MM - Aiming for early retirement, but how?

[lessobviousname]

Thanks for the reply Fortune. To answer your questions:

What's in the share portfolio? Is it diversified? Is it just employer shares? Does it produce dividends?

Share Portfolio comprises of Vanguard S&P and iShares MSCI. Doesn't provide dividends.

The life cover initially seems low, but assuming there's also mortgage protection on the BTL loan, perhaps the rent, savings and shares would provide sufficient income if there's any clog popping.

Yep. There's mortgage protection on the BTL loan. I think/hope it would be suffiecient in the overall mix of things.

Have you considered your planned expenditure and income over future years? Are education costs factored into your plans?

Working on this at the moment. Appreciate this is a really important number for both bridging the 55 - 65 gap, as well as beyond. We'll need to budget for college costs as well during this period too.

Will you have enough non-pension income/assets to support your planned lifestyle between retirement and being able to access your pension funds? Your spouse may be able to access the pension from 50, but that would require leaving that employment.

I think this is where I'm struggling to work things out. If it makes sense to maximise the AVCs over the coming years via the Share Portfolio then this would have a significant impact on both the available funds to bridge that gap, and the decision to sell (continue renting) our rental property.
If it doesn't make sense to use the Share Portfolio to max out the AVCs, then it would be harder to get the private pension value up, but would have more accessible funds via the Share Portfolio.

Thanks

 

[Fortune]

Working on this at the moment.

Without an expenditure number, it's hard to say what to do. Saving €600 a month seems low, given your income. I'm presuming that's in addition to the pension contributions.

It would seem sensible to use the shares and savings to fund the pensions, but also keeping an appropriate emergency fund and enough to pay for the post retirement pre pension years.

It seems to me that the BTL should be sold, as it looks like it's cashflow negative.

 

[kickstart]

Is it sensible to take money out of a Share Portfolio (each year) and use this to maximise our AVCs?

I think it's difficult to say for sure, as I think you'd need to dive deeper into the figures, returns etc. I suspect moving your shares into the pension will be a better way for them to grow, as future returns will grow tax free. You mention that this means a tax hit, but this tax is waiting for you no matter what you do, as someday presumably you'd like to spend the money in there. Your pension will eventually be taxed too, but given you're thinking of retiring at 55, you can tweak your withdrawals to pay at the lower rate, plus the 25% cash free lump sum will be waiting too.

 

[lessobviousname]

Thanks Fortune and kickstart.

I absolutely agree that there is more work needed on my side to get a better idea of that expenditure number.

I mightn't have been detailed enough on BTL. The rent received is paying off the mortgage and makes roughly €8k profit beyond all expenses (incl mortgage) in a year. I would've assumed that is a solid investment/return on it for the moment?

You mention that this means a tax hit, but this tax is waiting for you no matter what you do, as someday presumably you'd like to spend the money in there.

Really good point on the tax hit regardless. Thank you

 

[Persia]

Yield on the rental property is circa 6% gross, deduct for tax and repairs etc and you're at 2.7% or lower. 600k is a lot in one property.

This is really poor, throw in a ridiculously onerous regulatory environment and loss of property rights and I wouldn't touch it with someone else's stick.

Sell it and invest the money in a passive low cost fund.

 

[Dr Strangelove]

Yield on the rental property is circa 6% gross

You could sell rental and with the equity buy an apartment with a 10% yield.

If you are happy to live with the risks associated with being a landlord you might as well aim for a higher yield.

 

[Persia]

Or buy 2 apartments. Good point though. But Im very cool on property. Just too any regs and they keep changing....Im looking to exit at least two if not three.

 

[CharlieMac]

The rental income is €3,000 a month and the mortgage is around €1,800/month. With deductible expenses, it earns around €8k a year (after tax).

The rent received is paying off the mortgage and makes roughly €8k profit beyond all expenses (incl mortgage) in a year.

Are you sure about this? €3000 gross rental income and probably paying tax on that at 52%?

I can see the value of holding on to the rental to have another foot in the property market and perhaps to downsize to or pass on to a child. But as an investment I suspect putting the value of that rental even in an index fund in an ETF will grow more wealth for you and that is more accessible.

 

[lessobviousname]

Are you sure about this? €3000 gross rental income and probably paying tax on that at 52%?

Thanks all for the advice and comments. It's been incredibly helpful, and yes... I believe my workings on the rental property are incorrect, which removes pretty much all profit from the BTL property.
I'm also really concerned about the various risks for landlords at the moment, so I get where you're all coming from.

I've often looked at the property as something which could bring a passive monthly income to support retirement when the mortgage has been cleared (19 years still remaining). But it's likely that the property will start to require bigger investments as it ages in the next 5 - 10 years to keep it in good condition too.

The property was purchased for €465,000 about 10 years ago and is worth around €600,000 with €310,000 left on the mortgage.
If it sold for the above, it would net (after CGT) around €245,000. Would shifting this remaining sum into something like the current Share Portfolios seem like a sensible approach?

 

[S class]

Read these threads.

Key Post - PRSI and planning retirement

This Key Post is in the form of a FAQ where I don't know many of the answers. I will update the post as I get answers. 1. PRSI payable on reaching state pension age Answer: 0 (Class M) 1a. Does this relate to the start of the tax year in which you become 66? Or to after your birthday? Answer...

www.askaboutmoney.com

Can a person with rental or investment income over 7500 euro per year qualify for 65s benefit ?

No. However they could qualify for Jobseekers benefit at age 65. Basically the subsidiary employment rules for Jobseekers benefit are different to those for 65s benefit. Employment 1. PAYE employment Employment 2. Rental or investment income over 7000 euro per year. To qualify...

www.askaboutmoney.com

You should aim to reach 2080 Prsi contributions at age 66.

You should also aim to qualify for BP65 (or Jobseekers Benefit at age 65).

 

[CharlieMac]

If it sold for the above, it would net (after CGT) around €245,000. Would shifting this remaining sum into something like the current Share Portfolios seem like a sensible approach?

Share Portfolio comprises of Vanguard S&P and iShares MSCI. Doesn't provide dividend

These are in ETFs I guess?

Try to work out your Net rental yield and see what Yield you are getting on funds in your share portfolio. The markets are over valued in my view but your investment horizon is decades.

Worth having a long think about why you have the rental. Its giving you options many would wish to have. Maybe it would suit your family to keep it. But there are less risky and more gainful ways to grow retirement income.

 

[ArthurMcB]

Naturally, if we do retire around 55, we would need approximately 10 years of funds to bridge the gap until our private pensions kick in

Whats this all about?

Why can you only access your pension from 65? Sorry if I missed it.

I thought a private pension can be accessed from 50 with the approval of the trustees.

 

[ClubMan]

Early retirement - pensionsauthority

Most pension arrangements in the private sector permit members to retire early in certain circumstances. However, the benefits you receive are likely to be lower than they would otherwise be at normal retirement age.

pensionsauthority.ie

In occupational pension schemes, early retirement is generally possible with the employer’s and/or trustees’ consent from age 50 onwards.

Under personal retirement savings account arrangements, early retirement from an employment is possible from age 50.

Under personal pension arrangements, retirement benefits can be taken from age 60.

 

[ArthurMcB]

Right on Clubman, right on.

So whats the OP on about re needing to bridge stuff?

 

[ClubMan]

Did you act on any of the advice given a few years ago?

MM - Aiming for early retirement, but how?

Age: 42 Spouse’s/Partner's age: 40 Annual gross income from employment or profession: €56k Annual gross income of spouse: €88k Combined monthly take-home pay €7,900 Type of employment: Both (spouse & I) work for private companies In general are you: (a) spending more than you earn, or (b)...

www.askaboutmoney.com

 

[lessobviousname]

So whats the OP on about re needing to bridge stuff?

Bridging the time not working and reaching both the age for private pension (60 in my case with a seperate buy-out bond as an option at 57) + state pension age (which might shift out further than it currently is). Also, my partner is a few years younger so this might have an impact on years to bridge. Appreciate different pension pots can be accessible at different ages, but 10 years past my 55th birthday was the conservative estimate to cover a few different situations.

Did you act on any of the advice given a few years ago?

Yes. Cleared down the remaining mortgage on PPR, maxed out AVCs each year, invested in excess cash in shares. Lots of good advice in that previous post I was grateful for.

 

[ClubMan]

Bridging the time not working and reaching both the age for private pension (60 in my case with a seperate buy-out bond as an option at 57) + state pension age (which might shift out further than it currently is).

I presume that "private pension" means something like a Retirement Annuity Contract (RAC)? Which, if it cannot already be accessed from age 50, can be transferred to a PRSA which can be accessed from age 50.

Transfer of benefits - pensionsauthority

Pension arrangements generally allow you to transfer your pension benefits from one arrangement to another. The transfer rules depend on the arrangement you are transferring from and the arrangement you are transferring to.

pensionsauthority.ie

If such a transfer is necessary to allow early access then I'm not sure if it may require a certificate of benefits comparison (COBC) that may cost a grand or two? But maybe such a transfer isn't actually necessary in order to access the existing pensions early?

 

[Fortune]

I thought a private pension can be accessed from 50 with the approval of the trustees

OP is self employed so is likely to be limited to 60 at the earliest. Spouse is in an occupational pension. Access between 50 and 60 is only allowed where the member has left that employment; OP has stated they are likely to just work reduced hours rather than fully retire. A change of employment would give access to the pension with part time hours

 

[Fortune]

it may require a certificate of benefits comparison (COBC)

No, not needed for PPP/RAC to PRSA

 

[Fortune]

€61k in a Synergy Buy-Out bond from moving a pension from UK to Ireland

I've just had a look back at the original OP, and this pension cannot be accessed until age 55.

Incomes have increased, but savings have reduced. Maybe something to look at. Could be some easy fat to trim that could be used to bulk up the retirement savings (whether inside or outside of a pension).