More pensions or just clear down mortgage asap

Familyman77

Registered User
Messages
67
Evening everyone, I posted a couple of threads and have got some great advice so just a little bit more. Please see details below as I'm thinking more about the future and setting ourselves up as best we can . Something to note is we have a child with autism so we also have his future in the back of our heads aswell

Thanks for any input


Age: 42
Spouse’s/Partner's age: 36

Annual gross income from employment or profession: 65k
Annual gross income of spouse: n/a homemaker

Monthly take-home pay €4750 ( this figure includes ICTC tax credit €3300 per annum, €5000 per annum bonus paid weekly )

Type of employment: e.g. Civil Servant, self-employed
Private Sector construction industry

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

Saving a bit

Rough estimate of value of home
€350000
Amount outstanding on your mortgage:
€150000 17 years left at €912 per month ( plus €91.20 PPI )
What interest rate are you paying?
2.75% <50% LTV just changed this week

Other borrowings – car loans/personal loans etc

No other debt

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

Savings and investments: €25k in CU

Do you have a pension scheme?

Work one is minimum industry requires I pay €20 and work pays €40 per week. Employer wont contribute higher to this.
Separate one is executive pension plan started 2019. Has 100k value and would expect employer to contribute average of 20k per year to this

Do you own any investment or other property?

No

Ages of children: 4 and 7

Life insurance: with mortgage, also have PPI and have Death in service cover with small industry pension


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

I am going to use €100 per week to make either overpayments or pension AVCs. The pension calculator days I will reduce the mortgage by 7 years and will save €16k so I'm trying to work out the potential from using this €100 per week on top of current pension contributions, also of note When our 7 year old is 18 the ICTC is removed aswell.
 

Brendan Burgess

Founder
Messages
42,166
Work one is minimum industry requires I pay €20 and work pays €40 per week. Employer wont contribute higher to this.
Separate one is executive pension plan started 2019. Has 100k value and would expect employer to contribute average of 20k per year to this
Can you clarify this.

Is your employer contributing €40 a week to one scheme and €20k a year to another scheme?

Brendan
 

Familyman77

Registered User
Messages
67
Yes brendan. The €40 per week is a construction scheme pension. The other scheme is through zurichlife and I would expect the average to be 20k per annum
 

Brendan Burgess

Founder
Messages
42,166
My view is that one should not contribute to a pension until the mortgage is down to a comfortable level.

Your LTV is very comfortable. <50%

Your LTI is borderline comfortable/high €150k/€65k = 2.3 times earnings
However, if you adjust for your cash, your LTI is €125k/€65k = 1.9 times earnings.

I would normally prefer to see the LTI lower, especially with one earner. But with such a small pension fund, I think that probably makes it a priority.

So contribute enough to the pension fund to use up your top tax rate band, but no more.

If any of the following apply, you should pay down your mortgage instead of contributing to a pension:
1) You intend to trade up within 5 years
2) Your job is not secure within the next 5 years.

Brendan
 

Familyman77

Registered User
Messages
67
The 20k contribution ( estimated on my part ) is a yearly bonus based on profits. I can choose how I use the funds, the last 2 years I put them into the zurich fund based on advice from local FA. 2019 was 50k and 2020 I put 50k in. I could have taken the funds through payroll but would have had to pay full prsi , income tax etc.
 

Familyman77

Registered User
Messages
67
What would be a decent pension pot to have lined up. I know it's a very open ended question based on different peoples lifestyles but I was looking at my contributions giving a projected value of €800000 and then utilising an ARF
 

AAAContributor

Registered User
Messages
65
Assess what your annual expenses would be if retired. Mortgage will probably be paid off and work expenses will be null. Children will hopefully be out of education and earning. On top of the day-to-day outgoings you will have, make sure to build in room to replace your car and maintain your house. If at retirement the value of your pension and any other savings/investments (excluding the value of your home -unless you will downsize) is in the range of 25 - 33 times your expenses, you are in good shape.
 

AAAContributor

Registered User
Messages
65
Also, just to add, you could factor in any state benefits you will receive and knock that off whatever figure you assess your annual outgoings to be. Just to be conservative, I'd take 2/3rds of the present pension entitlement as the expected amount to be received (assuming you will be fully entitled to the full contributory pension). But, as an example, let's say your day-to-day annual outgoings for your wife and yourself are €25,000. Let's add to this figure 1% of the value of your home as capital maintenance, so €3,500. Note, you may not spend anything in a single in year but it is necessary to factor this into your budget to cover a boiler replacement or roof replacement. Let's say you spend €30,000 replacing your car every 5 years, so let's add €6,000 to your annual expenses budget for car amortisation. You are now at €34,500 (€25k + €3.5k + €6k). Let's assume you receive 2/3rds of the current state pension, so €8,650. Your annual expenses are now at €25,850. 25 times this figure is €650k approx. Of course, you have around 24 years to retirement so allowing for 2% inflation, your invested assets will need to be €1,045,000 at retirement age. This analysis ignores any entitlements your wife may receive and any gravy you'd like to factor in like helping kids with house deposit etc
 

Familyman77

Registered User
Messages
67
Thanks very much for the details. It's scary enough when you look at it that way as so many people I know arent even considering a pension as they seem to be content to live off the state pension figure. Reading through your examples they would tie in very closely to what I would want so I wouldn't be far off with my planned contributions though I think I will aim to hit that million mark sooner rather than later , though I do want a balance of having a good life on the way there
 

goingforgold

Frequent Poster
Messages
285
Most people will get nowhere near a pension pot of 1m even if they saved every last penny... Median household income is around 46k so 50% of households earn this or much less. The 1m pot is for the much higher earners or realistically only achievable with an equivalent public sector pension. That's why we hear so much about people being underfunded when it comes to pensions... Because achieving pension pots like that, or even a fraction of that, just isn't an option.
Thanks very much for the details. It's scary enough when you look at it that way as so many people I know arent even considering a pension as they seem to be content to live off the state pension figure.
 

Familyman77

Registered User
Messages
67
It's something that is playing on my mind a lot of late but I also want to live life aswell and see and do things whilst were all fit and able to do them. I've been putting any spare funds to overpay the mortgage then during this pandemic I went out and went totally off schedule and spent 5k on a boat to spend time with the family and other family members boating on the lake and visiting the islands on the lake . Was the best investment I've made for a long time . I guess it's all about what suits the individual. A good few of our friends could divert money to pensions but are living life for the now - which is something I admire too
 

Danny14

New Member
Messages
5
I think you should also give consideration to the fact that if you have ICTC it is expected that your child will not be in a position to live independently at 18...if this is case ICTC does not cease at 18. I also have ICTC for one of my children who is now almost 16 and I did find that life got more difficult for her as she got older and care levels increased considerably from age 12, my income is also currently effected as I regularly take periods of Carers Benefit Leave to look after her, also I need to factor in funds for private therapies. Also while she was an excellent student with very high school attendance up to age 14...unfortunately she has not been to school since Nov 2018 this is not something I would have foreseen at all as she hardly missed a day in primary school. Just something to consider do you need to set aside funds for future care requirements etc. Also I presume you familiar with DCA if you in receipt of ICTC.
 

Familyman77

Registered User
Messages
67
We have the DCA but as you said that's gone on therapies straight away. I've also got VHI and the plan we have him on actually covers 75% cost of the therapies. I thought the ICTC finishes at 18 so that's good to know
 

Danny14

New Member
Messages
5
We have the DCA but as you said that's gone on therapies straight away. I've also got VHI and the plan we have him on actually covers 75% cost of the therapies. I thought the ICTC finishes at 18 so that's good to know
Thats great re VHI some of our 'therapies' are her favourite restaurant and trip to JD so like your boat trips which sound fab ..go with what works.....my dd nearing 16 and never did I think she would be applying for Disability Allowance and given her situation will probably be granted it (we had no diagnosis or issues till 12 but that happens with girls with Autism)...but have to look to the positives ..she understands about the DA and knows she will have to give it up if employable in the future so she now has a debit card (which she loves pre covid she could order mcd's at kiosk and no counter etc) and does her own online shop ......plan for DA save 100 (maybe for her own car)...50 towards house/rent and rest for clothes / mobile etc...which despite her disability will made her feel more independent etc.......and she got a place in The Life Centre (alternative to school ....no uniform / homework /one on one tuition and she actually wants to do Leaving Cert there over next 3 years and skip JC )....so hopefully she will settle there) she got on great there for 2 days before lock down.....Not sure what your sons diagnosis is but for me (and others like my dd) life really changes once puberty hit but hopefully once out the other side things may improve but have to say it has changed my thoughts on income / saving / mortgages etc and also wondering how she will cope into adulthood if not fully independent which I do hope she will be I don't want sibling supporting so am also thinking along these lines..........but a balance needs to be found .... holiday / time out so badly needed for parents when dealing with a disability 24 / 7 ...so make sure you factor special date nights / treats for mum at home etc into your financial plan !!! just to add I love my daughter to bits.
 
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