# Money Makeover 41&41. Trying to get a handle on future



## 1eyeonthefuture (20 Sep 2019)

My Details:
Age 41
PAYE Worker & Director of current employers with a small shareholding
Income €55,000
Bonus approx. €15,000 PA, of which €5,000 PA single contribution made by business to my pension in addition to that noted below.

Pension: New Ireland Executive Pension (Passive Iris)
Current Value €79,000
Current Employer Contribution @ €700pm
Current Employee Contribution @ €500pm
Projected Fund Value at retirement (aged 65) @ €627,500


Spouse Details:
Age 42
Teacher In position since 1998, so 21 years service
Income €65,000
Pension Teachers’ Pension
AVC’s Current annual contributions @ €5,800 (monthly circa €450)
Current Value @ €77,000
Projected value at retirement age of 55 @ €222,423
(100% Cornmarket Balanced 0 Strategy 5 years)

Other:

●3 children, all under 6
●Main PDH – Currently € 110K Mortgage O/S (value circa 430K) 
 mortgage @ 800 pm
●Rental Property – Currently € 90K Mortgage O/S (value circa €120K) 
monthly rental income @ €800 / Mortgage @ €810
●Investment Purchase of Commercial Site / Land – value circa €60K but should increase. Mortgage free.
●Shareholding – currently hold a small shareholding of business of which I'm a Director which if sold today would be worth approx. €100,000. This cannot be divested until such time my employment ceases or I retire. It has been agreed that the business will purchase / I will give back these shares in the most tax efficient way possible – basically am saying that there will be a flexible position taken by both parties when the time comes to part ways.

No other loans
No credit card debt
Very little savings (circa €10K)
I currently have a serious illness insurance policy in place.Also a 4 times death in service policy thru employer. 
My wife does not despite suffering from crohns. 
In terms of future large expenditure, we are largely happy with our home ( may look at doing a garage refurb at approx. €30K).

●in the position that parents have already shared their living will and in the future I / my estate will benefit as follows:

-- Rental property – (currently €600 monthly income / €120K Value)
-- Foreign Holiday Home – (no current income from same /€200K Value)

Ideally we would both like to retire early if at all possible, especially my wife who might possibly go at 50 ? 
Alternatively we have spoken about possibly taking a career break ( her 1 year, myself 6 months) and taking the kids travelling for 6 months -

Queries
Unsure if it makes sence to keep the rental and sell. On the one hand zero € gain and hassle and risk of overextending, on the other hand an income generator in retirement. 

This leads on to the question are we distributing our income in the most efficient manner. 

Avc's... A whole new topic in itself I know and I've had some great help from members in other forum around same but would it make sense to halt payments and instead attack the mortgage? 

Any other comments or advice? – all appreciated.

Thank you for any help – when I start to look at retirement etc a certain amount of panic sets in as we just don’t know how we are set or if we are putting resources where they should go.


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## Homelandfan (20 Sep 2019)

I must say your financial position looks very robust, so ye should give yourselves a pat on the back! 
what interest rate are you paying on the mortgages? 
do you enjoy looking after the rental property, dealing with tenants etc or do you generally find it a pain in the ....?


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## 1eyeonthefuture (20 Sep 2019)

Thanks, largely by accident rather than design I'm afraid, though we have a modest enough lifestyle, don't smoke, rarely drink tho do like a good restaurant. 
2.99% on the PDH... I'd need to check our "box" where any paper of significance gets dumped for the rental rate. 
I don't necessarily mind the dealing with the apartment tho the upkeep can be a hassle as we seemed to have a particular bad year just gone where everything had to be replaced which can't be helped as we're at end of life expectancy. 
We have a notion in our heads that our work and somewhat frugality would put us in a position to hand a rental to each of the kids in later life and give them a head start in life so keeping it would play into that. Paying down one of the mortgages would free us up to possibly invest again but at 41 we are rapidly running out of time if our "dream" of getting out of working life at around 55 is to be realised. 
Neither of us are street smart when it comes to financial planning and I'm pretty certain there must be a better (smarter) way to align where our monies go. 
Many thanks


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## cremeegg (21 Sep 2019)

The first thing you need to work out is what is the profit or loss on the rental property.

Income 9,600

Interest 3,000 (my guess)
Costs 1,500 (my guess, with no agency fees)

Profit 5,100

Tax (at 50% ?) 

Profit after tax €2,550 on an investment of €30k. Thats good, but you need accurate figures, it may be very good.

That does not take into account the possibility of capital appreciation or loss.


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## Babystepsfan (22 Sep 2019)

Just a question on your pensions - the total fund values you quote - are they “real” values as such ? Can you access that amount as a lump sum at any stage ? I think not (unless you are due a lesser lump sum amount on retirement), therefore the value lies in the amount of income you will receive at a certain age and if that will be sufficient to live on. Don’t forget a pension will generally die with you as well and can’t be willed onwards. My point is you need to take this into account when accessing you net worth in terms of available funds and what to do with the available assets you own now.


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## 1eyeonthefuture (22 Sep 2019)

Hi baby steps fan... These are projected values provided by the pension provider. 
I've read notionally ( on AAM I think) that divide the projected value by 30 to give an estimate monthly income, in my case circa 2k pm. 
I would suggest that I could live quite comfortably on 2k per month as by that stage mortgages would be paid off, no need for as much life assurance premiums, serious illness covers removed etc.. I expect certain costs such as health insurance would Increase. In addition if I were to go at 55 the pe sion would be quite a bit short of the noted amount above... Although the business is growing relatively well and I do expect the value of shares to grow quite a bit, but can't depend on this 100%.Added to this the youngest of the kids would be 17 and the oldest only 20 so still a lot of costs on the horizon.
We are hoping wife's pension and income from rental would cover kids costs until such time any college costs (God willing) are finished and they can stand on own 2 feet. 


Babystepsfan said:


> Don’t forget a pension will generally die with



I wasn't aware of this - is there any product or mechanism to get around this to provide for spouse? It's an executive pension.. . I know the teachers pension proves for 50% in the event of death. 

Many thanks


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## Babystepsfan (22 Sep 2019)

I agree 2k per month would be very easy to live on but same as yourself if I take my own pension at say 55 it is estimated at approximately 25% of full retirement and about the same amount (€500 odd pm). Personally I would like to aim not to have to work to full retirement age (at current job).

I’m not an expert on pensions at all but I assume any spousal benefits/once off lump
Sums etc are written into the terms of the individuals pension. My point was that the overall fund value is really notional (esp as you are part of a pot really), and therefore just represents future guaranteed income based on a few assumptions ie you are going to work until X age.  When I’m looking at my own financial picture I really include it as a nice to have and would prefer to be more financially independent before I need it !
However if you had built your own pot of investments then the current value would be meaningful.


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## 1eyeonthefuture (22 Sep 2019)

Yes agree. Am 100% at the mercy of the markets.... Knew there was a reason I married herself apart from her model looks and beaming personality


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## RedOnion (23 Sep 2019)

Babystepsfan said:


> My point was that the overall fund value is really notional (esp as you are part of a pot really), and therefore just represents future guaranteed income based on a few assumptions ie you are going to work until X age.


You're point makes no sense in the circumstances. The OP doesn't have a defined benefit pension, so he has no guaranteed future income. He will have a real amount in his pension, not a notional.



Babystepsfan said:


> Don’t forget a pension will generally die with you as well and can’t be willed onwards.


This is incorrect; the treatment depends on the choices he makes. He has many options in terms of what to do with this at retirement and how to preserve value for surviving spouse / estate if he were to die.


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## Andarma (23 Sep 2019)

Can I ask what you mean by the 'living will' bit? Has ownership of those 2 properties actually transferred to you yet? If not, don't forget about future nursing home fees/Fair Deal scheme which could have a significant impact on your parents' assests.


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## 1eyeonthefuture (23 Sep 2019)

Andarma said:


> Can I ask what you mean by the 'living will' bit? Has ownership of those 2 properties actually transferred to you yet? If not, don't forget about future nursing home fees/Fair Deal scheme which could have a significant impact on your parents' assests.


Yes, understood. Process of transfer has begun. Provision has been made for such a situation arising. Thanks


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