50, mortgage cleared, what next?

Your age: 50
Your spouse's age: n/a
Number and age of children: 1 (12)

Annual gross income from employment or profession: €100k

Monthly take-home pay

• €3,000

Type of employment:

• Private company

In general are you:

• Saving
  
  • €1000 per month into a 3% regular savings account
  • €50 per week into an S&P500 ETF
  • Maxing out pension contributions (details below)

Rough estimate of value of home

• €500k

Amount outstanding on your mortgage:

• Zero (just cleared)

Other borrowings – car loans/personal loans etc

• None

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

• Yes

Savings and investments:

• €45k in Savings account earning 3.5%
• €5k in ETF
• €20k in college fund

Do you have a pension scheme?

• Yes Company DC scheme
• Maxing out tax allowable contributions for my age
• Pot value = €370k
• DB pension from previous employment - transfer value €50k

Do you own any investment or other property?

• No

Life insurance:

• Death In Service cover through work

Specific questions
1. Older house needs some modernising. Approx €85k home upgrade required. What is the best way to fund this? I could use some savings (25k) but want to maintain a rainy day fund of at least 20k. Other options are to decrease pension contributions for a year or take out a home improvement loan.

2. Is there anything else I could be doing to optimise my finances to allow me to retire at 60?

marramgrass said:

• Maxing out pension contributions (details below)

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You mean that you're contributing 30% of your gross or €390k p.a.?
Is your employer matching any contributions?
What are the charges and what type of asset mix is it invested in?
Ideally you should probably be mostly or fully in equities.
Is there any default "lifestyling" where it moves to lower risk/reward assets unless you actively choose otherwise?

marramgrass said:

• €45k in Savings account earning 3.5%
• €5k in ETF
• €20k in college fund

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It probably doesn't make much sense to have so much in a savings/deposit account unless you are going to use it imminently for the house upgrades.

What is the "college fund" invested in?
Be careful of silo thinking in this respect:

marramgrass said:

• DB pension from previous employment - transfer value €50k

Click to expand...

Is this in a buy out bond or what?
As above, what charges apply and what is it invested in?

marramgrass said:

1. Older house needs some modernising. Approx €85k home upgrade required. What is the best way to fund this? I could use some savings (25k) but want to maintain a rainy day fund of at least 20k.

Click to expand...

Do you really need such a large rainy day fund?
Ideally you should fund the upgrading from savings rather than borrowing or scaling back your pension contributions.
Is the upgrading one big job or possibly a sequence of smaller jobs?

marramgrass said:

Is there anything else I could be doing to optimise my finances to allow me to retire at 60?

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As far as I can see your net income should be about €4.5k p.m. after pension contributions?
That's €3.5k after your monthly savings.
Is this all accounted for?

Before planning to retire at 60 you need to get a handle on what sort of annual budget you might need to fund your preferred lifestyle.
Then you can plan to provide for that.

marramgrass said:

Annual gross income from employment or profession: €100k
Monthly take-home pay

• €3,000

Click to expand...

marramgrass said:

• Saving
  
  • €1000 per month into a 3% regular savings account
  • €50 per week into an S&P500 ETF
  • Maxing out pension contributions (details below

Click to expand...

There is something a bit off about your numbers & Clubman's. Assuming there is no other BIK and it is just €100k salary with 30% pension contribution, your take home should be about €3.8k

After regular savings, that's ~€2.6k per month. Are there other things that are increasing your take home pay? Eg. Additional tax credits

marramgrass said:

1. Older house needs some modernising. Approx €85k home upgrade required. What is the best way to fund this? I could use some savings (25k) but want to maintain a rainy day fund of at least 20k. Other options are to decrease pension contributions for a year or take out a home improvement loan.

Click to expand...

You have €70k in savings currently. It will be at least 6-9 months waiting list for most builders/contractors doing that type of work so you will probably have added another 15k by then.

Take out a small loan as buffer but as soon as work is complete, pay it off as quickly as possible and then build back up your savings. I don't think you need to make any changes to your pension while getting the work done

You don't need to have a college fund. You are mortgage free with a good income and 6 years to build up savings. You will probably still end up funding college through income so those savings won't be depleted.

_OkGo_ said:

There is something a bit off about your numbers & Clubman's. Assuming there is no other BIK and it is just €100k salary with 30% pension contribution, your take home should be about €3.8k

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How so?
€100K with €30K pension contribution = effective gross of €70K.
Assuming single parent with one dependent child that should be c. €4.3K net?

Thank you for the feedback & apologies for the confusion - let me add some more detail to clarify.

You mean that you're contributing 30% of your gross or €390k p.a.?
Is your employer matching any contributions?
What are the charges and what type of asset mix is it invested in?
Ideally you should probably be mostly or fully in equities.
Is there any default "lifestyling" where it moves to lower risk/reward assets unless you actively choose otherwise?

Click to expand...

DC pension: I am contributing 30% per month. Company contributes 5%. Pot is currently worth 370k fully invested in equities.

Is this in a buy out bond or what?
As above, what charges apply and what is it invested in?

Click to expand...

DB pension is based on my final salary x years of service with that company - I get an annual statement and transfer value.

Re income - I pay BIK on health insurance and I also contribute €800 pm to an ESPP program (goes towards savings/holidays/surprise expenses).

Home upgrade would need to be completed as a single job.
Leaving the college fund in place was a term agreed to in my divorce.
It's a fair point regarding using savings to cover renovation costs. Maybe the best option is to build that up over the next 9-12 months and then take a small loan to cover any gap.

Regarding retirement, I would need an income of €30k per annum, which based on current trajectory will probably take me to 62 or so to achieve.

Ok so your net take home is ~€3.8k and ESPP reduces that to ~€3k.

Your outgoings look like this:
ESPP - €800/m
Savings - €1000/m
ETF - €200/m
Everything else - €1800/m

If that is the case, you are effectively saving €2k per month as the ESPP is also savings and you get it back every 6/12 months depending on the setup. Just make sure that the ESPP shares are sold immediately, even better if your employer executes same-day sale for you

marramgrass said:

Leaving the college fund in place was a term agreed to in my divorce.

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That's fair enough, that leaves you with €50k in savings.

marramgrass said:

Home upgrade would need to be completed as a single job.

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I would start looking for a contractor now and get them booked in as it will be at least 6-9 months to get someone depending on your location but in general, trades are all busy at the minute.

By the time work starts, you will have €60-70k in savings. I would line up a loan of €40k to give you buffer in case the works are more than the €85k. As soon as work is complete, pay as much off the loan from available funds. I think you should be ok with a emergency fund of €10-12k if you are living on €1.8k/m

After that, divert your €2k of savings to clearing the loan. You should have it cleared in <12 months but take a 5-7 year term on it to give yourself flexibility.

That's the approach that I would take anyway. In 18-24 months from today, you would be debt free in a mortgage free home. I think you can clear the loan quickly enough that it doesn't justify changing your pension arrangements so stick with the 30% contribution

Thanks @_OkGo_ and @ClubMan
Any suggestions for strategies to pull retirement a little closer other than continue to pump max allocation into pension & build up cash reserves post renovation?

_OkGo_ said:

Your outgoings look like this:
ESPP - €800/m
Savings - €1000/m
ETF - €200/m
Everything else - €1800/m

Click to expand...

I think you are already living pretty frugally for an adult and an adolescent @marramgrass

It’s not useful to have numbers like 60 in your head I think. Just continue to save at the same rate and reassess every year. With your saving and spending habits, you will be comfortable in retirement whenever that comes.

Dr Strangelove said:

I think you are already living pretty frugally for an adult and an adolescent @marramgrass

It’s not useful to have numbers like 60 in your head I think. Just continue to save at the same rate and reassess every year. With your saving and spending habits, you will be comfortable in retirement whenever that comes.

Click to expand...

Thanks Dr SL. I think that makes sense to take the pressure off to do more.