Company shares : 200K (in the company I work at, I plan to leave these in place for another 8+ years unless the company is acquired)
Agree but you could always downsize to a €400K two bed apartment and free up enough cash to keep you going for 10 yearsThe pensions looks very light to me based on those incomes.
There was another Money Makeover recently which was similar.
In my view it illustrates the ‘danger’ (relatively speaking!) of prioritising mortgage overpayments versus pension contributions.
I personally take the view that it’s prudent to have 10 years of projected expenses in cash on retiring.
So, in your shoes, I would:
1. Continue maximising your tax-relieved contributions to both pensions and maintain an allocation of 100% to global equities in both pensions;
2. Diversify your after-tax stock holding - you have way too much exposure to a single company, who is also your employer;
3. Keep your future after-tax savings on deposit - opt for decent fixed-term products.
Best of luck with the house renovation.
I was thinking the same. Given the large incomes they have and even after discounting saving, they are seeing a big reduction in cost of living. They will be in their 50's when they retire, still very young and they will have a lot of free time, no restriction on the amount of annual leave they can take.As an aside, are you sure €49k per annum is a reasonable estimate for your projected expenses post-retirement?
You seem to be spending around €70k per annum at the moment and I doubt any of your kids will be entirely “off the payroll” in seven years.
I have often thought of that too. At the moment the company is going through high growth and we will either be acquired in the next 5 years or we will be market leaders, at least that is the thinking. Our shares are doing well. My personal view is cashing them in now is the wrong time. I will be reassessing in the coming years. The 200K is a projection of my current shares which have vested plus the ones that will vest in the coming 2 years at today's market price after tax is paid. It is conservative and not accounting for the price going up which I am confident it will going by what I know of our plans. I will also be getting similar tranches yearly for as long as I am there which I have not factored in either. However nothing is certain in life as we all know. What would I do with 200K in cash if I cashed them in is another question that is on my mind.Well done, you are in a very good position and have a sensible approach.
It's a significant risk holding so much money in shares of 1 company. That risk is compounded by the fact that it's your employer - if the company goes downhill then you potentially have a double whammy of losing your job and losing the value of your shares.
Yes I agree. I was late starting a pension (early 30s). I made the decision to favour paying off the mortgage because I was alarmed at the pension levy which was introduced and my thinking was they could do worse in the coming years. As it turns out they didnt. I would rather own my own house outright, there was a lot of uncertainty after 2008 about the housing market, ability to repay mortgages etc.... Anyway my pension performance was awful in the years 2007 - 2017. I took it under my own control and ploughed it all into global equities (thanks to the good advice here) and since then it is actually doing well. Its an interesting topic - which to favour?The pensions looks very light to me based on those incomes.
There was another Money Makeover recently which was similar.
In my view it illustrates the ‘danger’ (relatively speaking!) of prioritising mortgage overpayments versus pension contributions.
All other things being equal, I believe that the person who owes €400k on their mortgage and has €800k in a pension fund is better off than the person who’s mortgage free and has €400k in a pension fund.
Thanks for the advice. Any recommendation on fixed-term products? State savings certs? Interest on savings is very low.I personally take the view that it’s prudent to have 10 years of projected expenses in cash on retiring.
So, in your shoes, I would:
1. Continue maximising your tax-relieved contributions to both pensions and maintain an allocation of 100% to global equities in both pensions;
2. Diversify your after-tax stock holding - you have way too much exposure to a single company, who is also your employer;
3. Keep your future after-tax savings on deposit - opt for decent fixed-term products.
Best of luck with the house renovation.
At the moment we have private school fees and expensive kids activities and holidays 2-3 times a year for 5 people. All of which will drop off in retirement (except for our holidays off peak times). I have been closely reading Leper and Cervelo's great tips for heading to SpainAs an aside, are you sure €49k per annum is a reasonable estimate for your projected expenses post-retirement?
You seem to be spending around €70k per annum at the moment and I doubt any of your kids will be entirely “off the payroll” in seven years.
Any recommendation on fixed-term products?
I keep a close eye on monthly spend. All of my salary goes into savings but we take holidays and school fees out of that. My spouses salary goes into our day to day current account and we never spend above that and often have a running 1-3K left over which gets absorbed around Christmas or when the bills come in for activities or unexpected expenditure. So I am fairly confident of what we are spending and saving. We recently paid full orthodontics bills for the 3 kids out of savings but we still have the full amount of the extension/house works in there plus a buffer of from now to August savings which are contingency for something happening. Come September we start saving for retirement. Good point about 70, I do hope to be in good health and plan to enjoy life as much as I can between 58-70. I suppose if we are low on cash by then, downsizing and releasing cash is an option, but its a last resort.Are you sure your current expenses are running at 70k? I find it quite low considering my own expenses with only 2 teenagers, no expensive activities and no private education. As we have much lower income, we would also probably not have the same expectations (I guess there).
I also think that 70 is too early to expect a reduction of spending. Late 70s, early 80s, perhaps.
I am looking into investing options, its not my area so am very risk adverse and don't want to lie awake at night wondering if I made the "right" choices. I take your point though, accumulating cash is not the wisest move. Its something I plan to look into. I don't understand your point about square pegs and round holes. We have a plan for retirement which we are hoping works for us. Open to adjusting it if there is a solid reason to. But we are both looking to get out of full time work as soon as we can, which for us is when the youngest leaves school.I was thinking the same. Given the large incomes they have and even after discounting saving, they are seeing a big reduction in cost of living. They will be in their 50's when they retire, still very young and they will have a lot of free time, no restriction on the amount of annual leave they can take.
I have said it many times on here, the clients I see having the best retirement travel a huge amount and spend more in retirement than when they were working.
Back to the OP, why accumulate all the money in cash? Have enough cash for an emergency fund and invest the rest. No reason for you to do all the heavy lifting. The world's best companies can grow your money too.
From the money makeover, I am guessing that the OP has forced a few square pegs into a few round holes to suit their chosen timeline.
Life events will certainly get in the way! I like to think I am planning and preparing rather than overengineeringYour plan is a bit overengineered and you should leave yourselves potential for life events or change of mind.
For now I would even contribute to pension over tax relieved limits - you still get CGT-free appreciation that you won’t get with ETFs. It still make sense to keep some cash.
I don’t think you should be rigid about pension drawdown pre-66. You can always tap one pension in early 60s and the other a bit later when it suits.
Would echo remarks about overpaying mortgage (too late now) and also heavy risk of employer shares.
But to sum up just give yourselves the flexibility to retire, or half retire either together or at different times.
Good luck and let us know what you decide!
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