# Preparing for future / early retirement



## tails4e (30 Jul 2021)

Hi all, 
I've been pretty lucky with my career, but I've done nothing to plan for retirement, other than my contributory pension as part of my employment. I'd like to be able to smartly handle the money I have, as well as plan for ideally early retirement, and how to handle land inheritance without being severely taxed. Details are

Age: 41
Spouse’s/Partner's age: 44

Annual gross income from employment or profession: 200k
Annual gross income of spouse: 20k

Monthly take-home pay: 8k (some auto goes to company stocks as a savings scheme so would be higher without that) 

Type of employment: e.g. Civil Servant, self-employed: employee. 

In general are you:
(a) spending more than you earn, or
(b) saving
Saving. Have about 150k in the bank, anotjer 350k in stocks.

Rough estimate of value of home
Amount outstanding on your mortgage:
120k
*What interest rate are you paying?
3.2%*

Other borrowings – car loans/personal loans etc
None 

Do you pay off your full credit card balance each month?
Yes
If not, what is the balance on your credit card?

Savings and investments:
Stocks, 350k.

Do you have a pension scheme?
Yes, about 18k a year, current pension pot is 270k

Do you own any investment or other property?
No

Ages of children:
12,11,6

Life insurance:
Yes,basic

So, things I'd like to do:
Retirement - current projection is 40k pa, if I retire at 65, so clearly would like to have investment income. Perhaps rental property? If so, where? 

Retire early - maybe late 50s?

I will likely inherent land from the family farm, valued at ~400k. However I'm not a farmer, and its not desirable to sell the land (pressure to keep it in thw family), so this stands to be a large tax burden - is there any way I could minimize this? 

Any and all advice is appreciated!


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## presidenttttt (30 Jul 2021)

Well done on your career to date. IT?

Do you get a good deal on shares bought from your salary? If it is not an extremely good deal I would tend not to buy shares/ 
invest in my own employer- you already invest your time, and your main income stream is enough financial risk linked to one company, and depending on the industry I would also avoid investment in other employers in that industry, again simply an extension of the desire to diversify. 

Any reason not to pay off mortgage?I’d pay the mortgage off ASAP. You would need a very large gross return on shares to justify keeping a mortgage of 3.2%, and incur a lot of risk trying to achieve that ROI on shares, while paying off shares will give you a good effective return compared to not paying it off, with zero risk.

does your employer give an incentive to add to pension?

My numbers are not as good as yours but understanding if I can manage wealth to retire early is something I am exploring at the moment. I’d take professional advice early rather than later but I am sure other posters will have some much more useful inputs!


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## tails4e (31 Jul 2021)

presidenttttt said:


> Well done on your career to date. IT?
> 
> Do you get a good deal on shares bought from your salary? If it is not an extremely good deal I would tend not to buy shares/
> invest in my own employer- you already invest your time, and your main income stream is enough financial risk linked to one company, and depending on the industry I would also avoid investment in other employers in that industry, again simply an extension of the desire to diversify.
> ...


Thanks, not exactly IT, but it is in tech with an MNC. Shares bought vary from bonus/performance related, to a discount of around 20%. I do sell a fair few, most of the cash in the bank is from that, but I agree I am exposed quite a bit, hence this post as I'd like to diversify. So far the shares have returned well, as the company is doing well, but thats not going to last forever, so I do feel cashing some out is prudent. 

Good point about the mortgage, I should clear it. I'll look into that. 

I'm maxed out on my pension employer match, though the pension fund is not performing so great. 50% return in 5 years, when thr NASDAQ has returned 200% in the same period. Only the employer match and tax break make it worth it. 

Would like to go to a professional, but don't know of one. If you have any solid recommendations that would be appreciated (via Pm if it's not allowed otherwise)


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## Gordon Gekko (31 Jul 2021)

€8,000 a month net seems very low for a couple with income of €200k plus €20k a year.


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## tails4e (31 Jul 2021)

Gordon Gekko said:


> €8,000 a month net seems very low for a couple with income of €200k plus €20k a year.


Looking at my payslip 10800 a month gross before tax, is 130k. The rest is made up of  shares and bonus, so does not appear on the monthly statement. My nett pay from that is about ~5k, with the following deductions
3700 tax (paye, prsi, usc) 
1700 shares/savings fund 
700 pension


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## goingforgold (31 Jul 2021)

What is value of house. Is downsizing at retirement another option to further fund early retirement?


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## Marc (31 Jul 2021)

tails4e said:


> Hi all,
> I've been pretty lucky with my career, but I've done nothing to plan for retirement, other than my contributory pension as part of my employment. I'd like to be able to smartly handle the money I have, as well as plan for ideally early retirement, and how to handle land inheritance without being severely taxed. Details are
> 
> Age: 41
> ...



this is such an increasingly common situation that we recently purchased another advice business specifically to provide advice to people in this situation.

I’ve written a number of detailed blogs recently dealing with for example the perennial question









						Should I Overpay my Mortgage or Pay into a Pension? - Everlake
					

As with many things, the right course of action is going to be specific to your individual financial circumstances.




					globalwealth.ie
				




And it sounds like you have lots of scope to make tax relieved additional voluntary contributions (AVCs)  in addition to the employer matched payments









						Maximum AVC Contributions - Everlake
					

There isn't a maximum contribution you can pay into your pension. Pay a lump sum to your pension now and carry forward the tax relief.




					globalwealth.ie
				




and why selling stock in your employers company is always the right thing to do

[broken link removed]

Our new service is still in development

[broken link removed]


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## tails4e (31 Jul 2021)

goingforgold said:


> What is value of house. Is downsizing at retirement another option to further fund early retirement?


I live outside the city, so I'd not expect the house to be in high demand if I were to sell, so. I'll say 300k, maybe 400k at a stretch, so not much room for income from downsizing.


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## tails4e (31 Jul 2021)

Marc said:


> this is such an increasingly common situation that we recently purchased another advice business specifically to provide advice to people in this situation.
> 
> I’ve written a number of detailed blogs recently dealing with for example the perennial question
> 
> ...


Thanks, I'll look into those articles.

 I'm not a fan of investing in a pension via AVCs, as the return there seems a lot worse, even including the tax break, than other investments. (50% over 5 years for an aggressive fund, vs 200% over 5 years for the plain old NASDAQ. If a fund cannot beat the NASDAQ, its not a great sign IMHO). 

What are the current areas you advise on? Is there anything for long term investment/retirement income, like buying property to rent, etc?


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## Marc (31 Jul 2021)

tails4e said:


> Thanks, I'll look into those articles.
> 
> I'm not a fan of investing in a pension via AVCs, as the return there seems a lot worse, even including the tax break, than other investments. (50% over 5 years for an aggressive fund, vs 200% over 5 years for the plain old NASDAQ. If a fund cannot beat the NASDAQ, its not a great sign IMHO).
> 
> What are the current areas you advise on? Is there anything for long term investment/retirement income, like buying property to rent, etc?



you don’t have to arrange the AVCs via the occupational scheme.

many of our clients use a personal account (PRSA) to claim tax relief and have access to a much wider range of investment options.

although I think you need to weigh up risk and expected returns, the Nasdaq is a ridiculously high risk investment hence the high returns recently. Try measuring the return from, say, 2000.

there simply isn’t a better way to invest than to get 40% income tax relief on the way in and then invest in high return funds again free from personal taxes

it’s like the tortoise and the hare, it doesn’t matter what else you consider you’ll struggle to end up with more than the AVC.

the good news is that you still have 2 months to go back and top up for last year so all is not lost


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## 50andOut (31 Jul 2021)

As others already said you should be Maximising pension to your full 25% of 115k allowance and clearing your mortgage today.

At only 41 with great salary and mortgage free, you have some disposable income even after maxing your pension.
Looking at the age of your kids. - they will be through college in 15 years (assuming standard 3 year courses). 

Seems you will be able to save a fair amount over that time through pension and also through net income and the share scheme.

You don't mention any expenses, Understanding your outgoings is key and the first thing you need to forecast.

How much do you spend/save per month now / expect to spend in your late 50's?

Then look at what your savings / pension position is now and forecast out year on year to work out at what's point your savings/pensions can cover these expenses.

If you don't want to farm, can you just relinquish to other siblings? Not as if it's any value to you.

50andO


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## NY_Resident (2 Aug 2021)

Your CAT liability on the farm (assuming transfer from a parent and no previous gifts or inheritances) is approx €20k, assuming no reliefs. You should check out, and get professional tax advice, on Business Property Relief in respect of the farm transfer. You won’t qualify for Agricultural Relief because of the “asset test”, and whilst there are a few hurdles to meet, Business Property Relief would reduce your liability to zero and also provide an opportunity to maximise the “cost basis” of the property for future CGT/CAT transactions. Running as a business for 6 years post acquisition will likely be the requirement which turns you off, but still possible to meet this by entering into a farm partnership with others. Worth exploring at least.


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