# Late to the game, Am I on track for retirement ?



## Welshman (29 Jan 2022)

*Age:* 48
*Spouse’s/Partner's age:* N/A

*Annual gross income from employment or profession:*
€70k

*Annual gross income of spouse:*
N/A

*Combined monthly take-home pay*
N/A

*Type of employment:*
I work for a private company.

*In general are you:
(a) spending more than you earn, or
(b) saving?*
(b) I'm more a saver than a spender. I have low over heads and try to keep spending down as much as possible

*Rough estimate of value of home*
N/A - I have always rented a room during my time working in Dublin. Currently paying 800 euro a month. 

*Amount outstanding on your mortgage:*
N/A

*What interest rate are you paying?*
N/A

*Other borrowings – car loans/personal loans etc*
None

*Do you pay off your full credit card balance each month?*
I have a credit card with a zero balance. I always pay it off at end of month. 

*Savings and investments:*
€7k in cash savings (emergency fund).
€67k in a Zurich Investment bond.


*Do you have a pension scheme?*
Yes - Current pot is 170,000 euro. I contribute 5% and employer contributes 15%. I also top up with 20% AVC's every month. 
Total of 40% pension contribution every month.

*Do you own any investment or other property?*
no

*Ages of children:* No children and no plans to ever have any. 

*Life insurance:* Employer has scheme to pay out 2 times my salary to next of kin (70,000k x 2 = 140,000k)

I was late to the game in investing and starting my pension. I plan on max out my pension until I finish work here in Ireland and then leave to go back to the UK to retire.
I have no interest in buying property due to it being so expensive in the Dublin area and the fact I will be leaving at retirement.

I tend to have at least 500 euro left every month and have been saving it up to 5,000 euro and then dropping that into my Zurich bond.
The bond is invested in US equities (6 on the risk scale)  

I'm I on track or is there more work to be done here ?

Thanks in advance


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## Sarenco (29 Jan 2022)

It looks like you are doing all the rights things in terms of maximising your pension contributions but continuing to rent in your circumstances seems unwise.

Say you took out a mortgage of €200k at a rate of 2.2%.  Your annual interest payments would be roughly half what you are currently paying in rent.

When you want to move back to the UK, you could sell your PPR with no CGT and use the equity to buy in the UK.

It is very difficult to retire comfortably if you don’t own your own home so that’s where I think you should focus your attention.


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## ClubMan (29 Jan 2022)

Make sure that your pension has low charges (ideally < 1% annual management charge and no other charges) to minimise the drag on performance, and is invested in a suitable asset mix (in my opinion, at your age, up to 100% equities).


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## sonandheir (29 Jan 2022)

Sarenco said:


> It looks like you are doing all the rights things in terms of maximising your pension contributions but continuing to rent in your circumstances seems unwise.
> 
> Say you took out a mortgage of €200k at a rate of 2.2%.  Your annual interest payments would be roughly half what you are currently paying in rent.
> 
> ...


This is good advice. If you could get a 3 bedroom place, rent out 2 rooms(tax free) you'd be paying down an asset you could sell(or rent) at retirement. With interest rates so low on mortgages, it's the next best investment you could make after your pension.


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## sonandheir (29 Jan 2022)

sonandheir said:


> This is good advice. If you could get a 3 bedroom place, rent out 2 rooms(tax free) you'd be paying down an asset you could sell(or rent) at retirement. With interest rates so low on mortgages, it's the next best investment you could make after your pension.


If you're paying €800 for rent at that moment, and you get a place that has 2 other rooms that could be rented at this price, that's €2400/month. If that was your mortgage over 20 years you could get some place at a price of €450,000.

These are back of envelope calcs, but the point is that for the rent you're paying now you could have a decent house. Albeit it means being a landlord and all that entails, but just something to think of.


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## Clamball (30 Jan 2022)

Maxing out your pension is a good idea, but you will only draw down 1.5 x your salary as a lump sum on retirement.  So between that and your savings you probably will have €300-400K cash to purchase a house in the uk when you retire.

To safeguard against house inflation the idea of purchasing a house in Dublin and doing the rent a room scheme sounds pretty cost neutral to me.  You can afford a house of about €315K, mortgage about €1500 pm over 20 years, maybe €2400 pm from rent a room scheme.  This would even allow you to pay mortgage off quicker, say over 15 years (€1750 pm repayments) allowing some money to pay for utilities, house insurance repairs etc.   

By the time you reach retirement age you can sell the ppp (and over 20 years it should increase somewhat in value) and still have your savings and lump sum to help with the move back to the UK.  You might have closer to €600K then, which may be the average house price where you plan to live.  I would think you have a good feel for your outgoings and you ability to live in a house share, so it would seem a pretty safe step to take and help guard against house price inflation.


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## ClubMan (30 Jan 2022)

Clamball said:


> Maxing out your pension is a good idea, but you will only draw down 1.5 x your salary as a lump sum on retirement.


Isn't it the greater of 1.5 x final salary (or some average over the last few years) *or* 25% tax free?


Clamball said:


> To safeguard against house inflation the idea of purchasing a house in Dublin and doing the rent a room scheme sounds pretty cost neutral to me.


Is concentrating so much of the overall net worth in domestic property necessarily a good idea from a risk perspective?


Clamball said:


> By the time you reach retirement age you can sell the ppp


PPR?


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## elcato (31 Jan 2022)

Buying property over a short timeframe is not wothout it's risk. You also need to factor in the extra upkeep, buying and selling costs, property tax and hassle of being a LL. The OP has not indicated how long they are going to stay in Ireland for anyway.


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## NoRegretsCoyote (31 Jan 2022)

elcato said:


> Buying property over a short timeframe is not wothout it's risk. You also need to factor in the extra upkeep, buying and selling costs, property tax and hassle of being a LL. The OP has not indicated how long they are going to stay in Ireland for anyway.


He's 48 and will presumably retire at 66 or so.

There could be bumps on the road but you'd struggle to find an 18-year window over which Irish property wasn't a good investment.


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## aristotle (31 Jan 2022)

NoRegretsCoyote said:


> There could be bumps on the road but you'd struggle to find an 18-year window over which Irish property wasn't a good investment.



I bought property in 2005, so over a 17 year period I have (so far) gained about a 10% return pre tax but if I accounted for expenses it would probably be a good bit lower. That wasn't very good 

There are still properties in my estate that are in negative equity since purchased in 2007.


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## Sarenco (31 Jan 2022)

aristotle said:


> I bought property in 2005, so over a 17 year period I have (so far) gained about a 10% return pre tax but if I accounted for expenses it would probably be a good bit lower. That wasn't very good


Yes, but how much rent have you not had to pay over that 17-year period?

The important thing to compare is the interest payments on the mortgage with the rent you would otherwise have paid on the same property.


aristotle said:


> There are still properties in my estate that are in negative equity since purchased in 2007


That is highly unlikely unless the owners failed to make their scheduled mortgage re-payments or had interest-only mortgages with a high LTV.


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## Peanuts20 (31 Jan 2022)

Worth taking a look at your state pension options as well. If you have paid contributions in the UK, you may have options to add to those to maximise your state pension over there.


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## aristotle (31 Jan 2022)

Sarenco said:


> That is highly unlikely unless the owners failed to make their scheduled mortgage re-payments or had interest-only mortgages with a high LTV.


Correct, I should have said "worth less than what they paid for it", as opposed to negative equity.


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## aristotle (31 Jan 2022)

Sarenco said:


> Yes, but how much rent have you not had to pay over that 17-year period?
> The important thing to compare is the interest payments on the mortgage with the rent you would otherwise have paid on the same property.



I was referring to buying property as an investment for rental, as opposed to a PPR.


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## ArthurMcB (31 Jan 2022)

aristotle said:


> I was referring to buying property as an investment for rental, as opposed to a PPR.


But even in that scenario rental income should be factored into assessment of investment


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## NoRegretsCoyote (31 Jan 2022)

aristotle said:


> bought property in 2005, so over a 17 year period I have (so far) gained about a 10% return pre tax but if I accounted for expenses it would probably be a good bit lower. That wasn't very good


The gain would be double if you'd bought _18_ years ago in 2004 though

You can't live in a tent, and over a period of decades buying the same property is generally better than renting it. If you are settled in one place and have a stable income then buying is generally a better long-term strategy than renting


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## elcato (31 Jan 2022)

A lot of assuming done on the property points (yous are forgetting annual upkeep of said property and tax shifts)- lots of pros and cons. I just don't think it is worth the risk.


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## aristotle (31 Jan 2022)

NoRegretsCoyote said:


> The gain would be double if you'd bought _18_ years ago in 2004 though



But a 20% gain over a 18 year period is hardly considered "good investment"?


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## Sarenco (31 Jan 2022)

aristotle said:


> But a 20% gain over a 18 year period is hardly considered "good investment"?


It is if you are making an annual profit from the rental income over that period.  

Of if owning the property means you don't have to pay rent over that period.


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## NoRegretsCoyote (31 Jan 2022)

aristotle said:


> But a 20% gain over a 18 year period is hardly considered "good investment"?


I was a little vague it's true.

My claim should be something like: "over a two-decade period, someone choosing to buy a mortgage-financed property will almost always be better off than someone choosing to rent an identical property, and in some cases will be substantially better off"

There are statistics on Irish house prices and interest rates since the early 1970s, rents since the mid-1990s. If you can find an 18-year window where the above claim does not hold please let me know!


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## Clamball (31 Jan 2022)

There are risks in buying but there are also risks in renting for the next 20 years.

I think purchasing a property will de-risk the OP from ending up at 67 with insufficient money to purchase a home in the UK.  His wealth increase/decrease will track the property market in Ireland and at 67 will hopefully allow him to have more options and wriggle room.

Maxing out his pension contributions allows him to have a good income on retirement, but saving 5K per annum to fund his house purchase in 20 years relies on his buying power to match property prices and this is too risky in my opinion.


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## Peanuts20 (1 Feb 2022)

First question you have to ask, when are you planning on retiring. lets assume 65 for now

Second question, how much is property where you want to live?

You have approx 18 years to go to your retirement, assuming your investment keeps pace with inflation and you continue to invest 500 a month then at a rough calculation you will have somewhere in the region of €175k-€200k to spend on a house when you hit 65. remember, it's unlikely you will get a mortgage at retirement, at best, it will be very difficult

I know it is only a rough estimate, but will that buy you what you need given the value of your investment will (hopefully) rise above this but so will property prices?

Is buying in the UK now an option and rent it out?


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## NoRegretsCoyote (1 Feb 2022)

Welshman said:


> N/A - I have always rented a room during my time working in Dublin. Currently paying 800 euro a month.



If you don't mind sharing with strangers I think you are almost certainly better off buying yourself and renting a room.

Suppose you can get a mortgage of €250k which is at the limit of what the Central Bank lending limits allow. This will (just about) buy you a two-bed apartment in Dublin. Your mortgage will be €1500 or so over 17 years at 2.5%. You can rent a room with no tax liability for up to €14k a year. In practice budget for €500 a month from a lodger.

So you'll be paying €1,000 for a roof over your head (plus overheads) which is more than you do now but it's affordable on your income.
At the end you will own an apartment outright and you can use the equity to buy in the UK.


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