Help with basics - Pension/Mortgage

happycamper

Registered User
Messages
1
Age: 47
Spouse’s/Partner's age: 48

Annual gross income from employment or profession: €225,000 + average €30,000 bonus p.a(average)
Annual gross income of spouse: Stay at home mum

Monthly take-home pay : €8,300 (me)


Type of employment: e.g. Civil Servant, self-employed : Private sector/ PAYE

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

Savings €1,000 per month plus €250 per month invested in equities/ETF’s

Rough estimate of value of home : €650,000
Amount outstanding on your mortgage: €309,000
What interest rate are you paying? Split mortgage on PPR - €174k @ 2.9%(0verpaying by max 10% p/m) & €135k @ 1.7%.

Other borrowings – car loans/personal loans etc

Nil

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

Clear both cards each month
If not, what is the balance on your credit card?

N/A

Savings and investments:

€70k split between instant access bank accounts and Credit Union

€7k split between Irish/US equities and ETFs


Do you have a pension scheme?

Me – Company plan, present value €825k. Company contributing 22% p.a, I’m contributing €6,000 p.a = total €55,500 p.a

Spouse – Two pensions total value €50k, no regular contributions at present




Do you own any investment or other property?

Yes, Investment property. Market Value €170k, Mortgage €46k. Rental income €12.3k p.a. Matures 2028

Ages of children: 1 Boy- 3 years old

Life insurance: Covered by employer as is Health, Critical Illness and Company car


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


Aiming to retire by 60. I think pension is on track with present forecasts showing a value of €1.5-1.7M by age 60, we have an adequate rainy day fund for us and are now looking at the mortgages. We have three separate mortgages, Tracker on Investment property not touching but looking at our PPR, are considering overpaying the mortgage here. 2.9% fixed matures in May and BOI only offering the same again fixed or 3.9VAR.

-Do we look at Avant or similar to move both?
-Do I direct 1,000 savings(or part of it) into Mortgage overpayment and fix with BOI for another period(BOI will allow this)?
-Am I silly not to be putting more(AVC's) in the pension?
-Anything else obvious we're missing?

Thanks,
HC
 

RedOnion

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Messages
5,990
looking at our PPR, are considering overpaying the mortgage here. 2.9% fixed matures in May and BOI only offering the same again fixed or 3.9VAR.
It shows how much the mortgage market has changed that the tracker of 1.7% isn't that valuable any more!

If you fix again at 2.9%, you'll have an effective rate of 2.37%.
That rate gets lower if you pay a lump sum off the non-tracker portion out of your savings. Do you need a 70k emergency fund?
If you pay a lump sum of 40k, the rate drops to 2.3%. You maintain the option to overpay as much as you want - if there's a break fee to repay the fixed portion, then just pay it off the variable portion!

If you want to make regular overpayments against the fixed element, without a break fee, just shorten the term. But that's a contractual change.

But you'd get an overall cheaper rate by switching lenders.

I think pension is on track with present forecasts showing a value of €1.5-1.7M by age 60
There's something wrong with your projections. If you've currently got 825k, adding 55k per annum, and a growth of just 3% per annum you're going to hit 2m threshold at 60.
Double check the figures, especially the employer contribution. Is it really 22% of entire salary?

Apart from that, I would suggest that you would benefit from some tax planning advice. Who's name is the rental income in?
You could end up not using your tax bands efficiently in retirement, so any investment income subject to income tax should be directed to spouse to use their lower rate band and credits.
 

Steven Barrett

Registered User
Messages
3,979
You are spending €7,000 a month, so you need to be more aware of what you are spending your money on. As a high earner, you always have a large payment each month, so probably don't have to think too much about money. But while you are a high earner, you are not wealthy. Your lifestyle is based on €7,000 a month but you may not be able to sustain that through retirement. Yes, the mortgage will be paid off but you will also have more time to fill and can easily spend that money on travel. Your son will also still be in school and you will have education to pay for when you are in retirement. And kid's get more expensive as they get older!

Print off 2020's bank and credit card statements and categorise what you spent your money on. It's a pain but it will be an eye opener on what you spend your money on. Then put a plan in place for what you need to have a good income in retirement and work it back from there.

Remember, you life at 60 will probably be different to what it is now, so add a margin onto your expenses.

Steven
www.bluewaterfp.ie
 
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