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aurelius42

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Personal details

Age: 55
Spouse’s/Partner's age: 56

Number and age of children: 4 (all in 20s)

Income and expenditure
Annual gross income from employment or profession: €100k
Annual gross income of spouse: €0

Monthly take-home pay €5000
Type of employment: Me: Public servant Spouse: not working outside home

In general : Saving a little

Summary of Assets and Liabilities
Family home worth €400k ,no mortgage
Cash of €150k
Defined Benefit pension fund: >30yr service (of max 40), can draw down at 60
Buy to Let Property worth €350k with no mortgage

Other borrowings – none

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

Buy to let properties
Value: €350k
Rental income per year: €0 (no longer want to rent, hassle)
Rough annual expenses other than mortgage interest : €2000

Other savings and investments: €150k cash mentioned above, no appetite for ETF/Funds etc. due to tax/hassle/fees

Do you have a pension scheme? Public sector pre-95, can retire at 60 or before (actuarily reduced)

Life insurance: x1.5 income through income protection cover, none otherwise on either of us.

What specific question do you have or what issues are of concern to you?
Considering out retirement options given some recent life changes and whether our finances align. Spouse has significant physical disability, never earned and so no pension entitlement or state support (ever due to means test). While 'kids' all educated well, have a little ways to go before earning or earning well so some supports needed until then.
My work is very stressful and own health of concern given my commitments. Could take unpaid leave but maybe not enough respite and will affect pension. Original plan retire at 60 with ~€50k (no contributory pension at 66 for either of us).
Can't add to pension (e.g. AVCs) because single-income status means marginal tax rate + USC on draw-down later. No interest in renting again (hassle).
Thoughts move to enjoying life more while health still allows (e.g. travelling just about still possible). Considered selling one home (PPR) and/or extending the other (2nd home in South-East) to allow perhaps one child live-in to support care of spouse (making use of cash). Lifestyle not extravagant but COL suggests even <€50k pension might be a pinch?
 
It might be too late now, but was the BTL income in your sole name, joint names, or your spouses name?
 
aurelius42 said:
Can't add to pension (e.g. AVCs) because single-income status means marginal tax rate + USC on draw-down later.
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Can you clarify exactly what you mean here please?
aurelius42 said:
Lifestyle not extravagant but COL suggests even <€50k pension might be a pinch?
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What's "COL"?
Have you done out an annualised household expenditure to see what you actually need to live on?
 
RedOnion said:
It might be too late now, but was the BTL income in your sole name, joint names, or your spouses name?
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Thanks @RedOnion Any rent would have entered an account in my name and declared under joint assessment, but the house was also in my name. I'm guessing you're thinking of Class S annual contribution perhaps? It was only for a few years in any case which may not have resulted in any entitlement come 66 for my spouse. Or perhaps you were thinking of something else...
 
ClubMan said:
Can you clarify exactly what you mean here please?

What's "COL"?
Have you done out an annualised household expenditure to see what you actually need to live on?
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Thanks @ClubMan. I could contribute additionally to my pension via AVCs but there is little scope for any real gain. Any tax relief of 40% on the way in would be offset when I retire and draw down that increased pension (at 40% tax + USC + PRSI). The horizon before drawing pension is fairly short too.
By COL I mean cost of living. And yes, household expenditure is probably in the region of €45k. The single income aspect means the marginal rate kicks in earlier than if there were two pensions.
RedOnion said:
No, it was exactly that. But if she had been entitled to start class S contributions, then voluntary contributions could be made. Feels like a bit of a missed opportunity.
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I guess but even for myself with a similar few years of Class A PRSI contributions from way back, it amounts to only about €90/wk at best when I eventually can claim it. Without going back to renting (and all that entails) the amount would limited to just the years of renting unless spouse can continue to make Class S contribution in absence of income?
From my reading, any class S payment can only be made up to a year after the year it applies to. Also, spouse needs to have at least 520 PRSI contributions paid under compulsory insurance in either employment or self-employment. In a related area I have enquired and spouse is not eligible for Homemaker Scheme as never worked.
 
aurelius42 said:
the amount would limited to just the years of renting unless spouse can continue to make Class S contribution in absence of income?
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Yes. The minimum prsi required for contributory pension is 10 years, with a maximum of 5 years voluntary in that.
All she needs is 5k unearned income to make class S contributions. From a tax planning point of view, all possible investments subject to normal taxation should be made in her name to benefit from her 20% tax band.

She could combine the S class with the Home caring periods scheme to get a contributory pension:

HomeCaring Periods Scheme

This Scheme makes it easier for people who take time out of their working life to provide care to qualify for a State Pension (Contributory).
www.citizensinformation.ie www.citizensinformation.ie

Maybe someone with better knowledge will chime in, but it feels like the best possible investment you as a family could make for her to qualify for a pension for the rest of her life if you could someone meet the criteria.
 
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RedOnion said:
Yes. The minimum prsi required for contributory pension is 10 years, with a maximum of 5 years voluntary in that.
All she needs is 5k unearned income to make class S contributions. From a tax planning point of view, all possible investments subject to normal taxation should be made in her name to benefit from her 20% tax band.

She could combine the S class with the Home caring periods scheme to get a contributory pension

Maybe demesne with better knowledge will chime in, but it feels like the best possible investment you as a family could make for her to qualify for a pension for the rest of her life if you could someone meet the criteria.
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Thanks @RedOnion but 10 years maybe not possible given spouse's age. Also, checked HomeMaker scheme and they reject it as spouse had no PRSI contributions ever - a condition of its application. Always struck me as unfair for those disabled who simply could not work (or source unearned income) and therefore don't qualify for contributory pension - and non-contributory is means tested.
 
aurelius42 said:
The single income aspect means the marginal rate kicks in earlier than if there were two pensions.
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I presume you mean "high rate"?
Be aware that a married couple with at least one spouse aged 65+ can earn up to €36k tax free and over that marginal relief may apply.

Exemption limits

This page explains exemption limits on certain taxes.
www.revenue.ie www.revenue.ie

Marginal relief

This page explains marginal relief
www.revenue.ie www.revenue.ie
 
ClubMan said:
Have you ascertained this for sure and checked if there is any scope for reasonable economising?
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Did a fairly careful account of current expenditure to arrive at that - didn't strike me as extravagant!
As for high rate, yes, and welcome that point around exemption limits. I was more focused on the decade before 65 I guess.
@RedOnion Thanks for clarifying the HomeCaring Periods scheme - I'll make enquiries now even though it suggests to wait until retired.
 
aurelius42 said:
Did a fairly careful account of current expenditure to arrive at that - didn't strike me as extravagant!
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That's €3,750 a month. With no mortgage and no school-age children that's higher than I would expect. Are the extra expenses from helping out your children and healthcare costs for your spouse?
 
arbitron said:
That's €3,750 a month. With no mortgage and no school-age children that's higher than I would expect. Are the extra expenses from helping out your children and healthcare costs for your spouse?
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Some would be disability-related (maybe 15%) but not factoring kid support. To me it was in line with recent estimates for comfortable-ish pension for a couple.
 
aurelius42 said:
Some would be disability-related (maybe 15%) but not factoring kid support. To me it was in line with recent estimates for comfortable-ish pension for a couple.
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I'm a bit unclear. Are you using actual expenditure data or estimated data or some guideline?
 
ClubMan said:
I'm a bit unclear. Are you using actual expenditure data or estimated data or some guideline?
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Actual expenditure but not factoring (minor) kid support. Everyone's expenditure differs but aside from some additional healthcare costs, I'd view lifestyle expense as below average and not something I'd see (or favor) changing.
 
Both myself and wife retired last couple of years. Again no debt for last 15 yrs. We have been doing the travelling bit etc. That said I certainly think for several years we will spending more than we earned while working. Even been conservative and going steady the days of say living on 60% of your pre retirement income are gone.
 
You have €500k assets that don't give you any income and actually cost you money. I would think during retirement is the time to use that money one way or the other. In addition, will you not get a lump sum when you retire? To me the question is more about how to make it works for you than not having the money. I can't comment on your PPR choices as it really depends on where you want to live but I would not keep 2 properties if I wasn't using or renting one.
I don't quite understand the child live-in plan.
 
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You have €900k worth of assets and a gold plated civil service pension.

There is no need for you to economise so long as you put the non-home assets to productive use.

aurelius42 said:
Other savings and investments: €150k cash mentioned above, no appetite for ETF/Funds etc. due to tax/hassle/fees
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aurelius42 said:
no longer want to rent, hassle
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This makes no sense. I full appreciate that you don't want the hassle of renting. I understand that you might not want to invest directly in shares.

But you have €500k earning you nothing - in fact, it's costing you.

Sell the buy to not let and invest all your money in a 100% equity ETF.
And if that is too much hassle, then buy an ordinary unit-linked fund.
It might be inefficient from a tax point of view, but getting 60% of a decent return is better than getting 100% of 0%.

Brendan
 
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