx £14k).
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She should look at making backdated voluntary UK national insurance contributions if she can. Google "Form NI38" and send it off to HMRC without delay as there is a contributions window that closes next year. These are incredibly cheap and could qualify her for a full UK state pension.
 
A parent skipping children to benefit grandchildren in a bequest - they will get hammered for CAT.
I dont understand why a parent would do this, unless its because the child is already sorted, or its some spite job.
 
elcato said:
Your first port of call is to max out your pension payments to 35% of your income. This will put all 35k into your pension till you're 60 and then 40% after that. Even 5 years is 175k without any growth but it will be gross so will only cost you 105k (60% of 175). From your current pay packet you would down about 20k a year net. This in itself is a better saving rate than if you just saved yourself so do it straight away. Email finance department straight away. You may also be able to add AVC's to this figure if you can afford some more from this year and last year (I think) but you may be left a bit tight although you're coming into a few bob soon also. You would pay the AVC's using a form 11 to get the relief back. There is talk of this incentive being changed or even got rid of by the next guv in waiting so no time to lose.
Click to expand...

Good advice, thank you @Elacto. I've upped my AVC to 25% for now and will increase to 35% once the parents house is sold - I still have some expenses to cover and don't want to get caught short.
 
fistophobia said:
A parent skipping children to benefit grandchildren in a bequest - they will get hammered for CAT.
I dont understand why a parent would do this, unless its because the child is already sorted, or its some spite job.
Click to expand...

@fistophobia - not spite. She just figures that her children are sorted and that it would be a great boost for the grandkids.

At current values, it might be worth €100k to each grandchild so they'd be looking at about €23.5K CGT each. I have pointed out the tax implications to her but the way she looks at it is that they would get about €75k each.
 
Skellinton said:
At current values, it might be worth €100k to each grandchild so they'd be looking at about €23.5K CGT each. I have pointed out the tax implications to her but the way she looks at it is that they would get about €75k each.
Click to expand...
If she left it to the parents (her children) they could give their children 100k over a drip fed gift scheme or a very cheap loan. Explain to her she is giving the state 25% of her money for free.
 
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