Moneymakeover Release Equity or Funds from Investments

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vonsmi

New Member
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Hi,

Would love to hear some opinions.

I am 47 yrs old, female, single no kids

I am in the lucky position to max out my pension relief each year as well as save 2k each month into a Zurich investment fund. However with this I don't have much funds available during the month that don't already have a job (mortgage, pay bills, groceries 2 hols a year, a little bit of spending for wants not needs)

I have no debt (apart from mortgage) and this is my financial position

Mortage
90k left, currently fixed @4% until June 2028, 1.3k repayment each month set to pay off early around the end of 2032, can drop down to 730 per month to be paid down by original maturity July 2041

6k Cash
155k with Zurich
775k across 3 pension pots (50k/180k/545k)

I am hoping to retire anywhere between the age of 51 or 55 and think I am in very good shape for that, to be honest lately i have gotten very attached to the 51 over the 55 as I just cannot deal with work and the stress anymore.

However I am thinking about doing some bits to the house before I retire, so I am looking at a spend of may 50k max 75k.

I cannot decide whether I should release equity or just take it out of Zurich.

Here is what I have come up with as options and I can talk myself in and out of all of them
release equity - drop mortgage back down to 730EUR and use the extra 500EUR to pay the equity release, means I can keep saving 2k (which should earn me more interest than the mortgages cost me)
release equity - reduce 2k savings each month to service equity release mortgage
take from Zurich - I can keep everything monthly as is but 50-75k would just be gone

Any thoughts? Ideally this is not setting me back to far with the plans for early retirement.

Thanks for you thoughts and input in advance.
 
What is the purpose of the savings plan? Money you didn't need then but you will need in the future. It is there to be spent and you have a need for it now. And the beautiful thing is you will have put less than €50,000 into the savings plan to get €50,000 now.

Going forward, I would build your cash reserve up higher than €6,000 so you can use it for short term demands on money.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
Did the pension pots grow from employer contributions and you maxing out pension tax relief alone or did you ever over pay beyond that relief into a pension fund? Or did the overpayments all go in to the Zurich pot outside the pension wrapper?
 
Steven Barrett said:
What is the purpose of the savings plan? Money you didn't need then but you will need in the future. It is there to be spent and you have a need for it now. And the beautiful thing is you will have put less than €50,000 into the savings plan to get €50,000 now.
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thanks, that the type of reminder i need, I have probably become overly attached to the savings but thats indeed what they are there for
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Steven Barrett said:
Going forward, I would build your cash reserve up higher than €6,000 so you can use it for short term demands on money.
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fair point too, its the lack of getting sensible interest anywhere that makes me reluctant to keep cash and thats why dump everything into zurich...but i am aware i am a little light on that all important emergency fund
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Thank you!
 
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At others have said, it makes no financial sense to borrow for the house improvements when you have the money available to pay for them - and even to further reduce your mortgage. You should probably also maximise your pension contributions if you're not already doing that and make sure that your pension is invested appropriately and the charges are competitive for AVCs.
 
vonsmi said:
I cannot decide whether I should release equity or just take it out of Zurich.
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I'm always amazed that people can't see what is staring them in the face.

You have a relatively expensive mortgage at 4% and are using an investment strategy that charges high fees.

Cash out the entire Zurich plan, pay for the renovations/upgrades and then clear the remaining mortgage with the balance (even if there is a break fee).

Depending on the gain in the plan currently, you will be mortgage free or very close to it.

After that, you can redirect your mortgage payments and the Zurich payments into an equivalent ETF on any of the trading platforms for much lower cost. You will know exactly where you stand for early retirement.
 
CharlieMac said:
Did the pension pots grow from employer contributions and you maxing out pension tax relief alone or did you ever over pay beyond that relief into a pension fund? Or did the overpayments all go in to the Zurich pot outside the pension wrapper?
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All within the limits from Revenue grown over time and from 22yrs of employment in Ireland with monthly contributions always with employer contributions too. I have been going in quite heavily with AVCs since 2014 and always maxed out.
 
Ok I see 3 of you here ( messyleo/clubman/okGo) that mention clearing the mortgage altogether, I have been reading such different advise that I felt an overpayment while also investing was a sensible compromise. I will mull this over!

Also as I always just lurk and this was my first post, I can't just thumbs up/thank your responses - so thank you to everybody that has taken time to comment so far - Really appreciate your thoughts and advise.
 
vonsmi said:
I am hoping to retire anywhere between the age of 51 or 55 and think I am in very good shape for that, to be honest lately i have gotten very attached to the 51 over the 55 as I just cannot deal with work and the stress anymore.
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Do you have a view of your expected post-retirement spending needs?
 
vonsmi said:
I have been reading such different advise that I felt an overpayment while also investing was a sensible compromise.
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Why? Where have you seen advice to the contrary on Askaboutmoney?

If you are maximising your pension, your only debt is your mortgage and you have funds available then it usually makes sense to reduce or clear the mortgage. As mentioned earlier it's an effective guaranteed 4% (or even better if you factor in taxes on other alternatives) return.
 
conor_mc said:
Do you have a view of your expected post-retirement spending needs?
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30kEUR p.a. will do me after taxes, thats in todays money.

In 2023 I paid a financial planner to run the figures but at that point it was 55 as retirement age and it was more than ok for that. I don't need to leave anything behind, so if I die with nothing in my bank account and will have spend my last EUR on my last day on a 99cone :) I will have a done a great job. And there would still be a house, which I have every intention to draw equity out as much as I can for living expenses if needed and let the bank deal with the house once I am gone. Although the financial models did not require that based on what they came out at and there was still a bit left even at 100 just with the capital without any value for the house.
 
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I’m curious what number you would have to hit in order to feel comfortable retiring at 51 with an anticipated annual spend of €30k pa?

I would have thought that you would need a pension pot well north of €1m, plus a paid off home.

Incidentally, I agree with the consensus view that you should clear your mortgage.
 
ClubMan said:
Why? Where have you seen advice to the contrary on Askaboutmoney?
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I am thinking this might be advise from back in the day when we had like 1.25% mortgage interest rates for years and years and the ECB was negative and the logic was that an investment eg with Zurich should outperform that. And most likely not here in the forum but elsewhere.

I totally see where you are coming from with todays rates and even my specific 4% rate (probably re-fixed it at stupid time instead of riding it out with a variable for a while). More food for thought.
 
Sarenco said:
I’m curious what number you would have to hit in order to feel comfortable retiring at 51 with an anticipated annual spend of €30k pa?
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Generally, about 3.35% seems to be a sustainable rate - the “4% rule” specifically targets a time-limited 30-year retirement. One could obviously increase that safe withdrawal rate a bit if expecting a defined benefit or state pension.

So you’d need about 900k to sustain 30k per annum withdrawals, allowing for inflation increases. If expecting 15k pa from 67 (edit:66!) onwards, you’d probably only need about 750-800k I would imagine. On the other hand, with these lofty P/E ratios I would want a cushion so I would aim for the 900k mark myself.

OP also has a cushion of equity in their home with no intention to bequest, so plenty of options (equity release, downsize, sell up and rent, part-time work) if anything goes pear-shaped.
 
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conor_mc said:
If expecting 15k pa from 67 onwards
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66?

Applying for the State Pension (Contributory)

From 1 January 2025, if you apply for the State Pension (Contributory), there is a new way of calculating your rate of payment.
www.citizensinformation.ie www.citizensinformation.ie

What age can I get the State Pension (Contributory)?​

You can get the State Pension (Contributory) from the age of 66 if you have enough social insurance (PRSI) contributions.

You can choose to defer claiming your State Pension (Contributory) up to age 70.
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