Mid 30s, trying to do long term planning

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LeinsterNordie

Registered User
Messages
13
Personal details
Age:36
Spouse’s/Partner's age:34

Number and age of children: 3 and 1 year old


Income and expenditure
Annual gross income from employment or profession: 105,000 (+ bonus of approx. 14k)
Annual gross income of spouse: 85,000 (+ bonus of approx. 5k)

Monthly take-home pay: Me: 4,700 Partner 3,600 after tax/pension/ESPP contributions

Type of employment: Multinational employees

In general are you: Saving


Summary of Assets and Liabilities
Family home worth €700k with a €410k mortgage

Savings:
Cash: €40k
Investment fund: 12k
Company shares : €15k plus 25k of RSUs vesting over next 3 years

Pension:
Me: €115k DC fund plus 9k/annum DB
Partner: 90k DC fund

Current Pension contributions:
Me: 9% Company: 14%
Partner: 12% Company: 6%

Family home mortgage information
Lender: BOI
Interest rate: 2.35%
If fixed, what is the term remaining of the fixed rate? 6 years


Other borrowings: none

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

Other information which might be relevant
Life insurance: company scheme paying 5x salary (Me), 3x Salary (Partner)


What specific question do you have or what issues are of concern to you?

We have kind of come to a stage where we are relatively set up. Moved into long term home about a year ago and spent a bunch of money kitting it out, two kids now part of the family, cars bought and paid for etc. Looking towards long term setup for success. Currently have about 3,500/month available to save/invest (plus ~20k in bonuses paid over the summer). With no real short or medium term draws on funds. So what combination of saving/investing/pension/mortgage overpayment makes sense? I like the idea of taking advantage of the 3k/year gift exemption to put savings together for the kids if they needed it in their 20's for a house etc. Does this make sense or is there a major drawback to putting this in trust? What other things should I be thinking about? I read these makeover threads and at times see completely different perspectives on how to approach your finances to what the OP originally thinks so would be interested in some feedback on how to set up for long term success
 
Before sorting the kids out take care of yourself. Max out pension contributions and over pay the mortgage as much as possible.
 
PGF2016 said:
Before sorting the kids out take care of yourself. Max out pension contributions and over pay the mortgage as much as possible.
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That's fair, once my partner is back from maternity leave pension max out is next on the list. The mortgage is fixed for a little more than 6 more years so won't be able to overpay by much. I think pension max out will cost me ~500 net per month. Any ideas on best plan for the remaining money.
 
LeinsterNordie said:
The mortgage is fixed for a little more than 6 more years so won't be able to overpay by much.
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Why can't you overpay? There would be no break fee in your case with current interest rates.


LeinsterNordie said:
I like the idea of taking advantage of the 3k/year gift exemption to put savings together for the kids if they needed it in their 20's for a house etc. Does this make sense or is there a major drawback to putting this in trust?
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I have this set up for my own kids. A simple trust document with a life company. Money goes out by direct debit, and everything is taken care of. The downsides I see are that the money is legally theirs immediately, and can't be touched until they're 18. Similarly to a pension, you're locking away money that you can't get if something unexpected happens. Other than that you just need to plan for them potentially having access to a very large sum of money at 18.
 
NoRegretsCoyote said:
You should strongly consider marriage as you have so much home equity.

At the moment you are both facing a big CAT bill if the other passes away.
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Working on that, will be done shortly (costs already accounted for/paid separately to what's listed above)
RedOnion said:
Why can't you overpay? There would be no break fee in your case with current interest rates.
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I just meant that the overpayment is limited to 10% at the moment which would be only 160/month
RedOnion said:
I have this set up for my own kids. A simple trust document with a life company. Money goes out by direct debit, and everything is taken care of. The downsides I see are that the money is legally theirs immediately, and can't be touched until they're 18. Similarly to a pension, you're locking away money that you can't get if something unexpected happens. Other than that you just need to plan for them potentially having access to a very large sum of money at 18
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What life company/funds did you select? Would you recommend them? My (possibly naive) solution to dealing with them having access to the cash at 18 is simply don't tell them it exists?
 
LeinsterNordie said:
Working on that, will be done shortly (costs already accounted for/paid separately to what's listed above)

I just meant that the overpayment is limited to 10% at the moment which would be only 160/month

What life company/funds did you select? Would you recommend them? My (possibly naive) solution to dealing with them having access to the cash at 18 is simply don't tell them it exists?
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your overpayment isnt limited, there is nothing to stop you making any size of overpayment you want (as a partial redemption) there may (or more likely may not) be a small fee for doing this. You can check that with the bank.
 
LeinsterNordie said:
What life company/funds did you select? Would you recommend them? My (possibly naive) solution to dealing with them having access to the cash at 18 is simply don't tell them it exists?
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Mine is New Ireland. I know Standard Life also have a standard bare trust offering. There are fees with these, but I reduced the fees by putting in a lump sum to start.
It's just invested in a world Indexed fund.

Yes, not telling them is an option. The New Ireland document has the option of striking out the clause that the trust auto dissolves on 18th birthday. I can't remember the exact terminology, but any broker will be able to advise.
 
Blackrock1 said:
your overpayment isnt limited, there is nothing to stop you making any size of overpayment you want (as a partial redemption) there may (or more likely may not) be a small fee for doing this. You can check that with the bank.
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PGF2016 said:
Check this. The penalties (if any) may be lower than you think.
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RedOnion said:
There is no limit. 10% is just the amount BoI will allow before seeing if a break fee is due.
There will be no break fee for you at the moment.
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This is a new one on me, I knew you would have minimal fees to break the contract at this stage but I assumed I'd have to clear the mortgage or go on whatever rates are available at the time of the break. So I could clear a chunk off the mortgage and keep the rest of the terms unchanged?
 
LeinsterNordie said:
So I could clear a chunk off the mortgage and keep the rest of the terms unchanged?
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Yes. Your right to repay early is covered by legislation, as well as your mortgage terms and conditions.
If however you want to amend the contract, such as shortening the contract term, that's a change and some lenders will force that to be at new lending rates.
 
There seems to be consensus that maxing out the pension and overpaying the mortgage is the way to go with any excess cash. What makes me wary is that all my cash is locked up.

My mortgage rate is 2.3% until 2031. Is there any merit to investing the excess cash between now and then instead of putting straight into mortgage? I'd need a pre-tax return of 3.9% to match the return from the mortgage overpay (which feels pretty achievable) and it would give more access/flexibility with the money and a potentially greater return. Decide then at the end of the fixed term what to do with the fund when setting up the next term on the mortgage?
 
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