# Late 20's wondering what to do with savings



## TableCandleBar (31 Aug 2020)

*AGE*: 27
*Spouse’s/Partner's age*: Im single

*Annual gross income from employment or profession*: E98,000 Base salary. And E100,000+ annually on RSU Stock
*Monthly take home pay*: E10,000 (approx...)
*Expenditure pattern*: Fairly low, I save quite a lot. 

*Rough estimate of value of home*: E340,000
*Mortgage on home Remaining*: E180,000
*Type of mortgage*: 10 year. Fixed for 4 years. Currently at the end of year 1.
*Interest rate* :  @ 2.80%

*Other borrowings:* None

*Do you pay off your full credit card balance each month?* No credit card

*Savings and investments*:
E135,000

*Do you have a pension scheme?*
Yes, company matched. Currently over 20k.

*Do you own any investment or other property?* No.

*Ages of children:* No children

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

I'm quite lucky with a decent job. I'm just after finishing my first year of paying off my mortgage. It's a 4 year fixed rate. The property I bought is a 2 bed apartment and I'm renting out the second room. While I've been paying this off I've been able to save a lot on the side and I'm wondering what I should be doing with it. My initial plan when I bought this place was to continue to pay off the mortgage at the fixed rate until year 4 at which point I would be able to move to a variable rate mortgage and pay it off early. However I could potentially pay it off next year (with a breakage fee) since I am saving more than I initially planned. I quite like the idea of having a second property slightly outside the city but I realise this is probably not the best idea financially.

As I see it now my options are:
a) Continue to pay this off for the remainder of the fixed term and invest / save on the side (looking for some advice on what I could do here for the next 3 years to maximise savings. Currently savings are simply sitting in my bank/savings account)
b) Pay mortgage off next year (with a breakage fee), I should be able to so this with change which I can potentially invest elsewhere.
c) Invest in a second property (next year, at which point I should have 200k in savings)
d) none of the above, let me know.

Thank you.


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## Clamball (31 Aug 2020)

If you are interested in a second property go for it, you have excellent savings and equity.  

What are your interests and hobbies, you could also develop those? Say you were interested in golf you could invest in lessons, equipment, playing some expensive courses, joining a golf club, etc. You could concentrate on this for a few years while you build your savings.

Or maybe you would like to buy old properties and do them up.  

Your in a great position to decide what to do next;  my only caveat is a second investment property is probably not the best option for making money given the tax rules, there are probably better investments to be made.


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## SPC100 (31 Aug 2020)

Are you looking for a date. 

But seriously what do you want to save for? Do you expect to be able to earn this income for an extended period.


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## SPC100 (31 Aug 2020)

I'm assuming this is not drugs, prostitution, illegal, and Is something like one of big tech companies.

For the record this is more than decent job. It puts you in top ten percentile income or similar.


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## SPC100 (1 Sep 2020)

Ideas
Overpay pension
Pay off mortgage
Build up deposit for 'family home'
Be fi (financially independent)
Buy a tesla
Give up work for few years


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## TableCandleBar (1 Sep 2020)

_> What are your interests and hobbies, you could also develop those?_
This is a good idea, I do put in quite a bit of money into hobbies already

_> my only caveat is a second investment property is probably not the best option for making money given the tax rules_
Completely understood, I think it would be a bad move financially. Are the tax rules you are talking about related to local property tax?

_> what do you want to save for? Do you expect to be able to earn this income for an extended period._
Good question, honestly I'm not sure what I want to to save for. I will need a second home anyway at some stage.
I expect to be able to earn close to this for the forseeable future but I suppose you never know. If I lost my job tomorrow in the current climate I would get another one paying close to what I'm currently earning. But if another crash were to happen then this of course would not be the case.

> and Is something like one of big tech companies.
You got it!


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## aristotle (1 Sep 2020)

Make hay while the sun shines. Having being through the dot.com crash and we saw the effects of covid19 on certain industries we know anything can happen. You may want\need to move jobs or be made redundant so you are right to think about the best things to do now with you very high level of income inclusive of the RSU stock. 

I have to say, even with being in IT myself for many years I didnt think there were 27 year olds taking in 200k per year, amazing and well done. What area of IT are you in, if you can say?

Max your pension AVCs, keep a chuck of cash for 4-5 years time as you might want to clear your mortgage (I don't think interest rates will be very high then but who knows).


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## NoRegretsCoyote (1 Sep 2020)

SPC100 said:


> I'm assuming this is not drugs, prostitution, illegal, and Is something like one of big tech companies.
> 
> For the record this is more than decent job. *It puts you in top ten percentile income or similar.*



It actually puts him within the top 0.3% of gross incomes for single males. His income is higher than 99.7% of other unmarried men.

An astonishing salary for a 27-year old.


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## SPC100 (1 Sep 2020)

Thanks for checking. I was going to estimate 1p.c. but I didn't have figures to hand and I didn't want to be wrong. .3 is still in the top ten percent!

I might have been thinking of households.

Do we know it is a man?


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## NoRegretsCoyote (1 Sep 2020)

SPC100 said:


> I might have been thinking of households.
> 
> Do we know it is a man?



No.

Even higher if it's a woman.


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## AAAContributor (1 Sep 2020)

TableCandleBar said:


> _> my only caveat is a second investment property is probably not the best option for making money given the tax rules_
> Completely understood, I think it would be a bad move financially. Are the tax rules you are talking about related to local property tax?



As regards tax OP, it is punitive for a higher rate payer like yourself.

Any rental profits will be subject to income tax at the higher rate + USC + PRSI. 

Local Property Tax (LPT) is not a major factor in the overall financial calculations but as a technical concern, it is not an allowable expense in calculating any taxable profit. Also, LPT is due for revision. Politically at the moment an increase would be difficult, but it is still possible.

It's not clear what your plans are but perhaps in a few years you may look to end the lodger arrangement and sell your principal private residence (PPR) and purchase a larger PPR for yourself and/or any significant other. That could give you an increased exposure to property as a % of your overall net worth that you are looking for. Something else to consider with your current after-tax savings is to take some of it and invest in a residential real estate investment trust (REIT) - either a domestic one or perhaps a global one for more diversification. You could become a quasi-landlord that way and could give you property exposure if that's what you desire.

I presume you are building up a form of equity exposure through RSU grants. Maybe when you get the cash into your hands on vesting, you'd consider diversifying into some global low-cost equity funds. Before I'd do this, just make sure that you are utilising your investment potential to the full within your pension. You can contribute 15% of your earnings up to €115k and make sure to avail of the increase to 20% when you turn 30. As a 27-yr old, a 100% equity allocation in the pension should be fine given your investment horizon. The tax relief is generous at the moment to someone in your position but with a government on the hunt for revenue sources to finance the budget, a reduction of the earnings cap for tax relief and/or a withdrawal of the top-rate income tax relief on pension contributions could potentially be on the cards, so max it out while you can.


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## TableCandleBar (1 Sep 2020)

aristotle said:


> I have to say, even with being in IT myself for many years I didnt think there were 27 year olds taking in 200k per year, amazing and well done. What area of IT are you in, if you can say?
> 
> Max your pension AVCs, keep a chuck of cash for 4-5 years time as you might want to clear your mortgage (I don't think interest rates will be very high then but who knows).


I'm an engineer in one of the larger tech companies in Dublin. Thank you for the advice on maxing AVCs. I've just done this.



AAAContributor said:


> It's not clear what your plans are but perhaps in a few years you may look to end the lodger arrangement and sell your principal private residence (PPR) and purchase a larger PPR for yourself and/or any significant other. That could give you an increased exposure to property as a % of your overall net worth that you are looking for. Something else to consider with your current after-tax savings is to take some of it and invest in a residential real estate investment trust (REIT) - either a domestic one or perhaps a global one for more diversification. You could become a quasi-landlord that way and could give you property exposure if that's what you desire.
> 
> I presume you are building up a form of equity exposure through RSU grants. Maybe when you get the cash into your hands on vesting, you'd consider diversifying into some global low-cost equity funds. Before I'd do this, just make sure that you are utilising your investment potential to the full within your pension. You can contribute 15% of your earnings up to €115k and make sure to avail of the increase to 20% when you turn 30. As a 27-yr old, a 100% equity allocation in the pension should be fine given your investment horizon. The tax relief is generous at the moment to someone in your position but with a government on the hunt for revenue sources to finance the budget, a reduction of the earnings cap for tax relief and/or a withdrawal of the top-rate income tax relief on pension contributions could potentially be on the cards, so max it out while you can.


Thanks for the feedback. Lots for me to look into here. Honestly I hadn't heard of REIT before so I guess I have some research to do. 
Thanks for the advice regarding pension, I've just changed my pension contribution from 8% -> 15% and I'll change this to 20% once I hit 30.


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## SPC100 (1 Sep 2020)

You can contribute more than the limit, but you have to wait to claim back the additional relief in future years. 

E.g. you put 100k in pension now, it grows tax free till you retire. (From Age 50 for some pensions). You still contrubute min required each year to get company match. You claim back the tax each year till you have claimed the full 100k.

 Your 100k would likely cover the next half a decade of your contributions. Maybe a full decade when you consider you will still make the min payment reach year to max employer match.

Big benefit is that it grows tax free.


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## aristotle (2 Sep 2020)

SPC100 said:


> Big benefit is that it grows tax free.



If it grows that is. Some people prefer to invest equal amounts over time, dollar cost averaging type of thing.


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## SPC100 (2 Sep 2020)

Research shows you are generally better off putting lump sum in immediately vs dripping it in. But yes dripping it in is easier on the nerves.

And yed there are no guarantees on the

In this case with a big saver and earner at young age they will be investing regularly with additional funds


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## RedOnion (2 Sep 2020)

TableCandleBar said:


> Thanks for the advice regarding pension, I've just changed my pension contribution from 8% -> 15%


There's still time to make an AVC backdated to last year, and claim the tax back on it too.


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## imalwayshappy (3 Sep 2020)

NoRegretsCoyote said:


> It actually puts him within the top 0.3% of gross incomes for single males. His income is higher than 99.7% of other unmarried men.
> 
> An astonishing salary for a 27-year old.



Is there a website where you can check this information. I am curious for myself!


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## Protocol (3 Sep 2020)

Try the SILC, it is divided into deciles.






						Survey on Income and Living Conditions (SILC) 2018 - CSO - Central Statistics Office
					






					www.cso.ie
				




See tables 2.4, 2.5, 2.6.


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## NoRegretsCoyote (4 Sep 2020)

Protocol said:


> Try the SILC, it is divided into deciles.
> 
> 
> 
> ...



Not useful for ultra-high incomes. You have to go to the Revenue income tax distributions [broken link removed].


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## tom_tom (4 Sep 2020)

OPs salary really got my attention ...

Myself I'm engineering manager in large US MN (Dublin) tech firm with responsibility for compensation budget and benchmarking.
OH is senior manager in (Dublin) US MN tech firm willing to pay top $ to attract the right Talent

On review this  OPs salary is a complete outlier.

Recent examples

1. A top performing engineer 29yo in my group ..all in 105K (salary, bonus, RSU). + benefits. (granted they have not moved to play the field)

so example of someone who has recently played the field.

2. I recently lost a top SW engineer with 12+ experience ...they now the lead architect in new firm ...new package all in 200k (includes very healthy RSU pack)

Fair play to OP ...the advice is simple ...keep dong what you're doing .
if the RSU where 100K over 4yrs ..it would still be top of range and easier for me to understand.

or

the OP could be quoting current valuation of their RSU vs the Target price (the allocation awarded by the employer)
When quoting salary  I only ever quote target / awarded value to gauge the level that person is at.
RSU's typically vest over a timeframe ..there will be variation in value over the term


[
QUOTE="NoRegretsCoyote, post: 1680037, member: 106686"]
It actually puts him within the top 0.3% of gross incomes for single males. His income is higher than 99.7% of other unmarried men.

An astonishing salary for a 27-year old.
[/QUOTE]



NoRegretsCoyote said:


> It actually puts him within the top 0.3% of gross incomes for single malen s. His income is higher than 99.7% of other unmarried men.
> 
> An astonishing salary for a 27-year old.


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## DublinHead54 (4 Sep 2020)

Tech stocks have gone through a major rally in 2020, so understandable that RSUs are now valued at a lot more. 

This shows why Ireland is an attractive place to base European operations as although 100k is large in Irish terms, this is pale in contrast to packages offered in Silicon Valley for software engineers. I have read that the very top coming out of the best schools can name their prices. 






__





						News, Analysis & Comment | Financial Services & Banking Sectors
					

Browse news and career advice from the financial services, investment banking, fintech industry. Get expert insight into what it's like to work in finance.




					news.efinancialcareers.com
				




_Google's renewal rejections included applications for a software engineer and a business analyst, both on $1.3m in Menlo Park California. The visas were to have begun in July 2020. A 'compensation associate' in Mountain View on a $985k salary also had his/her visa refused recently _

(granted these are also outliers)


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## NoRegretsCoyote (4 Sep 2020)

Anecdotally, a software engineer friend in Dublin says equivalent roles in his firm in NYC are about double his pay, and that's not even the Silicon Valley price.

Marginal tax rate also not as high I think in NYC although it is high in California.


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## DublinHead54 (4 Sep 2020)

NoRegretsCoyote said:


> Anecdotally, a software engineer friend in Dublin says equivalent roles in his firm in NYC are about double his pay, and that's not even the Silicon Valley price.
> 
> Marginal tax rate also not as high I think in NYC although it is high in California.



I don't think the cost of living argument of NY vs Dublin is that valid as a reason to have double his pay. In my experience taxation in the US is significantly less (income, capital gains, dividends) than it is in Ireland. They do have higher costs in property tax, and health insurance. However, if you are young, rent and healthy those factors don't really impact you.


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## NoRegretsCoyote (4 Sep 2020)

@Dublinbay12 

That's my point, in the same firm his standard of living would increase quite a lot if he took up a NYC role.


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## DublinHead54 (4 Sep 2020)

NoRegretsCoyote said:


> @Dublinbay12
> 
> That's my point, in the same firm his standard of living would increase quite a lot if he took up a NYC role.



I second that having done the reverse move!!


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## tdunirl (4 Sep 2020)

TableCandleBar said:


> *AGE*: 27
> *Spouse’s/Partner's age*: Im single
> 
> *Annual gross income from employment or profession*: E98,000 Base salary. And E100,000+ annually on RSU Stock
> ...



hi TBC, this is my first post here.  You are about my son's age and I was in a similar financial position at your age.  So, my advice would be more long term in nature, because if you start with the end game in mind, it is far easier to take the steps to get there.  It sounds like you are still single, so if you plan on a family at some point, that is a very significant and expensive decision.  Also, think about the long term, are you entrepreneurial, will you probably stay in corporate land and if so, when would you like to retire?.  Echoing some advise below, hobbies etc., we are all fed this image that we must spend our whole lives working for a living, as you get older, you will realise that enjoying life (in whatever way you get enjoyment) should actually be the major objective, many people your age only realise this in their late 40's.....

As regards investments etc., I think a rule of thumb of a third in equity, a third in property and a third liquid is a reasonable approach.  Include all your assets in these calculations (so find out how your pension is allocated) as well as your house.  It might seem wasteful to leave a third liquid in a low interest environment, but Government/Corporate bonds offer some returns.  An often forgotten advantage of liquidity is having the cash to do something when a crash hits, which will happen every decade or so.  If you wanted a second property as an example, but were not in a hurry, I'd save the cash and wait to buy at the right time, which could either be another crash (might not be so far away depending on this darned virus....) or just some good opportunistic option that comes along later.  I'd also recommend that your equity be aggressive (i.e. high growth) given your age, plenty of time in your 50's to get more careful there.  You can play with these figures depending on you risk appetite, here is an example of a reasonably aggressive portfolio for you age
1. 20 % aggressive stocks (e..g tech etc)
2. 20% other stocks (e..g phara etc, good long term growth prospects)
3. 30-40% property, can include REITs and other property equivalents as well as your house.  Stick to the higher end as the lower returns are worth it versus the risk of the second tier stuff, unless you know what you are doing in the shark infested property world
4. 20%-30%  liquid, best returns you can get (includes bonds and corporate, but like property, avoid the riskier ones)

All of this depends on your life ambitions as I said, but the above is a reasonable approach for now.

Hope that helps, t


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