Hi - My wife and I are reviewing our finances and were trying to get things in order/somewhat optimised. I know similar questions are asked all the time on AAM, so apologies if it’s a bit repetitive, but we were looking for some thoughts/insights with a specific view as to:
Age: 29
Spouse’s/Partner's age: 30
Annual gross income from employment or profession: €80k. €100k within 3 years (assuming no promo– unlikely scenario)
Annual gross income of spouse: €45k. €60k within 3 years (assuming no promo)
Monthly take-home pay:
€3.6k + €2.4k = €6k (this is post Single Scheme Public Sector Pension, PRD (will be significantly rolled back over next few years), AVC contribution (€400pm), Health Insurance deducted at source, other short term work savings schemes which smooth out yearly cash flow e.g. Christmas savings scheme/holiday savings scheme (€300pm)).
Type of employment:
me: public sector - full time, permanent
spouse: public sector - full time, permanent
In general are you:
Currently saving €1k-€1.5k per month cash after pension savings. With this level of savings and including the current mortgage overpayment we are quite satisfied with our current standard of living.
Putting €200 each into AVC pm.
Rough estimate of value of home:
450k with a mortgage of 306k =144k equity. Entered a 5-year fix (3 years left to run) @ 3%. Normal payments c. €1.2k. Overpaying mortgage by c. €600 pm so total payments of c. €1.8kpm. All other things being equal, we will have our mortgage cleared in c. 19-20 years. We are quite happy in the home having only bought in 2017 and would not see us moving in the medium term at least. Have requested breakage fee and it currently appears uneconomical to break.
Other borrowings:
None –Save for big purchases separately.
Do you pay off your full credit card balance each month?
Yes
Savings and investments:
All of our savings to date were used to fund as big a deposit as possible on home and to pay cash for wedding in 2018. Savings built up since:
Do you have a pension scheme?
Yes: both public sector single scheme (post 2013)
Both paying into AVCs - €200pm each c. €10k balance
€5k DC pension from previous employment along with tiny DB pension of €300pa.
Do you own any investment or other property?
No
Children
1 child (3 months). Expected baby expenses over medium term (e.g. childcare) will be met from increased salaries (Increase of c. €35k gross over next 3 years) so hopefully minimal impact on current savings rate.
Life + Health insurance:
Life – Mortgage protection + cover provided by work for both + Death in service benefit for both
Health – Yes. Basic plan for the moment.
What specific question do you have or what issues are of concern to you?
As noted above, I was hoping to solicit some views as to
Specifically, what we can do on point 1 & 2 to set us up for point 3. As noted above, we are members of the Single Scheme, which allows for Cost Neutral Early Retirement (CNER) at 55. I know this is a long time away, but we figure the best time to plan and prep for it is now! We realise things change and this may not be what we want, but we figured that by prudently managing our finances we could only improve our situation whether or not we want to pull the trigger.
As it stands, were we to retire at 55 on a cost neutral basis, we would have a combined pension of c. €22k pa (CPI linked & including CNER actuarial reduction) and a lump sum of c. €150k (also CPI linked). €22k pa would not exactly fund the type of lifestyle we would like to have post retirement, and based on current habits (noting this will obviously change) plus a bit of a buffer I think this would equate to c. €40k pa.
So basically, wondering what is the most optimal/easiest to implement strategy to build up funds to bridge the gap. As noted above:
A non-exhaustive list of options (not mutually exclusive) we see as readily available to us:
- What we are missing;
- Where to go next;
- How to set ourselves up for a potential early retirement should we so wish.
Age: 29
Spouse’s/Partner's age: 30
Annual gross income from employment or profession: €80k. €100k within 3 years (assuming no promo– unlikely scenario)
Annual gross income of spouse: €45k. €60k within 3 years (assuming no promo)
Monthly take-home pay:
€3.6k + €2.4k = €6k (this is post Single Scheme Public Sector Pension, PRD (will be significantly rolled back over next few years), AVC contribution (€400pm), Health Insurance deducted at source, other short term work savings schemes which smooth out yearly cash flow e.g. Christmas savings scheme/holiday savings scheme (€300pm)).
Type of employment:
me: public sector - full time, permanent
spouse: public sector - full time, permanent
In general are you:
Currently saving €1k-€1.5k per month cash after pension savings. With this level of savings and including the current mortgage overpayment we are quite satisfied with our current standard of living.
Putting €200 each into AVC pm.
Rough estimate of value of home:
450k with a mortgage of 306k =144k equity. Entered a 5-year fix (3 years left to run) @ 3%. Normal payments c. €1.2k. Overpaying mortgage by c. €600 pm so total payments of c. €1.8kpm. All other things being equal, we will have our mortgage cleared in c. 19-20 years. We are quite happy in the home having only bought in 2017 and would not see us moving in the medium term at least. Have requested breakage fee and it currently appears uneconomical to break.
Other borrowings:
None –Save for big purchases separately.
Do you pay off your full credit card balance each month?
Yes
Savings and investments:
All of our savings to date were used to fund as big a deposit as possible on home and to pay cash for wedding in 2018. Savings built up since:
- €25k cash savings/emergency fund
Do you have a pension scheme?
Yes: both public sector single scheme (post 2013)
Both paying into AVCs - €200pm each c. €10k balance
€5k DC pension from previous employment along with tiny DB pension of €300pa.
Do you own any investment or other property?
No
Children
1 child (3 months). Expected baby expenses over medium term (e.g. childcare) will be met from increased salaries (Increase of c. €35k gross over next 3 years) so hopefully minimal impact on current savings rate.
Life + Health insurance:
Life – Mortgage protection + cover provided by work for both + Death in service benefit for both
Health – Yes. Basic plan for the moment.
What specific question do you have or what issues are of concern to you?
As noted above, I was hoping to solicit some views as to
- What we are missing;
- Where to go next;
- How to set ourselves up for a potential early retirement should we so wish.
Specifically, what we can do on point 1 & 2 to set us up for point 3. As noted above, we are members of the Single Scheme, which allows for Cost Neutral Early Retirement (CNER) at 55. I know this is a long time away, but we figure the best time to plan and prep for it is now! We realise things change and this may not be what we want, but we figured that by prudently managing our finances we could only improve our situation whether or not we want to pull the trigger.
As it stands, were we to retire at 55 on a cost neutral basis, we would have a combined pension of c. €22k pa (CPI linked & including CNER actuarial reduction) and a lump sum of c. €150k (also CPI linked). €22k pa would not exactly fund the type of lifestyle we would like to have post retirement, and based on current habits (noting this will obviously change) plus a bit of a buffer I think this would equate to c. €40k pa.
So basically, wondering what is the most optimal/easiest to implement strategy to build up funds to bridge the gap. As noted above:
- We have c. €1k-€1.5kpm of cash that we can use to save/invest currently to save for this.
- We already make AVCs (which would be available to us at 55) of €400pm which we have scope to increase.
A non-exhaustive list of options (not mutually exclusive) we see as readily available to us:
- Increase AVCs;
- Pros:
- Tax efficient
- Available to us at 55
- OK investment options available
- Cons:
- Investment returns variable
- Illiquid
- Pros:
- Aggressively pay down mortgage and then utilise the freed up cash flow to save;
- Pros:
- Guaranteed return of 3%
- Frees us up to save more aggressively closer to retirement
- More liquid than AVCs
- Cons:
- Forego tax efficiency
- Funding an asset in the medium term that doesn’t produce an income in retirement.
Appreciate any thoughts or observations anyone may have.