Nearly 50 and want to work less

C

Cameo

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Combined family paye income of about 260k or so

three kids, (9 to 14) so outgoings will remain high but no private school fees planned, childcare of about 500 per month currently

Almost no mortgage on our primary residence, will be paid off in next 6 months

Three Dublin properties rented, Approx. value, 500k, 300k and 225k. Rent per month of 2100, 1500 and 1500 respectively. All solid properties in term of rental demand

The 500k property has about 150k loan outstanding on ecb plus 0.5%

One other loan of 100k, interest free

No other loans or finance etc

Usually have a cash balance of 20k or so

No shares held directly, still waiting for the crash...

pension

Me
Deferred DB of c. 6k pa payable from age 60
DC pots of around 550k

I’ll be 50 in a year.

Spouse
Deferred pension of 10k from age 65

Dc pots of 100k

currently plan to continue working but looking to reduce outgoings and work less or maybe one of us give up or start contracting and alternate taking time out

Plans are. Sell 500k property(3 bed semi with garage and west facing garden in d16) and buy a cheaper property using the balance to pay off the mortgage, rental income should drop a small bit but probably not hugely

In a years time take 25% tax free cash and use it to pay off 100k loan

So in one years time be debt free and have rental income of approx 60k pa.and arf, marf of 400k

Life cover of c. 600k but no phi or critical illness

Will max out pension contributions if money continues to be earned

I don’t like the idea of being so concentrated in property but yield is attractive relative to anything else going. It’s not very tax efficient either as all just held directly

Any thoughts of alternatives to property or how to maximize income?
 
Can you go part time in your current role? When you say go contracting what sector? Sometimes contracting just means working longer hours for a shorter amount of time i.e. a 3 month contract rather than contracting 2/3 days a week.

My rule of thumb is if you are spending your monthly salary you can't afford it. If you take your salary and take a 1/5th of it to represent going to a 4 day week, if you can live of that you should be grand.
 
Congrats on being in such a healthy position at 49.

How much is your PPR worth?

Your plan to sell the 500k property to purchase a cheaper one does not make much sense to me as you have a very cheap tracker on it and the transaction costs between buying & selling will be about 20k. You will also have void periods where you will have no rent coming in during the process.

Is there any CGT due on any of the rentals?

What are your household monthly expenses like?
 
Andrew365 said:
Can you go part time in your current role? When you say go contracting what sector? Sometimes contracting just means working longer hours for a shorter amount of time i.e. a 3 month contract rather than contracting 2/3 days a week.

My rule of thumb is if you are spending your monthly salary you can't afford it. If you take your salary and take a 1/5th of it to represent going to a 4 day week, if you can live of that you should be grand.
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potentially could go part time and that would be preferred option for now.
i work in finance sector and when I mean contract I mean short term contract 3 to 12 months and take time out between contracts

should be able to afford 60% of my salary spouse already works 4 day week
 
Easel said:
Congrats on being in such a healthy position at 49.

How much is your PPR worth?

Your plan to sell the 500k property to purchase a cheaper one does not make much sense to me as you have a very cheap tracker on it and the transaction costs between buying & selling will be about 20k. You will also have void periods where you will have no rent coming in during the process.

Is there any CGT due on any of the rentals?

What are your household monthly expenses like?
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PPR probably 800k +
tracker is good provided I want to continue repaying 1300 a month, kind of like saving 1300 per month but not tax efficient. can afford to max my pension and make repayments currently but maybe only one if earning less

cgt on all properties but not huge 500k one was ppr previously

not really sure of monthly outgoings but a lot goes on pensions(4000plus, gross) and paying off two loans(3800) currently

running costs on house would be high large property and gardens
 
Question about your 60k rental income when you're debt free

That will create a tax bill of say 25k?

Do you have any ideas for how to reduce the tax bill?

You will have to take the rent and put half to the side for the tax man. Maybe you already do this.
 
moneymakeover said:
Question about your 60k rental income when you're debt free

That will create a tax bill of say 25k?

Do you have any ideas for how to reduce the tax bill?

You will have to take the rent and put half to the side for the tax man. Maybe you already do this.
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I’ve no ideas how to reduce the tax bill, that’s really the key point about current investment. property yield is ok now relative to other asset classes but it’s terribly tax efficient, i do pay lots of tax on the rental income currently and this will continue as long as the properties are rented. Would be much better within a pension wrapper but they’re not unfortunately.

Which is making me think, can you transfer a property into pension fund and then an ARF. No tax relief but at least I could reduce the tax on the income until I absolutely need it?
 
I agree completely

The only consolation upon retirement is the income tax hopefully drops

A couple can earn 36k before hitting the tax net and then some more before hitting high rate.

But meanwhile you have 10 years paying government 25k of your rental income.

One suggestion is, before retirement, to renovate the properties. The cost can be offset against tax.
The increase in value will allow you to increase the rental income (and tax unfortunately).
 
moneymakeover said:
I agree completely

The only consolation upon retirement is the income tax hopefully drops

A couple can earn 36k before hitting the tax net and then some more before hitting high rate.

But meanwhile you have 10 years paying government 25k of your rental income.

One suggestion is, before retirement, to renovate the properties. The cost can be offset against tax.
The increase in value will allow you to increase the rental income (and tax unfortunately).
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Thanks for the advice, I suppose not having the properties in a pension fund give me some extra flexibility of not being in a pension but it’s costing me a lot in tax
 
Sugar where did the last 6 years go...

Update on where things are now

Still want to work less!

Income
Me around approx €165k including bonus
Spouse €0 currently, on a career break

Kids
18, 17 and 14, all living at home in full time education
No school fees

Pension Contributions
I currently max mine and with company contributions contribute about 50k annually

PPR
Value > €1m
Mortgage NIL
We spent a fair bit over the last couple of years on house, solar, heating, insulation, windows and some other renovations so house maintenance expenses hopefully lowish for next 10-15 years

2nd home
Value approx. 350k
Mortgage NIL

Buy to let properties
Buy to let 1 : Value approx. 425k
Rent 2200 per month (market rate)
Mortgage NIL

Buy to let 2 : Value approx. 475k
Rent 1800 per month ( lagging market rate)
Mortgage NIL

Buy to let 3 : Value approx. 250k
Rent 1600 per month (around market rate)
Mortgage NIL

Current Rental income
€67 pa

DC Pension arrangements
Me approx. 850k (after taking Tax free cash, that’s earmarked for something else! )
Spouse 400k (after taking Tax free cash, that’s earmarked for something else!)
100% invested in equities generally

DB Pension arrangements
Me 7k pa. from age 60
Spouse 12k from age 65

State pensions
Me ; should have almost full Irish and UK state pensions ( I am assuming maybe some kind of part-time work to add to entitlement )
Spouse: should have almost full Irish and UK state pensions( I am assuming maybe some kind of part-time work to add to entitlement)

Other
Shares around 50k vesting over next three years
Cash around 50k currently

Projected income
I am hoping we could take 3.5% income from pensions (when in ARFs) so income should be around
€45k plus
€65 rental income ( before expenses, tax etc)
when we stop working and then various income kicking in mostly in 11 - 12 year’s time.

Income then would be an additional 50k or so.

The income in 11 to 12 year’s time seems generous, assume outgoings will be much lower as kids hopefully more or less fully self sufficient then.
So my question is should with some more carful budgeting and probably some cutbacks, can we both stop working altogether in 2 years, and survive on the lower income for the next 10 year or so other pension income including the state pensions kick-in?
Clearly, I need to do a detailed budget plan (I have quite a generous one done which I need to have another go at) but I guess I am seeing if I can get advice from anyone who has done something similar.
Other than food, college fees, healthcare, utilities, property maintenance, holidays and transport, what are the big potential expenses?
Also planning to see if I can work maybe a 4 day week over the next two years; although I’d say working a 4 day week could be putting a target on myself to be exited.
I suppose the other question is, should we sell all buy to let properties and invest in shares to avoid hassle and have a better diversified income stream (or less idiosyncratic risk)
I included value of PPR as I guess while we don’t ever plan on selling we could if necessary downsize, same with the holiday home; it could be sold to raise cash.
Any advice or tips or sharing of relevant experience appreciated.

Thanks

Cameo
 
Cameo said:
Buy to let properties
Buy to let 1 : Value approx. 425k
Rent 2200 per month (market rate)
Mortgage NIL

Buy to let 2 : Value approx. 475k
Rent 1800 per month ( lagging market rate)
Mortgage NIL

Buy to let 3 : Value approx. 250k
Rent 1600 per month (around market rate)
Mortgage NIL
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I would sell the properties, not in a hurry, but by the time you are 60.

Energy is finite and there will come a point where it is too much hassle and you should be long out of it by then.

Lack of mortgage interest makes it less tax efficient too unless properties are fully in non-working spouse’s name.
 
You have around €3.85 million in net wealth. More than €2.5 million of that is in Irish residential property. I'd be looking to max your wife's pension and reduce your exposure to property.
Congratulations though, you are a very wealthy multimillionaire and could just stop working tomorrow (certainly in 5 years when you are 60) and live quite comfortably.
 
Unless you have remarkably expensive tastes, you have more than enough to finish working tomorrow if you want.

I suggest getting out your bank statements and figuring out what your average burn-rate has been for the last, say, three years.

That will give you a good starting point for figuring out your budget in retirement.

You might spend more on travel and hobbies but, on the other hand, your expenses will presumably fall as your kids roll off the payroll. It’s probably a wash.

You only get one spin on this merry go round and I guarantee you won’t ever regret not spending more time in the office.
 
Well done Cameo on what is a very strong financial position for you and your family.

I am certain that it took hard work, thought, risk and some element of luck and timing to have yourself in the position you are in, so make sure you congratulate yourself quietly for what you have achieved.

A few thoughts I had, in no particular order

You absolutely need to track your household expenses (separate to your BTL expenses). I have just completed this exercise over the past 2 years and it has given us a very clear idea of the amount we are spending (frightening) and what we are spending it on. It also gives me a clear idea of what income we need from our assets to sustain the style of life we have. Information is knowledge, knowledge is power.

You have a second home valued at €350K that may not be earning any income for you. I appreciate it may be a holiday home, however to me it would be an indulgence to have a €350K housing asset earning no return (especially in the middle of a housing crisis). I am not making a judgement, just making a point that unless it is used frequently it is an asset earning no return and is costing you money to maintain.

You have 3 BTL properties with no debt, you have 3 children that over the next 10 years may be looking to get on the housing ladder (if they wish to stay in the country). The properties may not be when they may want to live etc..., however, I for one don't feel that our politicians and civil servants have the wit or ability to ever fix what is the 'housing crisis'. You and your children may be very thankful for not having to enter the renting/buying 'hunger games' in the future. Others will say (rightly so) that you are overexposed to Irish residential property which brings with it hassle and work, however, it also gives your family access to future housing that many of our young people are currently locked out of.

Stopping work sounds great, especially if you are tired of your career. However, you need to have a plan of what you are going to do with your time. I would guess that you are in the financial position that you are in based upon a growth personality type. That personality type may not be conducive to doing nothing after an initial 12 month retirement honeymoon.

And lastly, is one that I think is becoming and will become more relevant to Irish society over the next 10-20 years, that is one of how to protect and grow generational wealth. Many of us are 1 (or at most 2 generations) from an agriculture background. Our parents worked, they earned and they spent what they earned to live and raise their family. Boomers and Generation X are the first real generations in Irish history that through work, effort, luck, housing values increasing etc... are wealthy, not 'eff off American old money wealthy, but very wealthy compared to our parents and grandparents. How can we, who have benefited from a once in many generations wealth increase, help teach and educate our children to take, grow and nurture what they will inherit to ensure the lives of future generations are secure. Other nationalities have done this for eons, it would be a shame if we spent our good fortune on shiny expensive stuff that does nothing to help aid and educate future generations.
 
MG Midget said:
How can we, who have benefited from a once in many generations wealth increase, help teach and educate our children to take, grow and nurture what they will inherit to ensure the lives of future generations are secure. Other nationalities have done this for eons, it would be a shame if we spent our good fortune on shiny expensive stuff that does nothing to help aid and educate future generations.
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I find that prospect quite frightening. I'm in the same position but I think that it will lead to a very unequal society with all of the associated social problems.
 
Sarenco said:
You only get one spin on this merry go round and I guarantee you won’t ever regret not spending more time in the office.
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100% had enough of working with or for narcissistic individuals, spoofers and charlatans too.
Sarenco said:
suggest getting out your bank statements and figuring out what your average burn-rate has been for the last, say, three years.
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Good idea, slightly afraid of seeing how much we’ve been spending, I do have one or two spending weeknesses that would need to be altered to offset the drop in income
 
MG Midget said:
I am certain that it took hard work, thought, risk and some element of luck and timing
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You’re spot on, got lucky on a few of things, avoided buying a property at a really bad time and switching to a ridiculouslY cheap tracker mortgage, probably qualifying for decent uk pensions by buying back 17 years but a fair bit of thought and definitely lots of hard work

MG Midget said:
It also gives me a clear idea of what income we need from our assets to sustain the style of life we have. Information is knowledge, knowledge is power.
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I certainly need to get to this position asap
MG Midget said:
you have 3 children that over the next 10 years may be looking to get on the housing
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this is certainly a consideration too for sure although I want to avoid the kids having too much of a sense of entitlement and make their own way as far as possible

MG Midget said:
That personality type may not be conducive to doing nothing after an initial 12 month retirement honeymoon.
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I’d have to do something or I’d go up the walls, I do quite a bit of fairly physical stuff but not sure how long more I’ll be able to do some activities at the level currently (mostly mountain biking) and conscious I’d need to do something but maybe just different to office life
 
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