61 , does it make sense for us to retire now ?

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misterdarcy

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Personal details

Age: 61
Spouse’s/Partner's age: 56

Number and age of children: 3 ( 27,24,20) . Youngest two in college . Youngest going in to second year , middle one entering final year. 27 year old has fled the nest.


Income and expenditure
Annual gross income from employment or profession: €56,000
Annual gross income of spouse: €25,000

Monthly take-home pay Me: €3200 Herself : €1800

Type of employment: Both self employed

In general are you:
(a) spending more than you earn,
(b) saving?
Both careful ,but not scrooge like

Summary of Assets and Liabilities
Family home worth €300k with a €27k mortgage
Cash of €10k
ARF : €1,300,000 25% tax free part already cashed in few years ago and used to help with children's education and garden makeover and family cruise
Stocks and shares held : €12k


Family home mortgage information
Lender BOI
Interest rate 3%
If fixed, what is the term remaining of the fixed rate : 7 years



Other borrowings – car loans/personal loans etc

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



Buy to let properties None
Value:
Rental income per year:
Rough annual expenses other than mortgage interest :
Lender
Interest rate
If fixed, what is the term remaining of the fixed rate?

Other savings and investments:

Do you have a pension scheme? Spouse has €40k in PRSA

Do you own any investment or other property? no

Other information which might be relevant

Life insurance: Only to cover mortgage €27k

Simple question really. Can we afford to hang up the boots ?
 
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misterdarcy said:
ARF : €1,300,000 25% tax free part already cashed in few years ago and used to help with children's education and garden makeover and family cruise
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Just to clarify - €1.3M is the residual value after the tax free lump sum was taken?
misterdarcy said:
Company shares : €12k
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You mean shares in one of your employers?
Holding shares in this way is concentrating risk with your remuneration and a chunk of your investments in one place.
misterdarcy said:
Simple question really. Can we afford to hang up the boots ?
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Really depends on what your likely expenditure might be and if/how your ARF can deliver that.
Are you both in like to qualify for full state contributory pensions at 66?
 
ClubMan said:
Just to clarify - €1.3M is the residual value after the tax free lump sum was taken?

You mean shares in one of your employers?
Holding shares in this way is concentrating risk with your remuneration and a chunk of your investments in one place.

Really depends on what your likely expenditure might be and if/how your ARF can deliver that.
Are you both in like to qualify for full state contributory pensions at 66?
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Yes , I've checked in to this . Both of us have made the required contributions for 100% entitlement.to the state pension.
ClubMan said:
Just to clarify - €1.3M is the residual value after the tax free lump sum was taken?

You mean shares in one of your employers?
Holding shares in this way is concentrating risk with your remuneration and a chunk of your investments in one place.

Really depends on what your likely expenditure might be and if/how your ARF can deliver that.
Are you both in like to qualify for full state contributory pensions at 66?
Click to expand...

Apologies Clubman. I meant €12k held in share portfolio ( CRH, iseq20 etc)
ClubMan said:
Just to clarify - €1.3M is the residual value after the tax free lump sum was taken?

You mean shares in one of your employers?
Holding shares in this way is concentrating risk with your remuneration and a chunk of your investments in one place.

Really depends on what your likely expenditure might be and if/how your ARF can deliver that.
Are you both in like to qualify for full state contributory pensions at 66?
Click to expand...

€1.308M is the nett value now of the ARF today 16.8.23. . I took out the 25% tax free lump sump a few years ago under the rules of the scheme.
 
Have a look at what you're paying annually for the ARF.

For that level of investment there could be a substantial saving to be made - circa €10K+ pa. But, just be careful that there are no legacy exit charges (usually first 5 years) attaching to your existing one if you do decide to move it.

Do your businesses have a saleable value when you hang up the boots?

Gerard

www.prsa.ie
 
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misterdarcy said:
Simple question really. Can we afford to hang up the boots ?
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How can we answer this question when you haven't told us the most important financial information. How much do you spend monthly. How much will you need when you retire.

Your current income is 5K. How is this spent currently.
 
You've done exceptionally well to build 1.623 million (inlcuding the 25% taken) in pension contributions at your age an on your salary. Personally, I would feel I had plenty to retire on if I had 1.3 mil+ in an ARF, as I know I will not have even close to that aged 66, or even 68, but as mentioned above, your spending habits could be very different.
Before I bit the bullet, I would try and get rid of that mortgage asap, and any other car loan etc - I would use the cash and sell those shares (if I could).
 
Rasputin said:
You've done exceptionally well to build 1.623 million (inlcuding the 25% taken) in pension contributions at your age an on your salary. Personally, I would feel I had plenty to retire on if I had 1.3 mil+ in an ARF, as I know I will not have even close to that aged 66, or even 68, but as mentioned above, your spending habits could be very different.
Before I bit the bullet, I would try and get rid of that mortgage asap, and any other car loan etc - I would use the cash and sell those shares (if I could).
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Thanks Rasputin. I don't have any car loans , thankfully but was thinking that the potential growth on the shares would outstrip the interest on the mortgage over the next few years ( I might be wrong) but the first opportunity I get I intend to pay off the mortgage completely from any surplus funds after tax income. I would think it would be foolish to use additional ARF drawings to pay off the mortgage because it would cost be 40% + PRSI + USC which would be way more than the interest over 7 years on the mortgage.
 
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Given the fact that you are over 60, are 4% imputed distributions not already applicable to your ARF?

4% of €1.3m is €52k, just short of €40k per annum net of tax.
 
Sarenco said:
Given the fact that you are over 60, are 4% imputed distributions not already applicable to your ARF?

4% of €1.3m is €52k, just short of €40k per annum net of tax.
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Yes , but if I hope to retire I'd be using this €40 k for day to day living as there won't be any other income. Maybe the answer is in your question : work another 12 months , pay off the mortgage with the income generated from working and then hang up the auld boots ?
 
Well, my question is really whether your current €56k income includes a €52k distribution from your ARF?

I’m sure most couples could live fairly comfortably on €40k (net) per annum where they are debt free.
 
Sarenco said:
Well, my question is really whether your current €56k income includes a €52k distribution from your ARF?

I’m sure most couples could live fairly comfortably on €40k (net) per annum where they are debt free.
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Thanks Sarenco. Total GROSS income at the moment is €56K salary +€25k spouse + €52k ARF=€133k. This reduces to the ARF figure of €52K gross annually or €40k annually after tax if we jack in the work Our current annual expenditure would be about €70 k at the moment including mortgage repayments of roughly €4800 per anum and €16k per anum on college fees ,general support and accomodation for my two boys. One of them will be " off the payroll" hopefully in the summer of '24 , the other 3 more years left.
 
So

Current Income 133K
Retirement Income 40K
Expenditure 70K

No you can't retire.

In 2024

Your expenditure will be 70 - 8 K = 62K, so you can't retire in 2024, I've one of those kids, now on a gap year after college and thinking about going back for another degree ........

2026

70 - 16 = 54 K, so you can't retire than either.

When mortgage ends you'll be 54K - 6K = 49K

You have to put in figures for pensions and years to figure this out.
 
Sarenco said:
Well, my question is really whether your current €56k income includes a €52k distribution from your ARF?

I’m sure most couples could live fairly comfortably on €40k (net) per annum where they are debt free.
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We should have been told this in the OP. That he's got an extra income of €52K he's earning, unless I'm completely misunderstanding.
 
misterdarcy said:
Total GROSS income at the moment is €56K salary +€25k spouse + €52k ARF=€133k. This reduces to the ARF figure of €52K gross annually or €40k annually after tax if we jack in the work Our current annual expenditure would be about €70 k at the moment including mortgage repayments of roughly €4800 per anum and €16k per anum on college fees ,general support and accomodation for my two boys.
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Ah, thanks for the explanation - that all makes sense.

So, I think you have answered your own question - with an annual expenditure of €70k per annum you obviously can’t afford to retire on a net income of €40k per annum.

Once the kids are off the payroll, the mortgage is cleared and the State pension kicks in, you should be fine.

But I’m afraid you’ll have to keep going for the time being.
 
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