Just a regular Irish family with a crazy financial plan...

[marycc]

Personal details
Long term lurker and learner finally brave enough to post!
Age: Mid 40s
Spouse's age: Mid 40s
Number and age of children: 2, age 11 and 12

Income and expenditure
Annual household gross income from employment : €120,000 plus €15k bonus plus €17k rental income
Monthly take-home pay: €7,700

Type of employment - Spouse Employee and I'm self-employed.
Employer type: private company.

In general are you:
(a) spending more than you earn, or saving?
Saving 1,500 per month in various products

Summary of Assets and Liabilities
Family home value: €325,000
Mortgage on family home: €90,000
Net equity: €235,000

Cash: €67,000 in savings
Defined Contribution pension fund: €120,000
Company shares : €2,000
Buy to Let Property value: €350,000
Buy to let Mortgage:€120,000


Family home mortgage information
Lender BOI
Interest rate 3.3%
Type of interest rate:10 year fixed
If fixed, what is the term remaining of the fixed rate? 9 years
Remaining term: 20
Monthly repayment: €690 - 10% over payment and 2 annual breaks built in for Christmas and summer

Other borrowings – car loans/personal loans, credit card etc: No

Pension information
Spouse for both of us: Value of pension fund: €120,000,
€105,000 in Irish life Multi Asset Portfolio 6 Series G
€15,000 in Zurich Prisma 5- Investing ee €600/er €300 monthly
I have no pension

Buy to let properties
Value: €350,000
Net equity: €230,000
Rental income per year: €17,000
Rough annual expenses other than mortgage interest : €13,200 mortgage payments
Lender: BOI
Interest rate 3.3% fixed for next 20 years
If fixed, what is the term remaining of the fixed rate? 9

Other savings and investments:
CU: €5000
CU save €220 per month for annual Christmas pot
EBS ChoiceSaver - Irish life Investment product -€890- monthly children's allowance €240 goes in directly for long term saving for kids college
EBS Family Saver 1.25% €12,300- where should we put this?
EBS Moneymanger 0%- €2,300- where should we put this?
Bank of Ireland Super Saver- 3% - 200 per month for annual summer holiday pot
Zurich Prisma 5 - €47,500- €560 per month for ???
An post 10 year solidarity bonds are maturing every month €260- €9000 (approx 12month x3 years) left to mature with decreasing interest amounts
Revolut- use pockets to save for short term items like car tax, insurance, mini breaks ,etc.
Looking into setting up trade republic account for short term saving - 4% int rate current account and interested in dipping my toes into trading
Other information which might be relevant
Life insurance: Mortgage cover on both properties with Irish life, Joint life assurance with Allianz for €150,000 I think
Modest car , prob need to upgrade in 2 years
Bad habits ;-) 15,000+ a year on hols and 5,000 a year on eating out

What specific question do you have or what issues are of concern to you?
Hit me with your suggestions.
I can't make head or tail of my own strategy so need your guidance
Retirement:
Should I put our investment home into some clever pension thing?
Where do I start with a self employed pension- I am a director of my ltd company - or should I bother and just fund spouses er pension (I'm on lower rate of tax)?
Are the pension fund choices advisable? Should I try to move the Irish life to better performing Zurich?
Should we sell investment property? 20 years old will start being a drain?
Would both like retire at 60 max so 15 years..

Savings
The savings - too diversified? any advice for a better plan/vehicle for short /medium and long term
Should we pull out the 10 year bonds early to get better return elsewhere?
Anything glaringly obvious that we need to change or are doing wrong?

Thanks financial folk!

 

[arbitron]

Other savings and investments:
CU: €5000
CU save €220 per month for annual Christmas pot
EBS ChoiceSaver - Irish life Investment product -€890- monthly children's allowance €240 goes in directly for long term saving for kids college
EBS Family Saver 1.25% €12,300- where should we put this?
EBS Moneymanger 0%- €2,300- where should we put this?
Bank of Ireland Super Saver- 3% - 200 per month for annual summer holiday pot
Zurich Prisma 5 - €47,500- €560 per month for ???
An post 10 year solidarity bonds are maturing every month €260- €9000 (approx 12month x3 years) left to mature with decreasing interest amounts
Revolut- use pockets to save for short term items like car tax, insurance, mini breaks ,etc.
Looking into setting up trade republic account for short term saving - 4% int rate current account and interested in dipping my toes into trading

That's a lot of different savings accounts. I don't think it's wise to have separate pots for holidays, college, etc. It makes it hard to keep track of your actual savings balance and you can get a false sense that you are doing something financially savvy when you are just fiddling it around. It can also prevent you from maximising the value of your assets because some of it is arbitrarily "off limits". I think it's better to keep things simple, have 1 demand savings account with your buffer (3-6 months of expenses). Anything above the buffer goes into shares, etc.

Even the best savings interest rates are low and when you take DIRT into account there is really no sense in keeping any significant amount in a savings account, it won't keep up with inflation. If you plan to retire in 15 years you have to be disciplined as you will need consistent high growth, so you have to maximise pension/investments.

Bad habits ;-) 15,000+ a year on hols and 5,000 a year on eating out

That is 22% of your annual take-home pay...!

It's better to spend money on experiences rather than material things, and holidays are really important, but €15k a year is big by any standard.

 

[Steven Barrett]

I have no pension


Where do I start with a self employed pension- I am a director of my ltd company - or should I bother and just fund spouses er pension (I'm on lower rate of tax)?

This.

First of all, while you are self employed, you are not a sole trader, you are a company director. Therefore, your company can make large pension contributions into a PRSA and claim it as an expense in the year that you are paid. It is irrelevant that you pay 20% income tax, it is the business paying it.

You have too much cash. Make better use of it, either by paying down debt or investing it. Hold some of it for cashflow purposes, get the rest of it working.


Steven
www.bluewaterfp.ie

 

[Dr Strangelove]

Buy to let properties
Value: €350,000
Net equity: €230,000
Rental income per year: €17,000
Rough annual expenses other than mortgage interest : €13,200 mortgage payments
Lender: BOI
Interest rate 3.3% fixed for next 20 years
If fixed, what is the term remaining of the fixed rate? 9

This seems to be where you have huge risk exposure and you don't give it much thought. There's a good template for looking at whether you should sell or keep:

Key Post - Keep property as Rental or Sell?

Updated May 2020 The question regularly comes up on AAM whether somebody should keep an apartment that their family has outgrown as a rental or whether they should just sell up. Borrowers often run projections on the anticipated rental income from an apartment with a cheap tracker and conclude...

www.askaboutmoney.com

In terms of advice your pensions seem on the low side given your age and income. I would prioritise these over paying down own house mortgage other investment products. Apart from emergency savings I don't see much benefit in keeping wealth in deposits and investment products given the punitive tax treatment in Ireland. Just put as much as you can into your pension up to tax relieved ceilings.

and interested in dipping my toes into trading

This is madness. You are a random punter with zero market insight. Just put it into your pension.

 

[Bronte]

What specific question do you have or what issues are of concern to you?
Hit me with your suggestions.
I can't make head or tail of my own strategy so need your guidance
Retirement:
Should I put our investment home into some clever pension thing?
Where do I start with a self employed pension- I am a director of my ltd company - or should I bother and just fund spouses er pension (I'm on lower rate of tax)?
Are the pension fund choices advisable? Should I try to move the Irish life to better performing Zurich?
Should we sell investment property? 20 years old will start being a drain?
Would both like retire at 60 max so 15 years..

Savings
The savings - too diversified? any advice for a better plan/vehicle for short /medium and long term
Should we pull out the 10 year bonds early to get better return elsewhere?
Anything glaringly obvious that we need to change or are doing wrong?

Thanks financial folk!

Observations:

- There are way too many savings products there. What a waste of time to follow reading it never mind dealing with them.
- No you shouldn't put your investment property into some magical pension thing. But you should critically look at it and see if you're achieving max rent. I wonder how much of the 17K you actually get. Straight off it's taxed at 50% so you are getting 8K max.
- Yes you absolutely should have a pension, see the post from Steven Barrett and I recommend you contact him in real life to set it up for you.
- No comment on your other pension choices as I'm not an expert. But I will say you shouldn't be switching things around as there are all sorts of fees and hidden fees to eat at your invested income by doing that.
- To retire at 60 requires you to know how much you need to live on and how that is achievable. Given your costs and the fact your youngest is 2 I'd say that might be a tall order.
- I don't think the holidays and eating out is a lot if it's what makes life comfortable and enjoyable. But if the goal is early retirement than you need that money to make that possible.

 

[tomdublin]

and interested in dipping my toes into trading

That's about as likely to succeed as dipping your toes into dental surgery or flying an Airbus. Your financial planning "journey" should start by abandoning this particular money destruction strategy.