Can we retire at 60 ?

[Benbulben]

Personal details
My Age: 48
Spouse’s age: 49 (this year)
No Children

Income and expenditure
My Annual gross income: €89K
Spouses gross income €61k

Home
Family Home – Value €500k, Mortgage outstanding €60k Variable Rate 3.25% Paying circa €1k more than mortgage. Total €1805 p.m. currently on track to have it fully paid off in 2.5 years (but may pay it off this year explanation below)

Buy to Let Property: I have a One Bed Apartment that I own with my brother. This is mortgage free and generates €1,275 p.m. It is valued at circa €250k and is in a good location and nice building in Dublin. The rent could be higher, but the tenants are long term and very good.

Buy to Let Property: My wife has an apartment and is in the process of selling it(sale agreed, advanced stage). It should yield circa €100k when the mortgage and various fees are paid off. We intend to pay off the remaining €60k on our family home, leaving circa €40k left.

Home Life
Living in a country town and in our forever home for last 6 years and don’t plan on moving. It is a modest 3 bed with low maintenance and is a 15-minute walk into the town which has plenty of amenities. Financially comfortable and not crazy lifestyle (definitely saving more than spending) but feel the overpayments and savings have been taking a bit of a toll and would like to free up some cash when the mortgage is cleared for a little more discretionary spending.

Work
My job = Manager in Semi State
My Spouse’s job = Software Project Manager

Savings & Investments
Credit Union : circa €14k I currently put €1k p.m. into this but sometimes have to dip into it for holidays etc.
Cash: Various savings accounts for new car replacement and sinking fund for house repairs etc. circa €20k pay circa €400 p.m. into this.




Pension & Retirement

I am part of a D.B. Scheme and will have circa €130k Lump sum and €30k annuity @ 60 (will have 40 years @60) on current salary

Wife previous employer annuity of circa €10k payable @ 65

Wife currently has an executive pension (started mid 2018) with New Ireland with Prime Equities S12 RP circa 65% and Prime Equities S12 SP circa 35% with a current valuation of circa €95k.

Her company contributes circa €450 p.m. gross, and she contributes circa €600 p.m. gross.

At the end of the year, she maxes out her tax-free allowances into this as a lump sum of circa €10k per annum.

The fees on this are 0.5% AMC with a 0.5% Trailer fee.

I do not currently make use of my full Tax free allowances and could potentially put in €9k per annum gross into AVC or something else.

Loans
None

Credit Card
Cleared every month

Insurances
Death in Service: Circa 25% of my salary for my wife
Long term sickness scheme @ 66% of salary for €72 p.m.
Life assurance policy for both of us with €145k policy ( it was originally taken out to cover the mortgage on the main family home) it costs €41 per month, is set to mature in 2038 (covers me to 65) but we can extend it as it has a medical free conversion (i.e. no new medical tests or standards to meet)


Health insurance
Laya healthcare same individual policy each. I don’t think a family policy is any cheaper but will look into this.

Other

I will potentially receive an inheritance later in the year of approx. €90k.

Questions
We would like to retire when we reach 60 or to be precise when I reach 60 and have 40 years’ service. Do you think this is realistic? Is there anything we can do to make this more realistic?

At that point we would have an income of my lump sum of circa €130k and my annuity of circa 30k.

My wife would have an annuity of circa €9k payable @ age 65. My wife could cash in her executive pension @ age 65 also which might be worth €300k to €500k with circa €20k per annum going into it now. But I think we would need to cap the investments into this @ age 60 if we retired then and not pay anything further in (I’m not sure if this is an option or not) as we would not be able to afford that circa 20k per annum further investment each year I don’t think.

State pensions combined for both of us will come to around €28k payable @ 66.

I think we would be in a relatively good position from age 66 with circa €67 k per annum income (plus whatever we converted my wife’s executive pension into). But with the price of a vehicle, healthcare, fuel, general cost of living is this going to look different in 2045 money context ?

I would like to look at funding the years from 60 to 65 when we would hopefully be healthy and active and hopefully travel around a bit.


I have 2 questions on pensions

I have calculated that I have circa €9k per annum (at current 25%) that I could potentially put into an AVC.

Suppose my AVC was valued at €200k when I hit age 60. My pension pot at the moment through the DB is valued at circa €1m. Which I think leaves me with €1m SFT. Although I did read an interesting post by @Gordon Gekko that suggests that the actual SFT is more accurately €2.12m



Could I fully cash in the AVC at age 60? Could I use 70k of it to get me to the max tax-free threshold on the lump sum and then have the remaining €130k taxed @ 20%? i.e., first €200k tax free, next €300k 20%

Or would it be the case that my pension pot would be valued at €1.2m and I could only take out a max of €300k in cash with the rest of the AVC needing to be put into an ARF?

Secondly, if we retired at 60, would my wife be able to park the circa €20k per annum going into the Executive pension that matures at age 65 or would there be merit in trying to continue a minimal payment? I don’t know that there would be sufficient tax efficiencies to warrant further investment at that stage based on our income.

2 questions on future investment strategy

Intent is to use the income from my wife’s apartment to pay off our current mortgage on the family home.

That would leave circa €40 k and some of that is earmarked for hobbies/home improvements but maybe €30k left for investments.

Would it be wise to overpay that €30k into my wife’s executive pension and then you could avail of the tax-free thresholds over the next 2-3 years without having to put a lump sum into it? This would ease some of the current burden and allow for more freedom. I have seen some good posts on this here: https://www.askaboutmoney.com/threads/making-avcs-at-low-rate-relief-or-no-relief.219760/ and good suggestions from posters like @Sarenco, @Marc, @Brendan Burgess @Gordon Gekko


With the mortgage paid down we intend to loosen the strings a bit but there will still be circa €1k per month left over, what would be a good strategy to invest this and the potential further inheritance? We are happy with moderate to high-risk strategies to allow it to build up over the next 12 years.

Are we doing anything as per the above details provided that we should be doing differently or not doing?

Caveat I am a US citizen (born over there but lived in Ireland all my life) and this potentially restricts my ability to invest in Ireland/Europe.



Thanks very much for taking the time to read this.

 

[Brendan Burgess]

Any ideas on this?

 

[Early Riser]

Any ideas on this?

Could I fully cash in the AVC at age 60? Could I use 70k of it to get me to the max tax-free threshold on the lump sum and then have the remaining €130k taxed @ 20%? i.e., first €200k tax free, next €300k 20%

Or would it be the case that my pension pot would be valued at €1.2m and I could only take out a max of €300k in cash with the rest of the AVC needing to be put into an ARF?

@Benbulben posted a query specific to his own pension options in the course of another thread yesterday (https://www.askaboutmoney.com/threads/lump-sum-query-can-you-use-avc-to-boost-your-lump-sum.229777/

As I understand it, the rules for a Defined Benefit scheme will not allow him to top up his tax-free lump sum beyond 1.5 times his pensionable salary. He will have full service at his proposed (and normal) retirement age of 60 and will receive this amount from his main scheme. He cannot use an AVC to increase the tax free amount any further, nor to take any remainder in cash at 20%.

He will have to draw down the AVC at the same time as he retires and he can use the proceeds to fund an ARF. He has indicated in the other thread that he projects that their joint income at retirement will be circa €31k per annum until 65/66 when other pensions kick in. So he has potential to withdraw up to about €18k pa from an ARF in these interim years at 20% tax (plus PRSI and USC). This seems a good investment.
However, any ARF income beyond this value, and beyond a significantly more limited threshold after 66, is likely to attract tax at the higher rate (plus USC, and plus PRSI up to age 65/66) - depending on their total joint income then. The value of this is much more moot but each to their own. He may want to consider this in determining how much to contribute to AVCs between now and 60. I am assuming that some sort of indexing applies to his Semi-State DB pension but his wife's projected annual pension income seems more unclear.

I don't have anything to contribute to the broader questions.

 

[sidzer]

At that point we would have an income of my lump sum of circa €130k and my annuity of circa 30k.

If your salary is €89k then surely your pension will be €44,500 at age 60 if you have 40 years service? You will get the supplementary pension from 60-66.

Which pension category are you in? What year and month date did you begin working in your current job?

 

[Early Riser]

If your salary is €89k then surely your pension will be €44,500 at age 60 if you have 40 years service? You will get the supplementary pension from 60-66.

It is a coordinated pension scheme (similar to post-95 public servants). "Full service Occupational Pension" = 0.5 pensionable salary - State pension. So €44,500 - €13,800.
Only pre-1995 public servants paying modified PRSI would have the occupational pension calculated as in your post, and they would be eligible for neither a Supplementary Pension nor the State Pension.

The Supplementary Pension is a PS provision - I am not sure how many, if any Semi-States, provide for it. But it would seem not where @Benbulben is employed (as indicated in another thread).