Where should our focus be?

H

Houseseeker16

Registered User
Messages
11
Many thanks in advance for any insights!

Personal details

Age: 48

Partner's age: 49

Number and age of children: 3 (10, 8 and 6)

Income and expenditure

  • Annual gross income: €130k
  • Annual gross income of partner: €55k
  • Monthly take-home pay €5800 me, €3500 them
Type of employment: both public servants / semi state

In general : Saving about 2k per month plus child benefit. We have childcare cost of about 800 per month that will not be needed in about 3 years.

Summary of Assets and Liabilities
  • Family home worth €650k, mortgage of 340k on fixed rate 2.2 til 2026. 17 years left on mortgage.
  • Note Family home needs a refurb over time (not urgent but old and dated) - about 60k or so
  • Cash of €20k - sitting in aib savings account earning v little planning on keeping as emergency fund or if no emergencies then use for 3rd level costs in future
  • Other borrowings – none

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

Other savings and investments: none

Do you have a pension scheme?
- Me Defined contribution pension fund: value 490k contributing 15% incl avcs with employer contributing about 10%. Projected fund at age 60 is 1.5M
- Partner - defined contribution fund of 80k from previous employment. Just started new pension contributing 7% and employer contributing 9%. Partner was on illness benefit for 7 years, So we had some hard years and lived frugally but have come through and illness is fully resolved and back to work.

Life insurance: 70% serious illness income through income protection cover through pensions, death in service benefit of 8 x salary both, mortgage cover life insurance for 440k

Not married but due to get married in 2024

What specific question do you have or what issues are of concern to you?
I know the marriage item is our biggest risk but that will be fixed in 2024 when we are due to tie the knot!

Our plan is to save for the house updates of about 60k but keep saving the 20k education fund adding child benefit each month.

The house upgrade is our focus right now and it’ll prob take 3 years to save and complete work. By then we’ll be 51-ish.

We are not overpaying mortgage - but planning to do that once childcare cost ends (altho will then be into teenage years which I believe are expensive!)

Our salaries will potentially grow 2 to 3% per annum. Partner scope for promotion - I’m not keen to go any more senior.

Is it ok to have this focus now or would we potentially be missing the boat on maximising our pension contributions now? (Or overpaying mortgage)

I would like to retire at 60 and pension models 180k lump sum and 36k per annum income which I feel I could live off until govt pension kicks in. Partner happy to work til 67.

Is there anything wrong with this picture that we’re overlooking? Should we be putting the 20k into equities or something given that we are a good 9 years away from needing that for 3rd level. We will support kids in uni / 3rd level but they will be expected to live at home and attend local university rather than rent (unless self funding!)
 
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Houseseeker16 said:
Our plan is to save for the house updates of about 60k but keep saving the 20k education fund adding child benefit each month.
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This is terrible. Money is interchangeable. Putting a label "education fund" might give you some emotional value, but it's very expensive.

The best way to save for your child's education 10 years away, is to pay down your mortgage.

If you think as many do that education fund is a different currency from the euro, then invest in shares as your horizon is at least ten years.

Brendan
 
Houseseeker16 said:
Note Family home needs a refurb over time (not urgent but old and dated) - about 60k or so
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Houseseeker16 said:
Our plan is to save for the house updates of about 60k but keep saving the 20k education fund adding child benefit each month.
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Houseseeker16 said:
The house upgrade is our focus right now and it’ll prob take 3 years to save and complete work.
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Why not do this work now?

I am not sure whether you have €40k cash or €20k cash in total.

You can get a Credit Union loan for the bit you don't have and pay it off fairly quickly.
Alternatively, you could get a top up mortgage.

But you are saving €2,500 per month, so it seems that you would have the loan paid off in a year or so.

So no need to wait 3 years. If you would benefit from the refurb. do it now.

Brendan
 
Brendan Burgess said:
This is terrible. Money is interchangeable. Putting a label "education fund" might give you some emotional value, but it's very expensive.

The best way to save for your child's education 10 years away, is to pay down your mortgage.
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Ok that’s straightforward thank you Brendan and yes we are a little bit financially illiterate!!

I was wondering given we only pay 2.2% that investing it would be better but if it makes sense to pay down then we’ll really consider that.
 
Should they be paying the mortgage down at 2.2% fixed until 2026? I wouldn't have thought so. Maybe from 2026 onwards depending on interest rates then? You can get more than 2.2% even on deposit at the moment.
 
Brendan Burgess said:
This is terrible. Money is interchangeable. Putting a label "education fund" might give you some emotional value, but it's very expensive.
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I agree with @Brendan Burgess here. It's a common pitfall and easy to understand but lots of people often compartmentalise their finances like this, often to the detriment of their overall situation. E.g. they have the "education fund", and the "rainy day fund", etc. often on deposit, rather than taking a holistic view of and approach to their overall financial situation.
 
Houseseeker16 said:
Not married but due to get married in 2024
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Do it quietly today and have a celebration next year.

People in their 40s unfortunately do drop dead and you don’t want to be leaving your partner a big CAT bill.

Houseseeker16 said:
We are not overpaying mortgage
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You have a very cheap mortgage rate. Partner should max pension contributions instead of paying down mortgage. You’ll almost certainly get a better return this way.

You can pay off outstanding mortgage balance in retirement using tax-free lump sum.
 
ClubMan said:
Not really sure that you mean by that or if you're being facetious? Or maybe you mean in relation to tax and succession issues? There's not much in the way of romance on Askaboutmoney. :D
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No not being facetious - it is probably the most important thing we need to do to derisk / improve our financial futures in case one of us dies!! So yes it’s in relation to tax and succession issues!! We are happily (and romantically) together a long time and if common law arrangements were recognised like marraige from a tax / inheritance perspective then we would not bother with it!

Dr strangelove’s point is good and in fact we did lose a friend in their 40s recently who died suddenly from a heart attack which has focussed our minds. Unfortunately doing the legal bit requires 3 months notice and then the first slot in the registry office we can get is early 2024!
 
ClubMan said:
I don't think that you should be overpaying your mortgage at 2.2% fixed until 2026 (well done on that!) and agree with @Dr Strangelove's comments above.
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We made the decision to fix at that rate based on advice and info here - this is such a brilliant forum and resource, I can’t imagine how much €€ you have saved all of us financially illiterate punters over the years!!
 
I think it is overly optimistic to expect a €490k fund to grow to €1.5m in 11 years given the level of your contributions.

If you are serious about retiring at 60, I think yourself and your partner need to drastically increase your pension contributions.
 
When you say that you are saving 2420 a month, is that saving or differed spending? I am confused as you speak about 20k on an account. This would only represents 8 months saving.
 
Sarenco said:
I think it is overly optimistic to expect a €490k fund to grow to €1.5m in 11 years given the level of your contributions.

If you are serious about retiring at 60, I think yourself and your partner need to drastically increase your pension contributions.
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Ok thank you - this is quite a flaw in my plans and is very useful to point out. I need to check the assumptions in the pension website that gave me that figure. With a rough calculation of 3% annual return and 25k a year put in it between myself and employer would be more like 1M or just under at 60
 
Premos said:
When you say that you are saving 2420 a month, is that saving or differed spending? I am confused as you speak about 20k on an account. This would only represents 8 months saving.
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We bought our house in the last couple of years and paid for a replacement car recently so ran down our savings quite a bit. But about 25-28k in savings a year is about right
 
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