Moneymakeover Mortgage cleared, pension maxed, what do we do now??

J

jpmackey

Registered User
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Inspired by the other mid-life check-in MM posted yesterday by another user, I thought it was a good idea to ensure I am not doing anything wacky at this point of my life.

Personal details

Your age: 38
Your spouse's age: 43

Number and age of children: 0

Income and expenditure
Annual gross income from employment or profession: €95k basic, typically €105k with bonus.
Annual gross income of spouse/partner: €30k

Monthly take-home pay: €6,600 (max out AVC for me)

Type of employment: employed
Employer type: public

In general are you:
(a) spending more than you earn, or
(b) saving?
Saving/investing €40k per year

Summary of Assets and Liabilities
Family home value: €400k
Mortgage on family home: None
Net equity: €400k

Cash: €40k
Defined Cont pension fund: €35k AVCs
Company shares : €90k
Total net assets: €165k
Plus have DB pension which is a 1/80th per year with 16 years service so far.

Family home mortgage information
n/a

Other borrowings – car loans/personal loans etc
No loans

Do you pay off your full credit card balance each month? Yes

Pension information

Value of pension fund: not sure how to value DB pension

Buy to let properties:
None

Other savings and investments:
None

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

Sold off a second property in 2023 and paid off our mortgage with the equity.
I have paid max allowable contribution to AVC since 2023 to present and I will continue to do so.
We are investing about €35k-€40k per year into the stock market (40-50 companies) started in 2023 also.

Goal is to both retire as early as possible (ideally in ~12 years or so).

Appreciate any feedback.

Thanks
 
jpmackey said:
Value of pension fund: not sure how to value DB pension
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A good guide here is that a non-adjusting annuity from age 65 would cost around 5% today, whereas an inflation-adjusting annuity is probably under 4%. So the state pension of an inflation-adjusting 15k per annum is worth around 400k.
 
conor_mc said:
A good guide here is that a non-adjusting annuity from age 65 would cost around 5% today, whereas an inflation-adjusting annuity is probably under 4%. So the state pension of an inflation-adjusting 15k per annum is worth around 400k.
Click to expand...
Wouldn’t the inflation adjusting be more expensive?
 
jpmackey said:
Wouldn’t the inflation adjusting be more expensive?
Click to expand...
For every 100k in purchase price paid, you get ~5% or 5k pa. 4% means 4k per 100k paid in. A lower annuity rate means less paid out annually, equals more expensive. Opposite of a mortgage rate.

Edit- or think of it like you’re the bank, 5% is more income than 4%.
 
Last edited:
jpmackey said:
Wouldn’t the inflation adjusting be more expensive?
Click to expand...
Yes. 4% is, counter-intuitively, more expensive than 5%.

It works like this. You're aged 65. You have a pension fund of a nice round number like €100,000. You take it to a life office and ask what kind of lifetime annuity they will give you in exchange for your €100,000. The answer is:
  • an annuity for your life of €5,000 per year; or
  • a annuity for your life that starts at €4,000 in year 1, but rises each year by 2%.
Because the annual amount of the level annuity is 5% of the purchase amount, we can talk about the annuity rate being 5%. By the same reasoning, for an annuity increasing at 2% each year, the annuity rate is 4%.

(Annuity rates vary with long-term interest rates. Right now, I don't think you would get 5% for a level single-life annuity or 4% for an increasing annuity; I think current annuity rates are a shade lower. Plus, if you're in a couple what you may want is an annuity payable for your life, and the life of your spouse, if they survive you. The rates for that are lower again.)
 
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