Is retiring early a pipe dream? Are we too late to compensate for financial stupidity of 20s and 30s?

4

40sandClueless

New Member
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Personal details

Your age: 41
Your spouse's age: 48
Partner's age if not married: n/a

Number and age of children: 1, age 5


Income and expenditure
Annual gross income from employment or profession: 92k
Annual gross income of spouse/partner: 74k (plus bonus 4-5k after tax)

Monthly take-home pay: 8500

Type of employment - e.g. Employee or self-employed. Both employees
Employer type: e.g. public servant, private company.
Me: Public service
Partner: Private sector

In general are you:
(a) spending more than you earn, or
(b) saving?
Saving – saving 1500 - 2k per month

Summary of Assets and Liabilities
Family home value: 700k
Mortgage on family home: 302k
Net equity: 398k

Cash:
Defined Contribution pension fund:

My pension: Public service, “Superannuation Scheme”. No AVCs.

Partner: Company pays 5%, he pays 10% (was 5% until last year). Approx 175k in 'pot'.
Company shares : None
Buy to Let Property value: N/a
Buy to let Mortgage: N/a

Zurich Savings plan for son’s college: Saving 210 per month. Approx 4,200 to date

Total net assets: ?


Family home mortgage information
Lender: Haven
Interest rate 2%
Type of interest rate: tracker, variable, fixed. Fixed
If fixed, what is the term remaining of the fixed rate? Fixed until Aug 26.
If tracker, what is the margin e.g. ECB + 1% N/a

Remaining term: (Original term is not relevant) 16.5 years
Monthly repayment: 1850

Other borrowings – car loans/personal loans etc
Car on PCP – 300 per month – term is up in June 25.


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

Pension information
Me: Public service pension, will be calculated by percentage of final income (Superannuation Scheme, joined HSE 2011). No AVCs.
Partner: Value of pension fund: approx. 250k. Had been paying 5% AVCs, increased to 10% in Jan 25.


Buy to let properties n/a
Value: N/a
Rental income per year:
Rough annual expenses other than mortgage interest :
Lender
Interest rate
If fixed, what is the term remaining of the fixed rate?

Other savings and investments:
15k in Emergency fund

Zurich Savings plan for son’s college: 209.47 / month (since July 22)



Other information which might be relevant

Life insurance:
Me: Yes –Death in Service payment approx. 1 year salary. Also 300k life assurance with Irish Life .
Partner: Yes via Job (Death in Service payment of 6 x salary). Neither of us have critical illness cover.

Income Protection: Me: Yes. Partner: Yes via job.


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

Until 2 years ago, my partner and I had our heads in the sand – financially speaking – and living pay cheque to pay cheque, struggling to pay off debt. We have now cleared the credit card debts, carefully budget and are building an emergency fund. We saw a financial advisor last year and set up my life assurance, income protection and increased my partner’s AVC.

We are planning to build our emergency savings to 20k. We’re planning to buy out car after PCP term ends in July 25. I’m planning to start AVCs of 300-500e.

I’m worried about our large mortgage and would love to pay it off earlier but not sure if we should focus excess cash there or put any towards more AVCs or investments.

My job is front line healthcare, well paid but extremely stressful (and many years spent studying when I wasn't earning.) I would love to retire early when my husband is 65 so we can enjoy retirement together. For pension, I won’t have full service. Is this a pipe dream?

I worry a lot about our financial future - I've no idea if we're doing okay (whatever that is!) or not. Our financial literacy is embarrassingly low so please be kind. I have a lot of regrets about financial decisions in our 20s and 30s but we re trying to do what we can now. Can I ask If you were in my shoes, what would your next steps be?
 
40sandClueless said:
Zurich Savings plan for son’s college: 209.47 / month (since July 22)
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I would stop this. Pay off debt instead. College is a long way off and you will be able to pay for it from day-to-day income then and you’ll be glad of a lower mortgage.

40sandClueless said:
Me: Public service pension, will be calculated by percentage of final income (Superannuation Scheme, joined HSE 2011). No AVCs.
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You still have 26 years to make a 50% final value salary pensions, that’ll be when you’re 67. You could of course make AVCs.

Overall with your level of debt and modest pension pots for your ages I don’t see something like a retirement in late 50s as feasible on current trajectory.

But I think these “retire early” questions are a bit pointless myself. Retirement is increasingly a process rather than an event. I’m in a bulletproof office job and I’m aiming to be in a position by around 60 to do one or more different jobs, probably for lower pay and/or less certainty.

Anyway you have good financial habits right now. Keep that up and reassess every few years and see where you are.
 
40sandClueless said:
My pension: Public service, “Superannuation Scheme”. No AVCs.

Partner: Company pays 5%, he pays 10% (was 5% until last year). Approx 175k in 'pot'.

Pension information
Me: Public service pension, will be calculated by percentage of final income (Superannuation Scheme, joined HSE 2011). No AVCs.
Partner: Value of pension fund: approx. 250k. Had been paying 5% AVCs, increased to 10% in Jan 25.
Click to expand...
This is confusing and doesn't seem to add up?
€175K or €250K?
 
You have what is a good index linked pension coming to you, which greatly helps the overall picture when looking at your finances. It may not be particularly ‘high’ though, as you are on the new single pension scheme, not the better ones pre 2004. So you don’t have great retire ‘early’ options as your pension and lump sums will be reduced by cost neutral calculations. You can use the hse calculators to work out what that might look like, but you will have a good number of years to work from, so it will be reasonable enough, on the down side you can’t also plan to get old age pension as additional as that’s included in your hse pension. You can build up your own avs to make up the difference in both the lump sum and to augment you pension. You have plenty of time to do it.

Your husband has 17 years left of pension growth and they are the key years when you can invest a great deal tax free.

Ideally you continue as you are and invest max AVCs for your husband and possibly yourself if can afford to, but your husbands is more important. He can put in 25% tax free now, 30% the year turns 50, 35% year turns 55, 40% year turns 60. If pension is invested in reasonable growth funds and could manage to invest that much in AVCs it will grow quickly.
 
If I have got it right when your husband is 65 you will be 58 and you will have approximately 30 years service. I take it you will have increments and, very possibly, promotions in the meantime but on a salary of 92k the Modeller indicates that with CNER your annual pension at 58 would be about 16k and a tax free lump sum of 90k. You could use your AVC to top the lump sum up to the Revenue limit which, under current rules, would be about 120k (I didn't do the calculation). Anything remaining in the AVC could be transferred to an ARF - or Annuity if you prefer.
From 65 you would be eligible for a Supplementary Pension of about 7.5k (if not getting anything from Social Welfare) and this would be replaced with the State Pension (based on your PRSI record) at 66 - or 67/68 by then?

This is just to give you an indication. Only you know what this might be like for you.

PS. Have you any service prior to joining the HSE in 2011? Or PRSI to count towards a State Pension?

Setforlife said:
. It may not be particularly ‘high’ though, as you are on the new single pension scheme, not the better ones pre 2004
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Joined in 2011 so not the Single Scheme but the post 2004 scheme ("New Entrants").
 
40sandClueless said:
Yes, Dublin based and planning that our daughter will live at home and attend a college in Dublin.
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You are overproviding for college, as above redirect the money to over paying your most expensive debt first then direct into mortgage or pension.

Avoid lease agreement for cars in future they are a very expensive way of borrowing. Look at cost of buying out the lease v handing car back and getting a reliable second hand runaround.
 
Look forensically at all your spending, subscriptions etc are they needed?

Use an excel spreadsheet- I've provided a link to a prepared one that you can customise.

Always look for best deals on utilities every year, incl car and house insurance.

On Friday I saved 77 euro on renewal of my car insurance by shopping around.

Significant savings to be made when you get into that mindset....better in your pocket etc.

Well done on clearing Credit card debt and taking first steps to take control of your finances....most never do.

Annual Budget Template [Excel Download] | Zurich Ireland

Download our annual budget planner spreadsheet for personal and household use. Find out your monthly and yearly income and expenses.
www.zurich.ie www.zurich.ie
 
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Dr Strangelove said:
I would stop this. Pay off debt instead. College is a long way off and you will be able to pay for it from day-to-day income then and you’ll be glad of a lower mortgage.


You still have 26 years to make a 50% final value salary pensions, that’ll be when you’re 67. You could of course make AVCs.

Overall with your level of debt and modest pension pots for your ages I don’t see something like a retirement in late 50s as feasible on current trajectory.

But I think these “retire early” questions are a bit pointless myself. Retirement is increasingly a process rather than an event. I’m in a bulletproof office job and I’m aiming to be in a position by around 60 to do one or more different jobs, probably for lower pay and/or less certainty.

Anyway you have good financial habits right now. Keep that up and reassess every few years and see where you are.
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Appreciate your feedback. I had always put an education fund at a highest priority but what you're saying makes lots of sense. Good to have a sense of realistic sense of where we're at. Thanks.
 
Well done on your recent financial successes - it’s not easy to turn around like that but you seem to be on a good course now.

My observation is this - if you’re going to figure out a route to early retirement, it starts with a retirement budget. Some folks will read books and ride their bike (€), others want cruises and holidays with extended family/grandkids, give kids first home deposits, etc (€€€€€).

I’d suggest giving that some thought with your significant other, even drawing up a budget in today’s prices. The collective wisdom will be far better placed to advise with an indication of that lifestyle spend.
 
Your husbands pebsnsions should be 100% in equities with a view to it being invested there well into retirement, so a 30+ yr horizon. He should be looking to max contributions for his age.

Stop education fund as others have said, it just complicates the picture. Simplify your finances and wjere possible pay down debt (eg pcp?).
 
Dr Strangelove said:
I would stop this. Pay off debt instead. College is a long way off and you will be able to pay for it from day-to-day income then and you’ll be glad of a lower mortgage.
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I think the car debt would be more important to attack now that the mortgage. They're paying more for a car than for funding their child's university education.
 
conor_mc said:
Well done on your recent financial successes - it’s not easy to turn around like that but you seem to be on a good course now.

My observation is this - if you’re going to figure out a route to early retirement, it starts with a retirement budget. Some folks will read books and ride their bike (€), others want cruises and holidays with extended family/grandkids, give kids first home deposits, etc (€€€€€).

I’d suggest giving that some thought with your significant other, even drawing up a budget in today’s prices. The collective wisdom will be far better placed to advise with an indication of that lifestyle spend.
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Thank you, yes, we'll do that. We have an idea of what we'd like retirement to look for, depending on good health, so should be able to estimate costs.

Also appreciate you, and others', acknowledgement of our progress over the past few years. Hard not to focus on what we should have done ten years ago but we are where we are so I'm trying to focus on the future.
 
I thought that PCP was similar to hire purchase and there may be factors (e.g. fixed term contract and concomitant breakage fees?) that mean that there may not be significant, if any, savings to be made by clearing it early? Or perhaps I am mistaken?
 
I wouldn't beat yourselves up over this. You seem very normal. You either had a good deposit for that house or bought a long time ago and the value has gone up. You can always downsize in the future if retiring early is more important that the house.

I spoke to a financial advisor a few years ago. Best thing he sent me was a sheet with all the Cost Neutral Early Retirements calculations for me. I would advise talking to someone who understands public service pensions (as someone rightly corrected above, you're 2004 - 2012 scheme, so better than post 2012 at least).

I'm about the same age. Roughly same equity in a house. Haven't started AVCs yet. Started working at same time as you actually as well. I earn less and don't have a partner , so no second salary. And I thought I was doing well, just for having a house!
 
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