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

Run your thinking past us on this one… you say you’ve been investing 35-40k per year in a basket of individual stocks. Is this the “90k company shares” you listed in your assets? So add snother 12x 40k to that 90k and you get 570k, but before any growth?
Kind of yeah…

We have €40k leftover per year after expenses. I am allowing for ~€4.5k of that to put to my AVC as a lump sum to max to the allowable limit for my age (my total salary is not known until year end due to bonus). The remaining ~€35.5k is invested into individuals stocks (about 50).

I have applied a 2.8% compounding real rate of return (8% growth less 33% CGT less 2.5% inflation). So with an end date of Jan 2037, the portfolio is estimated to be worth ~€570k.

We are estimating expenses of €51k in early retirement (increased from today’s expenses for travel). So that for 11 years would use up the €570k shares portfolio, after which we will be able to drawdown our pension pots for the remaining of our retirement (>60).

Make sense?
 
Make sense?
Thanks for explaining, it does make sense. But with that info now, I would highly recommend getting your partner’s pension up and running to max out their tax relief at 20% and then drawdown on that ARF under income taxation rather than capital gains taxation…. Or rather a combination of both to minimise your tax bill.

Will you be able to access your own AVC’s via an ARF from age 50 while waiting for your DB pension from age 60? Again, better to have another income to use up tax credits rather than all CGT with minimal credits/allowances.
 
Thanks for explaining, it does make sense. But with that info now, I would highly recommend getting your partner’s pension up and running to max out their tax relief at 20% and then drawdown on that ARF under income taxation rather than capital gains taxation…. Or rather a combination of both to minimise your tax bill.
The problem with using her pension as a strategy is that it won’t be accessible until age 60 at a minimum due to scheme rules. So whatever we put into her pension pot will have to be removed from our “bridging” pot and thus increase our risk from age 50-60. Regardless of that I will still look into setting her pension up to give flexibility.
Will you be able to access your own AVC’s via an ARF from age 50 while waiting for your DB pension from age 60? Again, better to have another income to use up tax credits rather than all CGT with minimal credits/allowances.
Unfortunately not, I can only access DB and AVC pensions from age 60, hence the relatively large investment to stocks for bridging. As above, agree I should set her up with a pension income, thanks for pointing this out.
 
The problem with using her pension as a strategy is that it won’t be accessible until age 60 at a minimum due to scheme rules. So whatever we put into her pension pot will have to be removed from our “bridging” pot and thus increase our risk from age 50-60.

From earlier posts you seem to be talking about the period from when you are between 50 and 60. With a 5 year age gap, her pension, even if accessed at 60, would partly cover half of the bridging period.
 
From earlier posts you seem to be talking about the period from when you are between 50 and 60. With a 5 year age gap, her pension, even if accessed at 60, would partly cover half of the bridging period.
Good catch. I hadn’t thought of it that way.

However, with her now salary we are quite limited on how much we can fund into a pension. But take the point it would be more tax efficient overall.
 
Is there an actuarial reduction to your pension payout if you start to draw down at 60 as opposed to 65?
Yes there is indeed. As it is a cost neutral adjustment I figured I’d roll that dice in order to increase the probability of success for the period 50-60. Bridging from 50-65 would be a stretch.
 
I’m not so sure. There is a net profit built into health insurance premiums. Thus if you end up healthier than average you are quids in to pay for health outlays from cash reserves.
I am not sure that is how to think about health insurance. You are effectively saying to self-insure? You could apply that to your house also?

Self insuring a phone is one thing- max claim €1000? Health is a different story - you could be looking at €300,000 for a serious illness, and you lots of people with above average health get sick.
 
I am not sure that is how to think about health insurance. You are effectively saying to self-insure? You could apply that to your house also?

Self insuring a phone is one thing- max claim €1000? Health is a different story - you could be looking at €300,000 for a serious illness, and you lots of people with above average health get sick.
You are right and I agree with your analogy of the house. What illnesses cost €300k though?
 
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The problem with using her pension as a strategy is that it won’t be accessible until age 60 at a minimum due to scheme rules.
Does her employer make a contribution? If so, makes sense to stick with that scheme. If not, set up a PRSA yourselves and it’s possibly accessible from age 50 in the case of early retirement.
 
Does her employer make a contribution? If so, makes sense to stick with that scheme. If not, set up a PRSA yourselves and it’s possibly accessible from age 50 in the case of early retirement.
Yes she is part of a DB scheme too that her employer contributes towards as does she a very small amount currently.
 
Thanks guys, I understand the annuity rate concept now.

Using 4% rate (my pension is inflation linked) my DB fund (inc lump sum) is valued at €383k.

While I agree it is somewhat academic, it does explain and counter what looks like an underfunded DC AVC pot of only €35k.

Appreciate any other thoughts.

One question on my mind is should we start a pension for my wife or is the small tax relief hardly worth it, given we invest her money in liquid stocks that will hopefully bridge a gap from early retirement until pension drawdowns
Is that what your DB pension is currently worth after 16yrs servuce or what you think it will be worth by retirement?
 
You are right and I agree with your analogy of the house. What illnesses cost €300k though?
I am not an expert but I would expect any major cancer requiring major surgery, or an illness requiring a transplant? Or something requiring on going or repeat stints in hospital. If I shift focus off hospital there are also some medicines that are extremely expensive.

At a high level Ireland's model is drifting ever closer to the USA where private health insurance is a big advantage and costs are rocketing.
 
I thought of that as well but people with those sorts of significant diseases do get treated well and pretty promptly in the public healthcare system.

I doubt there are many essential treatments only available under private healthcare. The main difference being you will probably be treated faster by going private.
 
I don't know the costs of operations. However my husband was diagnosed out of the blue with a health issue which required multiple tests and visits that were at least partially covered by his health insurance and will eventually require an operation that will cost I would say at least 40k with a stay in hospital of about 10 days. It would probably have been classified as a pre-existing condition by a health insurance company as something he was told was minor and benign over 2 decades turns out to be an issue. He is under private care as it was the only way to have the necessary tests in a timely fashion. He was originally followed publicly. For the operation, we were told that the timing was important, not too early but promptly when necessary. We would have paid whatever was necessary. However, at this stage I feel that health insurance was a good option. Most people end up sick at some point in their life and require some treatment and hospital stay.
 
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