# Planning for retirement at age 55 and want to maximise finances in advance. Not sure how to optimise



## Mookie (12 Jul 2022)

*Age:*
42
*Spouse’s/Partner's age:*
39

*Annual gross income from employment or profession:*
E150,000
*Annual gross income spouse:*
E180,000

*Type of employment:*
Both private sector employees

*Expenditure pattern:*
We are both generally 'savers' but do indulge on extravagant holidays generally 4 a year and cars

*Rough estimate of value of home*
E600,000
*Mortgage on home*
E238,000 - we've been over paying our mortgage for 22months now by €2,000 per month. Mortgage term remaining 16 years.
current monthly payment excluding overpayment 1596. Total incl overpayment €3,596
*Mortgage provider: *
AIB
*Type of mortgage: Tracker, interest only, fixed rate*
Variable 
*Interest rate*
2.95%

*Other borrowings – car loans/personal loans etc*
None car loans on both cars cleared 

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

*Savings and investments:*
E165,000 savings.
€37,000 in investments monthly investment of 1,000 in equities worldwide under advisement of professional . Started approx 28 months ago
additional €170,000 receivable inheritance in next 2 weeks 

*Do you have a pension scheme?*
Yes, I pay 15% and employer pays 10% current value 275k
spouse pays 5% and matched by employer current value € 120k

*Do you own any investment or other property?*
yes 
value €265 - 275k
mortgage remaining €155k
rent 1,500 per month 
mortgage 947
other expenses 1,750
very good long term tenant always pays on time takes care of property and Generally never hear from them from one end of the year to the next.

*Ages of children:*
None. And none planned 

*Life insurance:*
Yes.
both as part of pension scheme employer pays 4 times salary 
plus mortgage life insurance on home and investment property

*What specific question do you have or what issues are of concern to you?*
overall our finances are comfortable think we are well covered in terms of insurance 
but I am looking to retire at 55 and my spouse will follow at age 55 or when I retire 
at the moment particularly when inheritance received we will have a lot of cash basically doing nothing 
we currently overpay mortgage by 2,000 thinking of increasing that to €4400 pm which would clear mortgage in approx 3/3.5 years
looking also to increase equity investment monthly from €1,000 to €2,500

just not sure if we are being smart with allocation of excess cash ahead of planned retirement 

should we increase mortgage overpayment as above
funnel more into pension fund
increase equity investments monthly 
buy a holiday home in country we visit every year and plan to retire there budget 350k to 400k
sell investment property and clear home mortgage with excess funds plus cash
or any other suggestions welcome

thank you in advance for taking the time to read and appreciate any suggestions


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## Gordon Gekko (12 Jul 2022)

Why wouldn’t you clear your home mortgage?!

Who’s the “professional” advising you regarding investments?

He or she sounds like a chancer.

You’re investing in your personal names and holding buckets of cash whilst carrying an expensive mortgage (circa 3%) and neglecting your pension contributions.

Crazy stuff.


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## aristotle (12 Jul 2022)

Did both of your incomes go up significantly in the last few years?
With those levels of income you probably should have a bigger net asset position. 

Your pensions are ok but should be higher given your income. 

You should really look at your spending. You have net income of about €15k per month, where does it go?

You could retire at 55 but you won’t have enough for 4 extravagant holidays per year I don’t think. 

Max your pension AVCs before you think about any investments outside of a pension.


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## HollowKnight (12 Jul 2022)

You can both easily afford to max your pension contribution for your age. 
use large pile of cash to pay against mortgage.


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## Mookie (12 Jul 2022)

Gordon Gekko said:


> Why wouldn’t you clear your home mortgage?!
> 
> Who’s the “professional” advising you regarding investments?
> 
> ...


Psychologically handing over that amount of cash to a bank I struggle with
im not going to name the adviser but he’s not a chancer p. Very well known and offers a subscription service . Found him great so far
i don’t think we are neglecting our pension contributions but take your point definitely not maximising


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## Mookie (12 Jul 2022)

aristotle said:


> Did both of your incomes go up significantly in the last few years?
> With those levels of income you probably should have a bigger net asset position.
> 
> Your pensions are ok but should be higher given your income.
> ...


Yes my income doubled 3 years ago 
my wife’s also practically doubled about 4 years ago 
so since we have been accumulating excess cash and I upped my pension contributions to total of 25%
our spending is not huge outside holidays . That’s our Achilles heel we spend heavy but justify it as being conservative in most other areas

ok so cull the investments and maximise pensions


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## Gordon Gekko (12 Jul 2022)

Mookie said:


> Psychologically handing over that amount of cash to a bank I struggle with
> im not going to name the adviser but he’s not a chancer p. Very well known and offers a subscription service . Found him great so far
> i don’t think we are neglecting our pension contributions but take your point definitely not maximising


What about paying a bank 2.95% interest for money they’ve loaned you whilst they pay you something between 0% and -0.75% for the privilege of holding your cash?

Any adviser who facilitates investment with those background facts is a chancer who just wants to make money rather than give the correct advice.

That level of pension contribution just isn’t enough given your capacity.


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## Mookie (12 Jul 2022)

HollowKnight said:


> You can both easily afford to max your pension contribution for your age.
> use large pile of cash to pay against mortgage.


Accept that we should maximise our pension contributions especially over investment after tax 
how much would you pay the mortgage down with a cash lump,sum


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## Mookie (12 Jul 2022)

Gordon Gekko said:


> What about paying a bank 2.95% interest for money they’ve loaned you whilst they pay you something between 0% and -0.75% for the privilege of holding your cash?
> 
> Any adviser who facilitates investment with those background facts is a chancer who just wants to make money rather than give the correct advice.
> 
> That level of pension contribution just isn’t enough given your capacity.


Well that’s the crux of what I’m trying to get to should I just clear the mortgage with cash
or should we maximise pensions and but an investment property abroad reducing holiday costs and ultimately retire there 
the adviser is well established and as I said offers a paid subscription service with different portfolios. Doesn’t take commission but they are not tax advisers just there to provide a basket of measured equity portfolios if your that way inclined


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## aristotle (12 Jul 2022)

Your variable Mortage rate will likely go up next month with the start of at least 2 and likely many more ECB rate increases. 

Is your investment mortgage a variable too? What term left?

Pay off a large part of the home mortgage as a minimum.


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## Gordon Gekko (12 Jul 2022)

The rate on the investment property mortgage is effectively half the headline rate because it’s fully tax deductible against the rent.

1) You have €165k plus €37k plus €170k.

2) Clear the mortgage (€238k).

3) Keep around €50k in cash for emergencies.

4) Make AVCs to both pensions for 2021 and 2022. 15% of €115k x 2 for your spouse (possible slightly more if turning 40 this year). 10% of €115k x 2 for you. 

Net of tax relief, I make the cost of doing that €35k-ish.

5) Max those max AVCs through payroll going forward.

6) What rate is the investment property mortgage at?


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## 50andOut (13 Jul 2022)

Mookie said:


> *Annual gross income from employment or profession:*
> E150,000
> *Annual gross income spouse:*
> E180,000





Mookie said:


> overall our finances are comfortable



That made me laugh - i'll assume you are being modest....

Investing in equities via a pension is tax free on the way in and grows tax free. Vs the after tax investment and taxable returns you are making in those equity investments. At 39 your spouse can and should be making the 20% (max 115k) and at 42 you can and should make 25% (Max 115k) AVC's before considering investing after tax funds (especially since you will look to draw down the pension early, so its only locked away for 13 years) .

As Gordan says above, clear the PPR mortgage, backdate the AVC's and increase the AVC's through payroll going forward. 

I'd guess the Net monthly salary  after increase to max the avc;s will be in the region of €14k per month - with no mortgage to pay - where is this being spent? - You should look at this and give a breakdown. Understanding your expenses now and into retirement is key to knowing when you can retire.

at 14k p.m., less maybe 2k on food and bills, that's a serious amount of disposable income, it seems to me you can still "Comfortably" go on some luxury holidays and continue investing excess into additional investing or a holiday home



50+o


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## Brendan Burgess (13 Jul 2022)

Yes, max the pension funds.

You can well afford to buy a holiday property.  But treat it as a cost rather than as an investment.  There will be maintenance costs and the costs of borrowing.  It's very unlikely that you will reduce the cost of your holidays unless you go to the same place 4 times a year and pay high rent. 

If you don't buy a holiday home, then , clear the home mortgage. 

Not sure about the investment mortgage as we don't know the rate. But it's probably right to clear it. 

I don't think you should sell your investment property. You have a good tenant so it's a good stream of income.  You should revisit this if your tenant leaves or if more anti-landlord legislation is introduced.


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## NoRegretsCoyote (13 Jul 2022)

Mookie said:


> €37,000 in investments monthly investment of 1,000 in equities worldwide *under advisement of professional*


Investing in equities while failing to maximise tax-relieved pension contributions is bananas. 

If you want to retire at 50 and you want to invest in equities then it makes zero sense to be building up a capital gains exposure outside a pension while you could be sheltering any gain from tax inside a pension fund. As well as missing out on the tax relief from failing to contribute up to the maximum for your age.

I'd fire your "professional".


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## Mookie (17 Jul 2022)

Hi 
thanks everyone for your input. 
it’s clear from what multiple people have said i will stop investing my after tax wages in equity investments and move to maximise avcs for myself and my wife.
and pay a substantial lump sum off home mortgage
the investment property is on tracker + 1.5% I’m aware this will increase in coming months but with current rate it more than wipes it’s own feet including clearing the tax bill.
I will retain this until existing tenant moves out and then sell. ( prior to this tenant there over 10 years had some very bad experiences)
re holiday home had a chat and we both agreed a holiday home would be a large cost (not investment) and would ringfence us to the same place year after year whereas our pattern is quite nomadic and always looking to explore new countries and experiences 

had a look at monthly expenses and very general as follows
2k in household costs and bills 
4k in mortgage incl overpayment 
1k in investment 
6.5k on holidays (average over last few years excl 2020 was between 65 & 80 k annually) we pay 6.5k a month into holiday fund
The rest just increases our collective savings 

again thanks for all your input


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## PaddyBloggit (17 Jul 2022)

Mookie said:


> 6.5k on holidays (average over last few years excl 2020 was between 65 & 80 k annually) we pay 6.5k a month into holiday fund



wow... 

You want to retire in 13 years and yet you are spending up to €80k on holidays annually... if you keep at that level, you'll have €1.04 million spent on holidays prior to retirement.


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## huskerdu (17 Jul 2022)

If you retire at 55, you will have to fund 30 years of life . Your current assets and your income for the next 13 years has to last 43 years .  

A very simple way to start thinking about this is to work  out how much you think you will spend each year for the next 43 years to maintain the lifestyle you want and how are you going to save that in the next 13 years . This will help you prioritize current spending vs pension funding 
Obviously maximising pension contributions to use the available tax credits is the first step but you still need to have a realistic plan to fund the next 40+ years


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## huskerdu (17 Jul 2022)

Mookie said:


> Psychologically handing over that amount of cash to a bank I struggle with


You have to hand over that amount of money to the bank eventually .  If you want it over now, you pay less .


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## Brendan Burgess (17 Jul 2022)

This is my summary of their assets:

Home €600k
Mortgage (€240k)
Equity in investment property: €110k
Savings and investments: €200k
Inheritance due: €170k
Pension 1: €275k
Pension 2: €120k
Total  assets: €1.2m

Ages 42 and 39

If it were me, I would not be spending that amount on holidays.  I would be clearing the mortgages or maxing the pension.

But they are making a choice and they are fully entitled to make that choice.



They have a net income of around €170k - they spend €80k on holidays, so they still have a net income of €90k after holiday expenditure!



Brendan


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