Moneymakeover Late 30s - Financial plan for next few years.

[Donohill]

Age:
39
Spouse’s/Partner's age:
38

Annual gross income from employment or profession:
€82,000 , potential company bonus of €10,000, have gotten 9-10% the last three years which was around €7,500 - €8,000 but bonuses have been scaled up so new top level of 12.5% to hopefully achieve. €1500 gift card annually also.


Annual gross income spouse:
€80,000 plus LTIs and RSUs of about €20k a year, takes bonuses in RSUs.

Combined take home pay:
About €7,700 per month after tax and pension payments

Type of employment:
Both in private sector

Expenditure pattern:
Pretty good. We like our holidays as we currently don’t have any major responsibilities, but we try and budget for them well. The odd meal out, avoid takeaways as much as possible. Weekly shopping budget of less than €100. Change phone, broadband, car tax etc every year if we can get better deals. Going through fertility treatment at the moment so expenditure pattern is definitely changing but obviously we look at this the best money we could spend.

We both save around €1k a month each. My wife in cash and me half in cash half in S&P 500 ETF on Trading 212.

Rough estimate of value of home:
€620,000 (Purchased August 2024, hopefully worth more currently)


Mortgage on home:

€480,000 – @ 3.55% with 2% cashback on that 3.55%. Fixed until February 2028.


Other borrowings – car loans/personal loans etc
None

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

Savings and investments:
€95,000 in cash between us which is being held for a few things explained further down.

My wife has RSU’s of about €95k with another €30k or so vesting, these are in dollars. Her company share price has shot up in the last year or so. Recently sold off a tranche and trying to figure best way of dealing with them from a tax perspective, again explained down below.

Do you have a pension scheme?
Yes, 107k in total (74k with current company, 20k and 13k with old companies) . I’ve maxed my personal contribution at 20% and my company contribute 8%. I had planned on upping to 25% next year as I’m hitting 40.

My wife has 88k in current pension and about 14k in an old company, trying to trace this currently. She puts in 10% and her company puts in 9%. I have been suggesting her to gradually increase this and she has gone from 4% to 10% in the last year. Eventually might get up to the 20%.

Do you own any investment or other property?
No.

Ages of children:
None. Have started fertility treatment.

Life insurance:
Mortgage Assurance. We both have death in service of 4 times salary.

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

We got married and moved into our house within a 6 month period last year so have been coasting and enjoying life for the last year. Now I’m trying to plan financially for the next while.

1 – The share situation. My wife has been with her company for 8 years and has accumulated a lot of RSUs and LTI shares. The shares are a mix of RSUs (income tax already paid at vesting) and company profit sharing shares (APSS). We believe the CGT cost basis should be the vesting/locked-in value rather than original grant price which significantly reduces the liability. There are also quarterly dividends being paid with US withholding tax deducted. We're not sure these have been properly declared on Irish tax returns or whether the foreign tax credit has been fully claimed. Might need to go to a specialist tax advisor on these.

2 –
We're holding €95k in cash with identified uses. Home improvements (windows, attic, cavity wall insulation C2 to B2/B1, estimated €25-30k after SEAI grants), bathroom renovation, potential fertility treatment costs, and possibly a lump sum on the mortgage. We also have the RSU proceeds available once the tax situation is sorted. We have two cars but one is a 07 Golf which while working perfectly fine might need an upgrade at some stage albeit we live in an area with good public transport, Luas adjacent, plenty of buses, and my wife is wfh 95% of the time and I'm 40% wfh.

Our fixed rate expires February 2028 and I'd like to hit 60% LTV at that point to access lower mortgage rates. We purchased in August 2024 but only drew down January 2025, so hoping for 3.5 years of price appreciation, I'm relatively conservative so have modestly assumed a €650k valuation.

I've applied to PTSB to overpay by €500/month joint (€250 each). Between price appreciation, BER uplift, overpayments and potentially a lump sum from savings or share proceeds, we're targeting 60% LTV. That lump sum could be around €60k if needed.

Key question: given all the competing uses for our cash, home improvements, fertility treatment costs, potential car upgrade, lump sum on mortgage, what's the optimal sequencing? And is targeting 60% LTV by February 2028 realistic or are we overcomplicating it for the sake of a few k in mortgage cost a year?

 

[geraldo2001]

You both appear to have built a strong financial position, particularly given the significant expenditure on your wedding and house over the last couple of years. There are two separate issues here, so I’ll deal with the company shares first before looking at the upcoming expenditure and mortgage.

1. Company shares & tax​

Your understanding of the RSUs is broadly correct. When an RSU vests, its market value at that point is treated as employment income and is subject to Income Tax, USC and PRSI, which would normally be dealt with through payroll. If you subsequently sell the shares, CGT is then calculated on any increase in value from the value at vesting to the eventual sale price.

The APSS shares are slightly different. An Approved Profit-Sharing Scheme is a Revenue-approved arrangement that allows an employer to award shares in a tax-efficient manner. USC and PRSI are payable when the shares are appropriated to the employee, but provided the shares remain in the scheme for the required three-year period, the original award can be exempt from Income Tax. When the shares are eventually sold, the CGT cost basis is generally their market value on the date they were originally appropriated under the APSS, rather than their eventual value when released from the scheme.

So it is important to distinguish between the two when working out any CGT liability:

• RSUs: the relevant starting value for the subsequent gain is generally the market value when they vested.
• APSS shares: the relevant starting value is generally the market value when the shares were originally appropriated under the scheme.

The dividends are a separate issue. US withholding tax being deducted does not remove the requirement to declare the dividends in Ireland. US dividends should still be declared to Revenue, with the US tax already deducted taken into account when calculating the Irish tax liability. For PAYE taxpayers, relatively small amounts of non-PAYE income can generally be declared through myAccount/Form 12, while higher amounts may require registration for self-assessment and a Form 11.

Given the value of the shares, the mix of RSUs and APSS awards, previous disposals and the possibility that dividends haven’t been correctly declared in previous years, I think this is one area where paying for a tax adviser to review the position would be worthwhile. They can establish the correct cost basis for each tranche, calculate any CGT due and make sure the historic dividend income and available foreign tax credits have been dealt with correctly.

Once the tax position is clear, I would also consider how much exposure you want to retain to one company. With approximately €95,000 already held in company shares, another €30,000 due to vest and further share-based remuneration likely in future, a meaningful part of your household wealth and your wife’s future income are linked to the same company. Diversifying some of this exposure could therefore be worth considering.

On a separate point, and more out of my own curiosity, I’m always interested in why investors, like yourself, choose the S&P 500 as their main investment vehicle. Is this a deliberate decision on your part based on a view that the US will continue to outperform other markets, and therefore you’re comfortable accepting the additional geographic concentration? Or was it simply the most familiar option when you started investing? There are broader alternatives, such as funds tracking the MSCI World or MSCI All Country World Index, which provide exposure across a much wider range of global markets. There is no right or wrong answer here, but I’d be interested to know whether the US concentration is a conscious investment decision.

2. Upcoming expenditure & the mortgage​

There isn’t quite enough information on your overall household expenditure to say exactly how comfortably the €95,000 can cover the home improvements, fertility treatment, potential car replacement and a mortgage lump sum, particularly as some of those costs are still uncertain. I would therefore be cautious about committing too much of the cash to the mortgage until you have a clearer idea of what those other costs will be.

The key thing I would try to avoid is paying down relatively cheap mortgage debt only to have to borrow again at a higher rate later. For example, it would make little sense to put a large lump sum into a 3.55% mortgage now and then find that you need to take out a more expensive car or personal loan because the Golf needs replacing or another large expense arises. Given that the 60% LTV target only matters when the fixed rate expires in February 2028, you have time. You can continue saving and making whatever regular overpayments you’re comfortable with, retain sufficient cash for the known and uncertain expenditure ahead, and then reassess closer to 2028 whether a lump sum is actually required to get below 60% LTV. At that point you’ll also have a much clearer idea of the property’s value, the outstanding mortgage balance and how valuable the 60% LTV threshold actually is in terms of the mortgage rates available.

 

[Donohill]

Thank you for your reply. I mull these things over a lot in my head so always good to get another opinion.

On the shares, 100% with you on divesting of the shares. I do think that a tax adviser is the way to go, it was more a bit of lethargy and fear of the online platform from my wife than any real strategy re the shares but hopefully we can get the ball rolling on that soon enough.

S&P500 was just from the minimum amount of research to be honest, it has been performing well since I started but obviously that can also change.

On the upcoming expenses:

• We had worst case scenario budgeted €25k for windows and doors but looks like it will come in below that around the 21/22 mark and we are also entitled to the €4600 SEAI grant so call it €17.5k.
• The attic insulation and cavity wall costs are also covered by SEAI grant. We've budgeted €5k after grants for these but waiting on quotes, think it could be cheaper.
• The car we have budgeted €25k but this could end up going up to €30k, eating up the unused budget from the windows.
• Bathroom we're waiting until after the windows are done but looking at €15k for that.
• Fertility treatment isn't cheap but we both have decent insurance plus I applied for the DPS offhand when renewing our EHIC cards last year which thankfully gives a solid figure for the meds required. Currently costing about €400 a month for consultants plus meds but almost €180 of that can be clawed back through insurance and tax relief. If we need to go IVF it will be more obviously but we do have cover for that up to a point also.

The "capital" expenses come to around €65-70k I would say and the ongoing fertility stuff is coming out of current accounts monthly. Between that, ongoing savings, annual bonuses and the share sales I think we should be able to get down to the 60% but I appreciate your point on having the mortgage money at hand also. Will definitely be aiming to see what way the wind is blowing closer to the refix time but I just like having outlines of plans ready so have been trying to put a decent framework in place.