Am I dreaming - Money makeover

[Dman35]

Personal details

Age: 48
Spouse's age: 47
Number and age of children: 15, 14, 12

Income and expenditure
Annual gross income from employment or profession: 140K + 18K Employer Pension Con
Annual gross income of spouse/partner: 65K

Monthly take-home pay: Combined @ 9,300 monthly (after my 22.5% pension/con)
Type of employment - e.g. Employee or self-employed. : Both PAYE

In general are you:
(b) saving? Not including Mortgage & Pension saving @ 1k p.m.

Summary of Assets and Liabilities
Family home value: 625K
Mortgage on family home: 98k - 3% fixed interested and @ 5.5 yrs left.

Cash:
10K - short term - Trade Republic @ 4% interest
70K in Post Office - Mixture of 5 & 10yr saving certs - Kids Child allowance of 410 p.m. goes there every month - Use towards college etc when needed.

Shares :
15K - With 280 p.m. paid in Zunich Funds
35K in Broker A/C - Used invest regularly in shares. Now taking out % every yr while trying to keep it under 1,250 profit allowance.


Other borrowings – car loans/personal loans etc : none

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


Pension information
Value of pension fund: @ 575K - Paying 3.5K per month (includes both employee & employer Con)
Spouse - Government Pension - Although as was out of country for number of yrs so to date only has @ 20 yrs service.

What specific question do you have or what issues are of concern to you?
I would love to Retire early and have spent a number of hours going through different related posts on this site and others and found them excellent source of information.
Thinking of a stepped approach.. When I have mortgage fully paid back I will be 55yrs, so go working in either a lower pressured job that covers just my living expenses or work part-time in my existing industry...
Either way stop paying towards my pension (as I'll let compounding work it's magic, while from 52 onwards pension will move to safer investments each yr until 60, pretty much 100% in bonds / cash) and no mortgage payments I think I'll need @ 3 to 3.5k per month take home pay to live comfortably, as my wife is planning on working until @60/62 at the moment (she loves her job) although than may change and she may end up changing to part-time as well by time she's in late 50's.

So around 60 yrs (hoping pension pot is @ 1/1.2M) take lump sum and draw down 4% p.a to live on.

Now I think all the above sounds reasonable on paper however I won't for a minute claim to be an expert here at all, so I'm sure there are a number of pitfalls / areas I should be looking at... Do I have all my eggs in one basket by having all my money in a form of equities i.e. pensions, Zunich funds & shares? Should I consider an investment property to spend the risk.
so would really appreciate any feedback / thoughts?

 

[Flybytheseat]

I would recommend leaving a higher percentage of your pension in equities (>=70%) after 52 as ultimately as you are going the ARF route meaning you have potentially many years ahead of you with the fund invested. Going 100% bonds/cash wouldn't be recommended or usual if going the ARF route.

Otherwise your plan looks very achievable. To achieve €3.5 K per month from your ARF you should be aiming at a fund value of €1.3M in todays terms allowing for 25% of the fund being taken tax free / @20% so may have to work beyond 55 to achieve this. This will be supplemented by your state contributory pension and your wifes Public Service pension so will probably be enough to live comfortably (but not extragavently).

 

[thedaddyman]

Given your salary, I do wonder if your spending is high as your cash position is not bad but I'd expect more.

Start with the basics, review tax, insurance etc and see where the money is going out and see where you can get more efficient. Could you pay the mortgage back faster? I'd say given your income, yes

 

[Dman35]

I would recommend leaving a higher percentage of your pension in equities (>=70%) after 52 as ultimately as you are going the ARF route meaning you have potentially many years ahead of you with the fund invested. Going 100% bonds/cash wouldn't be recommended or usual if going the ARF route.

Otherwise your plan looks very achievable. To achieve €3.5 K per month from your ARF you should be aiming at a fund value of €1.3M in todays terms allowing for 25% of the fund being taken tax free / @20% so may have to work beyond 55 to achieve this. This will be supplemented by your state contributory pension and your wifes Public Service pension so will probably be enough to live comfortably (but not extragavently).

Tks for taking the time to reply - Yeah you make a v good point, re Risk / Reward.... I just have a memory of when my father went to retire the stock market had fallen considerably in the yr prior and he had to work 3 or 4 more yrs to waiting until market had returned to retire...

I'm probably going too far the other way.... Yeah agreed, 55 at the moment is the target but that could move to 56/57 if needed to ensure have a big enough pot to live on fairly comfortably....

 

[Dman35]

Given your salary, I do wonder if your spending is high as your cash position is not bad but I'd expect more.

Start with the basics, review tax, insurance etc and see where the money is going out and see where you can get more efficient. Could you pay the mortgage back faster? I'd say given your income, yes

Tks for taking the time to reply - Yeah you are right if really put my mind to it we could be saving alot more...

Be to honest we're good enough on ensuring getting good price on insurance, tv etc.... However we're trying to get the saving for future and living in the day balance right. We both enjoying eating out the odd week, going for a few drinks, 2 family hols a yr etc

I've researched the FIRE movement quite a bit and while some people go down the route of eating out only once a yr, no major family hols, minding every penny etc (if it works for individuals, best of good luck), but that wasn't really for us....
So that's way changed my approached to a stepped approach rather than trying to completely retire in 50's.

Re Mortgage we are currently overpaying by @ 300 p.m. already and have a low intertest rate fixed 3% so happy to let that roll for next few yrs.

 

[DublinHead54]

Would your mortgage not be paid of earlier than 55 if the current term is 5.5 years, you are 48 and also overpaying the mortgage monthly?

I am not saying this is your duty, but in future you might want to offer some financial support to your kids?

 

[Steven Barrett]

Either way stop paying towards my pension (as I'll let compounding work it's magic, while from 52 onwards pension will move to safer investments each yr until 60, pretty much 100% in bonds / cash). So around 60 yrs (hoping pension pot is @ 1/1.2M) take lump sum and draw down 4% p.a to live on.

The original work done on the 4% rule had an asset allocation of 50% equities, 50% bonds. The optimal asset allocation in that paper was 75% equites, 25% bonds. His research found that investments with less than 50% equity did not last the required 30 years. And remember, the 4% is off the initial amount and inflation adjusted over your lifetime. So if you have a pension pot of €750,000, that's an income of €30,000 a year adjusted for inflation.

I would question whether €30,000 is enough for someone who earned €140,000 a year and is fully retired at age 60. There won't be much travel involved on that level of income.


Steven
www.bluewaterfp.ie

 

[Dman35]

Would your mortgage not be paid of earlier than 55 if the current term is 5.5 years, you are 48 and also overpaying the mortgage monthly?

I am not saying this is your duty, but in future you might want to offer some financial support to your kids?

Yeah you are right I'm just 49 and will be finished early in 54th year...

Fair point re kids... plan is once kids out of house is for us to down size our house (still in same location as a lot of options and are roughly 1/3 to 1/2 price of our house) and split the balance in 4 - 1/4 for us for hols etc, 1/4 for each of kids.. Hopefully give them all a bit of a start...

 

[Dman35]

The original work done on the 4% rule had an asset allocation of 50% equities, 50% bonds. The optimal asset allocation in that paper was 75% equites, 25% bonds. His research found that investments with less than 50% equity did not last the required 30 years. And remember, the 4% is off the initial amount and inflation adjusted over your lifetime. So if you have a pension pot of €750,000, that's an income of €30,000 a year adjusted for inflation.

I would question whether €30,000 is enough for someone who earned €140,000 a year and is fully retired at age 60. There won't be much travel involved on that level of income.


Steven
www.bluewaterfp.ie

Tks for taking the time to reply - Yeah that's certainly food for thought... Tks... Sounds like I'll need a bigger pot alright before I stop paying into it... Need to keep a close eye on how it preforms over the next few yrs...

Also give careful consideration to asset allocation and when to move from equities to bonds / cash and the % of the movement.

Tks for that.. v useful.