Mid 30s. Trying to plan for house and pension.

faketales

Registered User
Messages
24
Age: 34
Spouse’s/Partner's age: 35 (we recently started living together but haven't merged our financed yet. I would like to get my finances in order first. She is not dependent on me financially and is possible a little better off.

Annual gross income from employment or profession: 68k
Annual gross income of spouse: NA

Monthly take-home pay: 3,190euro

Type of employment: e.g. Civil Servant, self-employed: Semi state (DC pension)

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

a. I spend less than I earn.
Yes

b.
I currently put about 1,000 a month to my house deposit fund. This will drop a bit post covid...

Rough estimate of value of home: Renting. Hope to buy with 24 months. Looking at some places in the 350k range but sure if that's reasonable. Girlfriend would have similar savings.
Amount outstanding on your mortgage: na
What interest rate are you paying? na

Other borrowings – car loans/personal loans etc
No borrowings.

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

Savings and investments:
I lived in Canada for 9 years and still have money there.

In Canada:
Canada has two main saving schemes.

1. Tax Free Saving Account, I don't think there is an Irish equivalent but basically it allows you to save/invest 5k a year tax free. I have left money in here as if I take it out I can't add it back while not living there. I don't think there would be any tax to pay to transer this to Ireland. Under this program I have:

High (2%) interest saving account (not locked in): 30k euro (I saw/see this as a house deposit fund)
Mutual Funds: 8k euro

2. Retirement Saving Scheme. This is basically a private pension. I got tax relief putting funds in. I could pull them out put I would need to pay some tax.
Mutual Funds: 4.5k euro.

This is today's conversion, the value dropped by 5% at the start of covid.

In Ireland:
House Deposit Fund: 42k euro in regular saving accounts.


Do you have a pension scheme? Yes.

Current job:
I contribute 8% and my employer puts in 12%
Current value: 31k
Future: 430k

I also contributed to a DB pension for 4 years in Canada. Not sure how good 4 years is though.

Do you own any investment or other property? No

Ages of children: none. unsure if they are in future.

Life insurance: no, should I?


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

I don't expect anyone to be an expect on the Canadian details but do people have thoughts on if I should bring back my savings from my tax free account in Canada to use as a deposit or would I be better leaving them there and investing to maximize the use of the tax free benefit? I don't see myself living there again.

When I had my DB pension in Canada I though I was pretty set for life, but life changes... now I only started my Irish pension at 31 although I understand the contribution rate is good.. From my pension website it recommended making further contributions if I want my pension to be 50% of my current salary. Is that a target I should aim for? Or am I better to save further for a deposit? Its hard to answer questions about how much money I would like in retirement when there are so many unknowns.

If possible I would like to retire early 60s. Again it seems so far away but it would be good to know what would need o be done to achieve that.

I would like to develop a financial plan around house and pension and try and follow it (adjusting as need be when life throws stuff at you). Basically I wan't to be as aware as possible of the impacts on buying a house costing x on ability to retire etc.
 
Last edited:

RedOnion

Frequent Poster
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4,540
Some advice, you might edit your post to make it more concise. I nearly gave up on reading it. It the most long winded way of saying you budget properly and put spending money aside, and also save 1,000 per month.

In terms of pension here, I would suggest you make the contribution you need to make to maximise employer contribution.

After that, prioritise saving for deposit and get your house.

Once you have house, you can review your pension contributions. There's currently 20% going into your pension - that's a good starting place.

If I understand your main Canadian tax free account correctly, it's the growth / income that's tax free in Canada? I.e. it was your after tax income that went into it?
If you're Irish domiciled, you'll pay tax on it, regardless of the status in Canada. And even if you're not Irish domiciled, you'll pay tax when you bring the money here. You're also creating a massive FX exposure for yourself by keeping CAD funds when you intend to spend EUR. The rate has moved by as much as 8% in a short window this year.
 

faketales

Registered User
Messages
24
Thanks. I've cut out the irrelevant.

Yes, I am contributing what is required to max my employers contribution.

Correct. It was my take home pay that I put in the TFSA. My initial thinking was that I was moving to Ireland for a year or two for family reasons. I was born in Ireland so from my understanding I will be considered domiciled.

Should I be declaring my interest earned on my tax returns every year? Will it be subject to DIRT or income (and other) taxes? Its probable about 1,500euro over 3 years. I had been under the impression that I didn't need to declare or pay tax on this.

Given the better interest rate I could still be better off with leaving the money in Canada and paying tax. I am presuming the money I put in would not be taxes again if I ever need to move it to Ireland?

How might this work in relation to mutual funds? They have been up and down. Would it be based on the difference when I left Canada to when I sell?

The RRSP is much more complex I believe. I understand I will pay 25% to the Canadian government and the my marginal tax rate in Ireland - 25% if I bring it to Ireland. This will mean it will probable be a loss. Unless there is someway of putting it straight into an Irish pension.

I agree on the FX risk. I didn't move the money when I came to Ireland first as I expected I would be returning to Canada within 2 years. I was planning on moving it and then the exchange dropped. Had hoped for a recovery but doesn't seem to be happening.

Thanks for taking the time to read.
 

RedOnion

Frequent Poster
Messages
4,540
Given the better interest rate I could still be better off with leaving the money in Canada and paying tax.
Not really. The higher rate in CAD would suggest that, all other thing being equal, CAD will devalue against EUR. You're taking on an FX exposure. It might pay off, but you're taking a risk.

Personally, I like keeping my tax affairs simple. You're talking about 500 euro interest per year, and whatever return you expect on an 8k mutual fund. And for that you could end up having to complete tax returns, and pay Irish tax on it. For me, I'd say it's not worth the hassle.

Similarly with your RRSP account. It has a balance of 4.5k. it's not at the level where it's worth your while getting proper tax advice, and tracking it for the next 30 years. I'd cash it in, pay whatever taxes are due, but then make a lump sum payment into your Irish pension and claim full tax relief. It'd be different if you had 100k in it.
 

faketales

Registered User
Messages
24
Cheers. I think you make a valid point about keeping things simple. I did look at getting tax advise but once I go a quote I realised it would cost me more that it would save me.

Where do I go from here if I failed to report 500 euro per year to revenue. Surly I'm not looking at large fines? Are mutual funds based on increases since I left and I would only need to declare the year I leave?

Thanks... this stuff is complicated!
 

NoRegretsCoyote

Frequent Poster
Messages
1,476
There is no predictive value in interest rate differentials in advanced-economy currency pairs. If there were, someone with billions would have arbitraged them away already!

Otherwise @RedOnion is right, there is no point in keeping such a small amount abroad. It's better to repatriate and add it to your pension fund in Ireland.
 

RedOnion

Frequent Poster
Messages
4,540
There is no predictive value in interest rate differentials in advanced-economy currency pairs. If there were, someone with billions would have arbitraged them away already!
? I'm confused.
How do you think forward contracts / futures are priced? The relative interest rates are the main component that determine the from spot rates. If not, there would be an arbitrage opportunity.
"All other things being equal" interest rates are a great predictor of future FX rates.
 
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