# 43 yr old looking to set healthy financial path



## stantheman (28 Mar 2017)

Just came across this thread - really excellent resource & seems like some really solid advice given so kudos!

I'm doing ok but am trying to figure out where I'm going financially.
Ideally I'd love to get myself into a position to retire a few years early (ideally 60) so would like to start laying the financial groundwork now to enable that. 

Age: 43
Spouse’s/Partner's age: 40

Annual gross income from employment or profession:  €90k
Annual gross income of spouse: €48k

Monthly take-home pay
€3,600 (+ €700 monthly payment to share purchase scheme - removed at source)

Type of employment: Private sector - multinational. Mid level management.

In general are you:
(a) spending more than you earn, or
(b) saving?

Saving
€1000 a month to a Regular Saver 2% account (occasionally gets plundered for 1-2k for holidays, bigger household purchases, etc.)
€700 a month into Employee Share purchase program
€202 a month into Irish Life SaverScope managed equity fund


Rough estimate of value of home = €350k


Amount outstanding on your mortgage = €155k


What interest rate are you paying? = 3.4% (AIB standard variable)


Other borrowings – car loans/personal loans etc. - None


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


Savings and investments:

€10k in Regular Saver a/c earning 2%
Putting in 1000 a month
Gets raided for 1-2k occasionally for holidays, etc

€40k in Irish Life SaverScope equity fund
Putting in €202 a month
Would like to get this out of here because
High charges for a very average return (18% return over 15 years)
Govt levy = 1% of payments


1.65 annual fund management charges


Am not very bullish on equity outlook

€10k in a Rabo account earning 1% before DIRT
Need to get this out of here but have to find a more productive home for it


Do you have a pension scheme?

Yes
Defined contribution
Equity based funds - moving to more bond based funds
Pot value of €120k
As of January I'm contributing €1400 per month (20% combined company portion, own portion & AVCs)

Do you own any investment or other property?

No

Ages of children:

3

Life insurance:

Death In Service cover only

Other relevant info:

Have been putting away children's allowance as a future college fund (should be approx €25k there by the time the child is 16)
Work in a tech multinational that have developed a bad habit of layoffs every year for the past 4 years


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

How best to use €40k from Irish Life fund?
Could put it against the mortgage & keep other savings as rainy day fund?

How best to use the €5k share purchase funds every 6 months?
Continue to sell immediately & put towards mortgage?

Where is the best place to keep €25k rainy day fund so that it is not being eroded with inflation but I have quick access to?
Where should I put my financial focus - building my pension pot by upping my AVCs or paying down my mortgage as quickly as I can? (or a bit of both or something else like buying a second property once mortgage is paid off?)
As the LTV of my home is now <50%, is it possible to move to a lower LTV rate (3.1%)?  Sorry if this is an obvious one - just not sure if this is as straightforward as it seems, are there valuation fee +other fees to factor in?


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## Sarenco (28 Mar 2017)

Hi Stantheman

Taking your questions in order:-

1.  Yes, in your circumstances, I would use the net proceeds from the Irish Life fund to pay down your mortgage ahead of schedule and would retain your existing cash savings as a reserve to address emergencies.  Incidentally, I think you are absolutely right to cash out of that fund ASAP.

2.  Yes, in your circumstances, I would continue to sell any shares in your employer share scheme ASAP and use the proceeds to pay down your mortgage.

3.  Your emergency cash reserve should be maintained in a simple, instant access, savings account.  The "Best Buys" section of the site is worth checking out for the best rates available.

4.  Having established an appropriate cash reserve (I would suggest maintaining a cash reserve equivalent to around six months of your typical household expenses), you should maximise your AVCs and then use any available funds thereafter to pay down your mortgage.  Given our punitive tax rates on "unearned" income and gains, I don't think the risks of making after-tax investments are justifiable while carrying mortgage debt - particularly at current (non-tracker) rates.

5.  Unfortunately, unlike other lenders, AIB don't allow existing customers to move LTV brackets so you would have to switch lenders to get a better rate.  It's a bit f pain but worth the effort in my opinion.

While you haven't asked for comments about the asset allocation within your pension fund, I would caution against moving too aggressively into bond funds at your stage in life.  You should still have the large majority of your pension invested in equity funds for the time being.

Also, is your spouse contributing to a pension of some sort?  It's worth maximising all available tax-deferred space where possible.

Hope that helps.


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## SirMille (28 Mar 2017)

Move this 
€40k in Irish Life SaverScope equity fund
And the ten in Rabo into your mortgage.

The cost of equity is outstripping the return on both the forty and the ten.

Invest in dividend kings and get 3% annually.
You have the time and financial strength to make it work, capital intensive, but it works.


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## Sarenco (28 Mar 2017)

What are "dividend kings" exactly? 

Is that 3% before or after tax? 

"It works" - compared to what?

What time is involved in executing this mysterious strategy?


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## stantheman (28 Mar 2017)

Thank you for the advice Sarenco.

Regarding the cash reserve, I think it might be quite difficult to find a new job with a comparable salary to my current one where I am based (in the Northwest). I'm looking at upgrading my skillset and network to help with this, but for now feel I need a more substantial rainy day fund (12-18months) should the layoffs come my way.  

I'll get over to the Best Buys page and track down a good home for the rainy day fund. To switch mortgage providers I believe I'll need a valuation + a solicitor so that may negate any benefit to be made for the lower rate - esp if I can pay it down a bit faster.

About asset allocation, my current funds are 100% equity based. My plan is to move to funds with a greater bond emphasis for the next year or 2 (I just have a bad feeling that equities are overpriced and may have a correction coming), and then move back into more equity based funds. 

My partner is contributing to her public sector pension.


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## lukas888 (28 Mar 2017)

My understanding of "dividend kings" are companies that have paid increasing dividends for 50 years.It is mainly based on S&P 500 
companies.Buying a ETF  based on a basket would probably yield 3% net,but as a strategy for no risk investing absolutely not.The old caveat
past performance etc.


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## SirMille (28 Mar 2017)

Sarenco said:


> What are "dividend kings" exactly?


http://bfy.tw/AuMv

3% after tax

Fifteen year time frame.

Not comparing to anything else, but feel free to do that yourself. Google is your friend.

In terms of past performance, a better understanding of what I have proposed   and practice, would moot that question.


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## SirMille (28 Mar 2017)

@stantheman some, less than ten percent, of your portfolio should be in precious metals


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## stantheman (28 Mar 2017)

Thank you SirMille.
I'm seeing that putting the 50k against the mortgage is the right first step.

I'll take a look at the Dividend King information.
How would one go about investing in precious metals?


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## Gordon Gekko (28 Mar 2017)

SirMille said:


> http://bfy.tw/AuMv
> 
> 3% after tax
> 
> ...



The above is gibberish.

3% after tax? Wow, where do I sign? And exactly how high will the beanstalk be?


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## PGF2016 (29 Mar 2017)

SirMille said:


> @stantheman some, less than ten percent, of your portfolio should be in precious metals


Why should it be? What income do previous metals generate?


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## SirMille (29 Mar 2017)

I do not buy physical precious metals for a return. I am investing in the reset that is going to come, when PMs, which are sound money, will be valuable and Fiat currencies will be less valuable.

Single digit percentage of my overall portfolio.

The only place that I know that sells bullion coins in Eire would be the mint. Just buy ordinary bullion coins, don't buy any of the special coins, unless they contain errors like the James Joyce coin.


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## Sarenco (29 Mar 2017)

lukas888 said:


> My understanding of "dividend kings" are companies that have paid increasing dividends for 50 years.It is mainly based on S&P 500
> companies.Buying a ETF  based on a basket would probably yield 3% net,but as a strategy for no risk investing absolutely not.The old caveat
> past performance etc.



Thanks but I think you may be thinking of the S&P 500 Dividend Aristocrats Index, which tracks the performance of S&P 500 companies that have increased dividends every year for the last 25 consecutive years.  The dividend yield on an ETF that tracked that index was less than 2.5% over the last 12 months.  Before tax, obviously.

There is no similar index of "Dividend Kings".  To be frank, it sounds like a marketing term dreamt up by peddlers of stock picking newsletters.  Best avoided IMO.

More generally, I am not a fan of dividend investing for a variety of reasons - total return is ultimately what really matters.


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## Sarenco (29 Mar 2017)

And FWIW, I'm with Warren Buffett when it comes to "investing" in gold:

_"Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."

"Gold is a way of going long on fear, and it has been a pretty good way of going long on fear from time to time. But you really have to hope people become more afraid in a year or two years than they are now. And if they become more afraid you make money, if they become less afraid you lose money, but the gold itself doesn't produce anything."

"The major asset in this category is gold, currently a huge favorite of investors who fear almost all other assets, especially paper money (of whose value, as noted, they are right to be fearful). Gold, however, has two significant shortcomings, being neither of much use nor procreative. True, gold has some industrial and decorative utility, but the demand for these purposes is both limited and incapable of soaking up new production. Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end."

_


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## aristotle (29 Mar 2017)

Have a look at your life insurance as well. Make sure you have enough cover.


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## SirMille (29 Mar 2017)

lukas888 said:


> My understanding of "dividend kings" are companies that have paid increasing dividends for 50 years.It is mainly based on S&P 500
> companies.Buying a ETF  based on a basket would probably yield 3% net,but as a strategy for no risk investing absolutely not.The old caveat
> past performance etc.



The first organic link on Google, explains perfectly well what dividend kings are.
Even though I already posted the link to help clarify, for your convenience I have pasted a brief description below.

"The Dividend Kings are the* best-of-the-best* in dividend longevity.
*What is a Dividend King? *Stocks with *50 or more consecutive years* of dividend increases."

I practise what I preach. While not always practical I try to focus on the Swiss blue-chip equivalent, but the time frames are not the same.


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## SirMille (29 Mar 2017)

Sarenco said:


> And FWIW, I'm with Warren Buffett when it comes to "investing" in gold:
> 
> _"Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."
> 
> ...



Warren Buffet is amazing, but he doesn't pay a dividned on Bershire Hathaway and when asked about it, he said "sell a share", bit arrogant.
I like Mike Maloney, so I have under fairuse pasted a small portion of his website below.
*
How Many Investments Have All These Advantages?*
1 Gold is money
Physical gold is one of the best forms of long-term wealth protection. It is ideal for your heirs since it will outlast any currency they may use in the future.

2 Gold is a tangible asset
Physical gold is not subject to the risks that come with paper assets. It can’t be hacked or erased.

3 Gold has no counterparty risk
Physical gold cannot go bankrupt or broke. Gold bullion will never default on promises or obligations.

4 Gold can be private and confidential
If you want a private or confidential form of wealth, gold is one of few assets that can offer anonymity.

5 Gold is liquid and portable
Gold is easily convertible to cash, and can go with you anywhere.

6 Easy to store, low carrying costs
Gold storage is low maintenance, low-cost, and requires little space.

7 Gold requires no specialized knowledge
No special skills or expertise is needed to buy physical gold.

8 Gold can protect against government intrusion
International gold storage is simple to implement and can provide both financial flexibility and investment options outside your home country.

9 Gold hedges the stock market
If you want an asset that will rise when most other assets fall, gold is likely to do that more often than not. The more common stocks you own, the more gold you need.

10 Gold protects against crisis
In a world of elevated risks on multiple fronts, gold offers lower risk, greater safety, and bigger upside than any other investment.

Gold is dug out of the ground, gold may be a barbarous relic, gold may be other negative things. But I am of the opinion it should be present in everyones portfolio. It is sound money, and has twenty thousand industrial uses.


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## SirMille (29 Mar 2017)

Sarenco said:


> More generally, I am not a fan of dividend investing for a variety of reasons - total return is ultimately what really matters.


Are you a buy low sell high guy?
Are you a value investor, a la Phil town?
What is the investment strategy, that you practice?


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## Sarenco (29 Mar 2017)

SirMille said:


> I practise what I preach. While not always practical I try to focus on the Swiss blue-chip equivalent, but the time frames are not the same.



Ok, can you tell us which of the 20 stocks that currently make up the SMI (I assume that is what you mean by "Swiss blue-chip equivalent") have 50 years or more of dividend increases?  Or 25 years for that matter.

It would also be helpful if you could tell us how you are "getting" 3% per annum on an after-tax basis given the current dividends yields on stocks that comprise the SMI and the fact that Switzerland imposes a 35% dividend withholding tax.


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## Sarenco (29 Mar 2017)

SirMille said:


> What is the investment strategy, that you practice?



I'm an ultra-boring, buy and hold, total market investor.


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## SirMille (29 Mar 2017)

At the risk of repeating myself, I did say Swiss blue chip time lines are challenging.


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## SirMille (29 Mar 2017)

Sarenco said:


> I'm an ultra-boring, buy and hold, total market investor.


What criteria do you use to select?


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## Sarenco (29 Mar 2017)

SirMille said:


> At the risk of repeating myself, I did say Swiss blue chip time lines are challenging.



Use whatever time lines you like - I still don't see how you could reliably generate 3% after-tax dividend income on a diversified basket of large-cap Swiss stocks.


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## Sarenco (29 Mar 2017)

SirMille said:


> What criteria do you use to select?



Eh, I don't -* total* market investor.


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## SirMille (29 Mar 2017)

Sarenco said:


> and the fact that Switzerland imposes a 35% dividend withholding tax.



Example
Imagine your salary is  CHF15,000
Imagine your dividend is CHF  30
----------------------------------
Total income  CHF15,030

Dividend tax is 30%  CHF  10

10% overall tax  CHF 1,503

Tax bill CHF1,503-CHF10= CHF 1,493

You've effectively paid the 10% (CHF3) on the dividend,
and they've returned the other 7CHF, reducing your tax bill.

Makes sense?


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## SirMille (29 Mar 2017)

Sarenco said:


> Eh, I don't -* total* market investor.


You just follow, using Vanguard or the like?
That's it?


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## Sarenco (29 Mar 2017)

SirMille said:


> Makes sense?



No, sorry, that makes absolutely no sense to me.


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## Sarenco (29 Mar 2017)

SirMille said:


> You just follow, using Vanguard or the like?
> That's it?



Yep.  Simple global market, passive investing using cost effective index funds within a tax efficient pension wrapper.  I did say it was ultra-boring.


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## PGF2016 (29 Mar 2017)

SirMille said:


> *How Many Investments Have All These Advantages?*
> The more common stocks you own, the more gold you need.
> 
> In a world of elevated risks on multiple fronts, gold offers lower risk, greater safety, and bigger upside than any other investment.


Some of that stuff is nonsense. Also, it doesn't mention the massive disadvantage that gold doesn't produce income.


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## PGF2016 (29 Mar 2017)

Duplicate post.


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## SirMille (29 Mar 2017)

PGF2016 said:


> Some of that stuff is nonsense. Also, it doesn't mention the massive disadvantage that gold doesn't produce income.


Well argued.


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## WorstPigeon (30 Mar 2017)

The thing worth keeping in mind about gold is that, if you bought it at the peak in 1980, you would still be down in real terms. Still, after nearly 40 years! And we've just come off another peak, and it's still pretty high. Unless you're betting on a collapse of civilisation sufficient to wipe out the markets, but not sufficient to just allow people to steal your gold, I'd be pretty sceptical of gold. At best, as the Buffet quote above says, you're effectively gambling on other peoples' fear. It's not an investment.


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## PGF2016 (30 Mar 2017)

SirMille said:


> Well argued.


I'm guessing that's a sarcastic response. 

@WorstPigeon has explained it much better than me...



WorstPigeon said:


> The thing worth keeping in mind about gold is that, if you bought it at the peak in 1980, you would still be down in real terms. Still, after nearly 40 years! And we've just come off another peak, and it's still pretty high. Unless you're betting on a collapse of civilisation sufficient to wipe out the markets, but not sufficient to just allow people to steal your gold, I'd be pretty sceptical of gold. At best, as the Buffet quote above says, you're effectively gambling on other peoples' fear. It's not an investment.


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## Gordon Gekko (30 Mar 2017)

To those who hold gold as a hedge against Armageddon, how exactly do you think your piece of paper proving you own that gold ETF will be viewed by the marauding rape gangs?

To those who own physical gold in a Perth mine, do you think they'll dodge the nukes to deliver it to you here in Ireland?

And to those who hold gold under their pillows, do you think the same marauding rape gangs will say "fair play" as you try and spend it at the one remaining Lidl in Dublin?

I'm with Buffet on this one...gold is a waste of time.


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## WorstPigeon (30 Mar 2017)

I assume you just hire a wandering mercenary to guard your homestead, like in Game of Thrones.


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## Sarenco (30 Mar 2017)

But surely in that scenario the best mercenaries would already have been snagged by the Dividend Kings of Middle Europa?


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## lukas888 (30 Mar 2017)

Gordon Gekko said:


> To those who hold gold as a hedge against Armageddon, how exactly do you think your piece of paper proving you own that gold ETF will be viewed by the marauding rape gangs?
> 
> To those who own physical gold in a Perth mine, do you think they'll dodge the nukes to deliver it to you here in Ireland?
> 
> ...


Ah here now less of the ridicule.Thousands of investors trade gold cfds on a daily basis
And make and lose money as in trading any other commodity.I don't think even sir mille is
Suggesting that it should be anything but a tiny consideration of any investors financial planning. I'm sure that Buffet will be ecstatic
When the news reaches him that AAM posters agree with his views on gold.


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## WorstPigeon (30 Mar 2017)

It might be all very well for speculation, but it's not really an investment; it has wildly unstable value and doesn't produce income.


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## lukas888 (30 Mar 2017)

Its not wildly unstable, over the last 20 years it has climbed steadily year on year until its peak in 2011 and has fallen every year since.This
thread has now veered completely away from the financial path question,i think its time for all of us to finish the gold debate.


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## Sarenco (30 Mar 2017)

lukas888 said:


> Its not wildly unstable, over the last 20 years it has climbed steadily year on year until its peak in 2011 and has fallen every year since.



Well, by any conventional measure gold has been more volatile than equities over the last 20-year period - which included two fairly devastating stock market crashes.

To be fair, over extremely long time periods gold does appear to have been a reasonable store of value.  The problem is our individual lifespans are insufficiently long for this to be of much relevance.  From memory, gold lost over 80% of its real purchasing power between 1985 and 2011 - and has obviously declined dramatically in value since then.

I do agree that we have strayed somewhat off-topic but I think it's reasonable to ask posters to justify, or at least explain, their advice.  The OP can then make up his or her own mind whether or not to incorporate any recommendations into their own plans.


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## stantheman (31 Mar 2017)

Thank you for all the opinions and suggestions offered - I think differing opinions, & the ability to question those, are a big part of what make this forum so useful.

Based my own situation, risk profile and skill level, I am going to go with pooling my resources (Irish Life fund and Rabo savings) and putting them against the mortgage - it's the best & most secure return available to me right now.


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