Late to the game, Am I on track for retirement ?

W

Welshman

New Member
Messages
3
Age: 48
Spouse’s/Partner's age: N/A

Annual gross income from employment or profession:
€70k

Annual gross income of spouse:
N/A

Combined monthly take-home pay
N/A

Type of employment:
I work for a private company.

In general are you:
(a) spending more than you earn, or
(b) saving?
(b) I'm more a saver than a spender. I have low over heads and try to keep spending down as much as possible

Rough estimate of value of home
N/A - I have always rented a room during my time working in Dublin. Currently paying 800 euro a month.

Amount outstanding on your mortgage:
N/A

What interest rate are you paying?
N/A

Other borrowings – car loans/personal loans etc
None

Do you pay off your full credit card balance each month?
I have a credit card with a zero balance. I always pay it off at end of month.

Savings and investments:
€7k in cash savings (emergency fund).
€67k in a Zurich Investment bond.


Do you have a pension scheme?
Yes - Current pot is 170,000 euro. I contribute 5% and employer contributes 15%. I also top up with 20% AVC's every month.
Total of 40% pension contribution every month.

Do you own any investment or other property?
no

Ages of children: No children and no plans to ever have any.

Life insurance: Employer has scheme to pay out 2 times my salary to next of kin (70,000k x 2 = 140,000k)

I was late to the game in investing and starting my pension. I plan on max out my pension until I finish work here in Ireland and then leave to go back to the UK to retire.
I have no interest in buying property due to it being so expensive in the Dublin area and the fact I will be leaving at retirement.

I tend to have at least 500 euro left every month and have been saving it up to 5,000 euro and then dropping that into my Zurich bond.
The bond is invested in US equities (6 on the risk scale)

I'm I on track or is there more work to be done here ?

Thanks in advance
 
It looks like you are doing all the rights things in terms of maximising your pension contributions but continuing to rent in your circumstances seems unwise.

Say you took out a mortgage of €200k at a rate of 2.2%. Your annual interest payments would be roughly half what you are currently paying in rent.

When you want to move back to the UK, you could sell your PPR with no CGT and use the equity to buy in the UK.

It is very difficult to retire comfortably if you don’t own your own home so that’s where I think you should focus your attention.
 
Make sure that your pension has low charges (ideally < 1% annual management charge and no other charges) to minimise the drag on performance, and is invested in a suitable asset mix (in my opinion, at your age, up to 100% equities).
 
Sarenco said:
It looks like you are doing all the rights things in terms of maximising your pension contributions but continuing to rent in your circumstances seems unwise.

Say you took out a mortgage of €200k at a rate of 2.2%. Your annual interest payments would be roughly half what you are currently paying in rent.

When you want to move back to the UK, you could sell your PPR with no CGT and use the equity to buy in the UK.

It is very difficult to retire comfortably if you don’t own your own home so that’s where I think you should focus your attention.
Click to expand...
This is good advice. If you could get a 3 bedroom place, rent out 2 rooms(tax free) you'd be paying down an asset you could sell(or rent) at retirement. With interest rates so low on mortgages, it's the next best investment you could make after your pension.
 
sonandheir said:
This is good advice. If you could get a 3 bedroom place, rent out 2 rooms(tax free) you'd be paying down an asset you could sell(or rent) at retirement. With interest rates so low on mortgages, it's the next best investment you could make after your pension.
Click to expand...
If you're paying €800 for rent at that moment, and you get a place that has 2 other rooms that could be rented at this price, that's €2400/month. If that was your mortgage over 20 years you could get some place at a price of €450,000.

These are back of envelope calcs, but the point is that for the rent you're paying now you could have a decent house. Albeit it means being a landlord and all that entails, but just something to think of.
 
Maxing out your pension is a good idea, but you will only draw down 1.5 x your salary as a lump sum on retirement. So between that and your savings you probably will have €300-400K cash to purchase a house in the uk when you retire.

To safeguard against house inflation the idea of purchasing a house in Dublin and doing the rent a room scheme sounds pretty cost neutral to me. You can afford a house of about €315K, mortgage about €1500 pm over 20 years, maybe €2400 pm from rent a room scheme. This would even allow you to pay mortgage off quicker, say over 15 years (€1750 pm repayments) allowing some money to pay for utilities, house insurance repairs etc.

By the time you reach retirement age you can sell the ppp (and over 20 years it should increase somewhat in value) and still have your savings and lump sum to help with the move back to the UK. You might have closer to €600K then, which may be the average house price where you plan to live. I would think you have a good feel for your outgoings and you ability to live in a house share, so it would seem a pretty safe step to take and help guard against house price inflation.
 
Clamball said:
Maxing out your pension is a good idea, but you will only draw down 1.5 x your salary as a lump sum on retirement.
Click to expand...
Isn't it the greater of 1.5 x final salary (or some average over the last few years) or 25% tax free?
Clamball said:
To safeguard against house inflation the idea of purchasing a house in Dublin and doing the rent a room scheme sounds pretty cost neutral to me.
Click to expand...
Is concentrating so much of the overall net worth in domestic property necessarily a good idea from a risk perspective?
Clamball said:
By the time you reach retirement age you can sell the ppp
Click to expand...
PPR?
 
Buying property over a short timeframe is not wothout it's risk. You also need to factor in the extra upkeep, buying and selling costs, property tax and hassle of being a LL. The OP has not indicated how long they are going to stay in Ireland for anyway.
 
elcato said:
Buying property over a short timeframe is not wothout it's risk. You also need to factor in the extra upkeep, buying and selling costs, property tax and hassle of being a LL. The OP has not indicated how long they are going to stay in Ireland for anyway.
Click to expand...
He's 48 and will presumably retire at 66 or so.

There could be bumps on the road but you'd struggle to find an 18-year window over which Irish property wasn't a good investment.
 
NoRegretsCoyote said:
There could be bumps on the road but you'd struggle to find an 18-year window over which Irish property wasn't a good investment.
Click to expand...

I bought property in 2005, so over a 17 year period I have (so far) gained about a 10% return pre tax but if I accounted for expenses it would probably be a good bit lower. That wasn't very good :)

There are still properties in my estate that are in negative equity since purchased in 2007.
 
aristotle said:
I bought property in 2005, so over a 17 year period I have (so far) gained about a 10% return pre tax but if I accounted for expenses it would probably be a good bit lower. That wasn't very good :)
Click to expand...
Yes, but how much rent have you not had to pay over that 17-year period?

The important thing to compare is the interest payments on the mortgage with the rent you would otherwise have paid on the same property.
aristotle said:
There are still properties in my estate that are in negative equity since purchased in 2007
Click to expand...
That is highly unlikely unless the owners failed to make their scheduled mortgage re-payments or had interest-only mortgages with a high LTV.
 
Worth taking a look at your state pension options as well. If you have paid contributions in the UK, you may have options to add to those to maximise your state pension over there.
 
Sarenco said:
Yes, but how much rent have you not had to pay over that 17-year period?
The important thing to compare is the interest payments on the mortgage with the rent you would otherwise have paid on the same property.
Click to expand...

I was referring to buying property as an investment for rental, as opposed to a PPR.
 
aristotle said:
bought property in 2005, so over a 17 year period I have (so far) gained about a 10% return pre tax but if I accounted for expenses it would probably be a good bit lower. That wasn't very good :)
Click to expand...
The gain would be double if you'd bought 18 years ago in 2004 though

You can't live in a tent, and over a period of decades buying the same property is generally better than renting it. If you are settled in one place and have a stable income then buying is generally a better long-term strategy than renting
 
A lot of assuming done on the property points (yous are forgetting annual upkeep of said property and tax shifts)- lots of pros and cons. I just don't think it is worth the risk.
 
aristotle said:
But a 20% gain over a 18 year period is hardly considered "good investment"?
Click to expand...
It is if you are making an annual profit from the rental income over that period.

Of if owning the property means you don't have to pay rent over that period.
 
aristotle said:
But a 20% gain over a 18 year period is hardly considered "good investment"?
Click to expand...
I was a little vague it's true.

My claim should be something like: "over a two-decade period, someone choosing to buy a mortgage-financed property will almost always be better off than someone choosing to rent an identical property, and in some cases will be substantially better off"

There are statistics on Irish house prices and interest rates since the early 1970s, rents since the mid-1990s. If you can find an 18-year window where the above claim does not hold please let me know!
 
You must log in or register to reply here.
Back
Top