Moneymakeover We want to retire in 2 years. What are the next steps and is it even possible?

Personal details

Your age: 54
Your spouse's age: 53

Number and age of children: 1 child age 12

Income and expenditure
Annual gross income from employment or profession: €94k
Annual gross income of spouse/partner: €90k (sometimes a little more or a little less)

Monthly take-home pay: approx. €7500 between us plus €1220 rental income

Type of employment - I am public sector pre-95 with 35 years service (Can retire after 35 years). Spouse is private sector

In general are you:
(a) spending more than you earn, or
(b) saving? Saving approx €4k+ pm

Summary of Assets and Liabilities
Family home value: €700k approx
Mortgage on family home: €175k - 12 years left (was originally 230k for 15 years started in 2022 but over paid a couple of years ago to bring it down). Rate fixed for another 6 years at 2.3%

Cash: €10k in bank. Will top this back up to 30k in the next few months with savings and bonus.
Company shares/funds : 90k (Trading 212 - world equity funds)
Buy to Let Property value: €220k
Buy to let Mortgage: €17k tracker ECB + 0.8%

Also children's allowance has been going into equities in a separate degiro account and not touched. The last time i looked at it was about a year ago and it was just over €35k then. This wont be touched before college, so should continue to grow.

Other borrowings – car loans/personal loans etc
€30k car loan 0% interest, 2 years remaining (Decided to invest the money in world equities and get the 0% loan of the car company. Could pay this off any time, but should be paid off by the time we retire anyway)

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

Pension information

Value of pension fund:
Self : Public sector pension with 35 years service. Also €150k in AVCs.
Spouse : €750k in company DC pension (contributes max AVCs and company contributes 7% of salary) and €40k in old Irish life pension.

Buy to let properties
Value: €220k, Spouse bought in 2001 for €150K and lived there for 2 years before renting it out.
Rental income per year: €1220 x 12 = €14640 (gross) - 4 years left on LTL scheme with council.
Mortgage left owed on it is €17,000 with 2 years remaining on mortgage after some overpayments over the years. Tried to time the mortgage to be ending in 2 years time.
Rough annual expenses other than mortgage interest : €1100 for management charge.

Outgoings
This varies as we do give a lot of money to elderly relatives at the moment.
When we retire this will stop and its time for siblings to step up there.
Also the last couple of years we tend to put a lump of money into my AVC and top up my spouses if there is room for that too.
But outgoings at the moment would be about 45k per year.
The plan we have been working towards is to have the mortgages finished and the car loan paid off when we do retire. We will use our investments for this and if we need to, part of our lump sums.

So the outgoings (that hopefully wont be there at all in 2 years) are
€1440 PM Mortgage on home.
€560 PM mortgage on investment property.
€200 PM insurances between mortgage protection and term life insurance.
€536 PM Car loan
€150 PM Charity
Various amounts to relatives
Could pay a good portion of the mortgages down now, but the money is earning more invested than it would save. Also car loan is 0%, so again money better off invested at the moment.

Other than those and what will be ongoing are (and these vary year to year, sometimes there is money left to roll over other times not)
€600 PM for food / clothes etc
€300 PM for entertainment
€500 PM that we save into a bucket for holidays for the year.
€40 PM to cover service and tyres for car
€40 broadband
€20 PM for phones
€20 PM for electricity and heating (himself took up a hobby 3 years ago and built a huge pergola in the garden with 30 solar panels and batteries that he got for free from a house that was being auctioned. The excess generated in the summer pays for the car and the heating for the rest of the year too)
Things like hobbies or anything else we have to pay for hardly comes to more than €200 i would think.
But the thing is we want to be going on longer, nicer holidays etc in retirement. I fully expect our outgoings to increase in retirement. Want to enjoy retirement, since there will be time for enjoyment then.


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

Both burned out at work, so just want to retire. Decided 2 years time is the target. However dont know what steps to take now or even if we have enough to retire.
Should we go see a financial advisor? If so any tips on choosing one and what to expect. Really hate the idea of walking in to meet one and its just a salesman.
Any other advice greatly appreciated.

Paying down your home mortgage would be the first thing that I would look at.
Doesn't make much sense to be sitting on and accumulating further savings when you have a €175K mortgage outstanding.
The BTL mortgage may be a different matter since it's so small, the rate so low and the fact that you can presumably write the insterest off against rental income?

I don't understand PS pensions so don't know if you can/should be boosting the AVCs?

As ever in these cases you would be well advised to do a forensic analysis of your incomings and, more to the point, outgoings to undertand what you're spending right now, what you might be spending in retirement and if any tweaks can be made to optimise the expenditure. See here for some suggestions on how to tackle this:
Obviously expenses relating to your child and education (potentially including third level) should be factored in.

JamieB_ said:

€1220 rental income

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JamieB_ said:

Rental income per year: €15,000 with 2 years remaining on mortgage after some overpayments over the years. Tried to time the mortgage to be ending in 2 years time. 4 years left on LTL scheme with council.
Rough annual expenses other than mortgage interest : 1100 for management charge.

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Gross or net?

JamieB_ said:

Income and expenditure
Annual gross income from employment or profession: €94k
Annual gross income of spouse/partner: €90k (sometimes a little more or a little less)

Monthly take-home pay: approx €7500 between us

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This calculator suggests that your net should be more like €10K p.m.


I presume t hat some of the €2.5K discrepancy is due to pension contributions and maybe other payments via payroll?
Are you sure that your tax credits are correct?

I am a little confused where your 4k+ saved per month go? Are they invested through T212? Also you mention that your 10k cash is in world equity funds. So you do not have any emergency fund in non-risky assets? (world equity funds can lose value quickly).

As for your question if you can retire in 2 years, my suggestion would be to calculate your net worth excluding your main house. Then estimate what would be your yearly expenses and subtract from it your future pension/state pension. If the remaining expenses are less than 4% of your net worth you should be ready to retire.

35/55 rule is never to be seen again and by far the best benefit of previous public service pension schemes, We are planning our retirement around it even though it’s a little more awkward post 95/pre2004. If you can make it work then it’s a fantastic option to have, it sounds like your AVCs will certainly bring your lump sum to the max allowable with some left over to go into an ARF.

It seems an easy enough calculation to use the pension modellers on .gov plus your spouses SORP to work out your likely incomes after paying off the mortgages etc and see how that looks to you both. The main concern I guess would be that your spouses pension is very healthy but 55 is very early retirement so it has to last a long time, while you may have college to pay for etc. allowing for OAP for your spouses though and it’s seems very possible.

With the amount you are saving it seems like you would at least match your current income with pensions, with mortgages gone, probably exceed it quite a bit.

As Clubman has said, this is very difficult without knowing what your current expenditure is. It appears to be about 4k a month. So you will need an income of at least 36k net p.a. just to live. I'm guessing that your pension alone will be above 40k so that's a good start. 800k sounds like a good pension pot for your spouse as well but it will be from 55 rather than 65 which diminishes it somewhat.
The glaring stand outs to me:
The cost of second and third level education and general extras along the way for your child.
The mortgage of 175k is still quite large.
The lack of emergency fund although this could be offset by a (presumed) lump sum on retirement.

Edit: Post crossed with Setforlife above.

Thanks guys. I tidied that up a bit. I got a bit carried away with cutting and pasting and messed up the flow of what i was typing. Hopefully its a bit clearer now.
There are a lot of deductions from my salary that wont be coming out of it when i draw my pension. Super anuation, pension levy, widows and orphans, union, and some others that i cant get out of paying.
As you can probably tell, we are kind of in need of a professional to sit down with us and work all this out and what buttons to push and levers to pull etc, to activate pensions, when to draw down how much to take etc. Anyone know what would be the next step for us and how to get in contact with a professional who is not just a salesman? How do you filter them out?

JamieB_ said:

As you can probably tell, we are kind of in need of a professional to sit down with us and work all this out

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A good start would be to address some of the questions that I and others have asked above... At the very least you'll get useful feedback that will make you more informed for if/when you do talk to an intermediary.

Does anyone know what the procedure to retire is? Do I have to go to a broker or an FA to get the ball rolling. I assume I can just retire and start taking my pension once i inform the relevant government department. But what does my spouse do? I assume they cant just start drawing money down from their pension fund and would have to have an intermediary transfer it into an ARF. Anyone know what that is likely to cost and how its possible to find a good, reliable and trustworthy company to advise and deal with it? How much is a good fee for ongoing management of the fund?

JamieB_ said:

Does anyone know what the procedure to retire is?

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In the public sector you presumably have to notify HR etc.? I don't have any experience of that. But I quit paid work in 2021 and after a year or two started drawing some of my pension down early (late 50s) by contacting my broker through whom my pensions (main PRSA and a smaller buy out bond and personal pension plan) were arranged and we took it from there. There was some form filling including one (to the pension provider or Revenue? Can't remember...) declaring that I was retiring early. But that doesn't preclude me from resuming paid employment if I ever change my mind.

JamieB_ said:

But outgoings at the moment would be about 45k per year.

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What do you estimate your annual outgoings to be once you retire? You said you expect it to increase?

JamieB_ said:

i fully expect our outgoings to increase in retirement.

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JamieB_ said:

Public sector pension with 35 years service. Also €150k in AVCs.
Spouse : €750k in company DC pension

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What will your pension be on drawdown & what is estimated pension for spouse? Will your spouse get the contributory pension at 66?

Say you get 35/80th as a pension….. €41K
Your spouse gets 1/40th of €800K pot … €20K
And gets 75% of state pension at 66….. €11K

The question is can you live on these as income for life. What is pension increase looking like in your pension? Is it linked to inflation?

Can you delay drawdown of spouse pension and live off of your lumpsum and pension, savings and rental income for a few years? This might significantly increase their annual pension, but I am no expert. Can your spouse continue to get contributory credits for state pension from retirement date to age 66 to bring total contributions to 2080, (maybe S class from rental income?).

If you want an income of say €55K pa on retirement, spending an extra €10K pa on travel and holidays I think it is very doable using your pension and lumpsum from AVC for that. (Or your trading 212 pot) Then plan to draw down spouse pension say when your child starts university as it could be expensive if they have to live away from home. And I would say by the time your spouse hits 66 and draws down the state pension ye will be very comfortable, with combined income of >€75Kpa.

All my figures are based on guesses, understanding your own pensions and having a strategy to maximise post retirement income with the aid of a financial advisor should be your goal but on a rough back of envelope calculations I would go for it.

JamieB_ said:

€20 PM for electricity and heating (himself took up a hobby 3 years ago and built a huge pergola in the garden with 30 solar panels and batteries that he got for free from a house that was being auctioned. The excess generated in the summer pays for the car and the heating for the rest of the year too

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Can I just say.....

JamieB_ said:

Both burned out at work, so just want to retire. Decided 2 years time is the target. However dont know what steps to take now or even if we have enough to retire.

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Have you considered just stepping back your workload rather than retiring? You're still both quite young and could undoubtedly work a less stressful jobs that maybe allow you a lot more freedom for holidays and the like too. Tbh, I think you could nearly do this today if you wanted to, rather than survive another 2 years of stress!

Thanks guys, So could he contact the pension fund he is with and just take his 25% lump sum and leave it in the same funds and draw 4% a year or does it all have to go into an ARF before doing that. Looking at some of the charges for financial advisors to manage it and they are 1.5% or thereabouts. His pot should be near enough a million euro when we do retire and 1.5% of that seems to be a lot to give away every year.

We want to just quit the whole work thing and spend our time on whatever takes our fancy, so no interest at all in doing part time work tbh.
So I see the spending going more on holidays and leisure than we currently even spend on it. We really dont have that much other outgoings besides mortgages and car loan which should be more or less taken care of in 2 years time. If times did get tight we have a granny flat that we use as a store room that we could rent out, after about 10k worth of work fixing the door and the kitchen and a bit of paint and tlc, but for the moment i dont see us doing that, so we do have a little backup if needed.

JamieB_ said:

Thanks guys, So could he contact the pension fund he is with and just take his 25% lump sum and leave it in the same funds and draw 4% a year or does it all have to go into an ARF before doing that.

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If it's a PRSA then it can optionally be spilt into smaller contracts to give flexibility in terms of drawing down benefits in stages. Otherwise a PRSA can be converted to a vested PRSA, the 25% tax free lump sum taken out, and the balance can stay invested as before.

If it's some other type of pension the it may depend but I think the tax free lump sum can be taken and the balance put into an ARF. I don't think that the option to split into smaller contracts is available if it's not a PRSA.

The 4% mandatory drawdown (or at least being taxed on that amount) only kicks in from the year in which one turns 61.

In both cases the balance could be used to buy an annuity but that may not be a realistic option here?