Money Health check - reduce earnings over time and retire at 60?

N

Nerak14

Registered User
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14
Age: 45, single, no dependents
Spouse’s/Partner's age:

Annual gross income from employment or profession: 135k and up to 50k bonus
Annual gross income of spouse: n/a

Monthly take-home pay 6k

Type of employment: e.g. Civil Servant, self-employed - private sector

In general are you:
(a) spending more than you earn, or
(b) saving? Saving €1.5k a month; overpaying mortgage €500 a month (with lump sum overpayments of up to €20k per annum being contemplated, hence the post

Rough estimate of value of home €530k
Amount outstanding on your mortgage: €285k
What interest rate are you paying? 2%, 23yrs left but looking to pay it off before 60

Other borrowings – car loans/personal loans etc - none

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

Savings and investments: state savings €150k; €20k for annual costs/ investment property working capital in BOI

Do you have a pension scheme? Yes, DC, current value €700k but in higher volatility equity / moderate to high risk portfolios; maxed out out on deductible contributions 10% monthly plus avc, ER also pays 20% in pa on basic salary
Do you own any investment or other property? Yes, worth c €330k, mortgage free, €20k rent pa

Ages of children:

Life insurance: 3x salary DIS from ER plus good income protection


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

I think I’m in pretty good shape but I don’t foresee me continuing in high pressure role (with related high DC contributions) past 52, I’d like to work from then til 60 in a job that would pay day to day living expenses but realise I won’t make major upgrades to pension pot in those years. I know state savings are high but see them as both hedge on high risk rated pension portfolio and also I have one eye on the fact I’ll likely have an inheritance tax bill of c€150k (at current rules) at some point (would prefer parents to live to 100 and spend it all but they have future proofed a house in Dublin and won’t be downsizing and spending it so will be left to myself and one sibling)

So questions - am I doing the right thing overpaying mortgage, if I start annual lump sums I could be done by 55, am I being too passive having such a large amount in state savings?
Will I need to stick with the high pressure job longer than I hope to have reasonable pension pot? I have calculated expected annual cost of living increased for higher health insurance and excluding mortgage to be €40 p annum post 60
 
So the first thing is to clear your mortgage with your savings.

If both of your parents are alive and healthy, you won't be inheriting the house for some years. So pay down the mortgage now. You will have it well cleared by the time you have an inheritance tax bill. And you can face that problem when you come to it.

I understand the emotional attachment to the family home, but you may well feel differently about it in 20 years. But even if you do decide to keep it, you should get rid of your investment property. You should not have €1.7m in property assets. That is too concentrated.
 
With €2m in assets and the state pension at say, 70, you probably could give up work now if you wished.

Of course, if you start a family, that wouldn't be nearly enough, unless your partner is also a high earner.

If you feel under pressure and in danger of burnout, then you should look at doing a less pressurised job now. If you are earning €185k a year, you could cut it back to a job earning "only" €100k a year.

Alternatively, you are in a very good position to take a complete career break. Take a year or two off. Enjoy life while you are young and healthy. Then return to the workforce later.

If this is a possibility, then do hold onto your savings, but put them in the stockmarket.

Brendan
 
Thanks Brendan, table summary is broadly correct, I tend not to include the future inheritance value - but I know that’s inconsistent with taking account of the future liability. My concern is being asset heavy but will the current pension which might get to 1m by the time I reduce salary levels get me through
 
Why would you rely solely on the pension?
You will have two investment properties which you will get a rent from or which you will be able to sell.

And if all your "investments" are gone by the age of 80, you will be able to supplement your income by taking out a loan against your home.

Brendan
 
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