Irish Investment Strategy

Andrew365

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The taxation on investments is something I wish I had researched more before moving back to Ireland. It was definitely much more beneficial in the US/UK but it is what it is and now I can just look how to best take advantage of it. The below is the current strategy I am considering.

Goals
1. Trade up to house in Dublin area in 3-5 years - Need to save Cash for deposit + use equity built up in current property
2. Long Term will likely be in Ireland when retiring but strong possibility of another few years working abroad.

My goals are a mix of wanting to maximize retirement whilst also building a pool of liquid assets for the short to medium term financial needs. My strategy is as follows based on having 2k per month to save, this is net of living costs and other costs such as holidays but at times the cash would be dipped into.

  1. Non Liquid Investments
    • Overpay Mortgage - 500, after 3 years would equate to ~22% (~100k) in Equity assuming no change in house value or 15% with a 10% decrease in stock price.
    • Pension AVC - 500 ( including employer contributions, I would be at ~75% of max contributions before losing tax benefit)
  2. Liquid Investments
    • Cash - 500
    • ETFs - 250 - Plan to sell on or prior to the 8 Yr point but in the interim benefit (or lose) from market volatility
    • Prize Bonds - 250
What are peoples thoughts?
 
What age are you?
What is your mortgage interest rate?
What is your salary/Spouses salary if applicable?
Do you have any other investments/debt?

If you are not on a tracker the normal generic advice is to prioritise.
1- Rainy day fund (3-6 months of household expenses depending on circumstances)
2- Overpay mortgage if not on a tracker
3- Pension investment. At a minimum match employer contribution to get full benefits. If you are in the higher tax bracket many would argue to priorities this over mortgage overpayments. Becomes more divisive when you are in lower tax bracket and carrying a mortgage. As you are looking to trade up I personally would focus on bringing down my current mortgage.

Equity built up in existing property would be treated as a deposit when trading up so no need to be investing in ETFs/Prize Bonds if you are not on a tracker. Use these funds to overpay mortgage.
 
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What are peoples thoughts?
Keep it simple.

First, build a reasonable cash reserve (perhaps three months' net salary) and keep it on deposit. Then maximise your tax relieved pension contributions. Then use any available after-tax savings to pay down your mortgage ahead of schedule.

When your mortgage is paid off, maintain a high allocation to equities in your pension and start buying (tax free) State Savings Certs and Bonds.
 
Keep it simple.

First, build a reasonable cash reserve (perhaps three months' net salary) and keep it on deposit. Then maximise your tax relieved pension contributions. Then use any available after-tax savings to pay down your mortgage ahead of schedule.

When your mortgage is paid off, maintain a high allocation to equities in your pension and start buying (tax free) State Savings Certs and Bonds.

I should have noted that I have a reasonable cash reserve. I am never going to pay of the mortgage as it is 3 months old I plan to change house in around 4 years. My goal is that I will need a chunk of cash when changing house as ideally I will get a bigger house whilst keeping the same LTV. So I am looking for the best way to invest my liquid assets out of the above.
 
What age are you?
What is your mortgage interest rate?
What is your salary/Spouses salary if applicable?
Do you have any other investments/debt?

If you are not on a tracker the normal generic advice is to prioritise.
1- Rainy day fund (3-6 months of household expenses depending on circumstances)
2- Overpay mortgage if not on a tracker
3- Pension investment. At a minimum match employer contribution to get full benefits. If you are in the higher tax bracket many would argue to priorities this over mortgage overpayments. Becomes more divisive when you are in lower tax bracket and carrying a mortgage. As you are looking to trade up I personally would focus on bringing down my current mortgage.

Equity built up in existing property would be treated as a deposit when trading up so no need to be investing in ETFs/Prize Bonds if you are not on a tracker. Use these funds to overpay mortgage.

What age are you? Early 30's
What is your mortgage interest rate? 2.6
What is your salary/Spouses salary if applicable? N/A the 2k is available for savings.
Do you have any other investments/debt?

I think I am just going to have to get over the fact that I like seeing my savings and investment accounts go up each month and just maximise the tax benefits in Pension.

Incidentally, you ignore employer contributions in calculating your maximum tax-relieved contributions.

Sorry but does the 20% of earnings not on total contributions inclusive of employers? i.e. if for a 30 yr old it is 20% of salary and Employer contributes 15%, I could only contribute the remaining 5%?


Keep it simple.

First, build a reasonable cash reserve (perhaps three months' net salary) and keep it on deposit. Then maximise your tax relieved pension contributions. Then use any available after-tax savings to pay down your mortgage ahead of schedule.

When your mortgage is paid off, maintain a high allocation to equities in your pension and start buying (tax free) State Savings Certs and Bonds.

I should have noted that I have a reasonable cash reserve. I am never going to pay of the mortgage as it is 3 months old I plan to change house in around 4 years. My goal is that I will need a chunk of cash when changing house as ideally I will get a bigger house whilst keeping the same LTV. So I am looking for the best way to invest my liquid assets out of the above.
 
Sorry but does the 20% of earnings not on total contributions inclusive of employers? i.e. if for a 30 yr old it is 20% of salary and Employer contributes 15%, I could only contribute the remaining 5%?
No, you can still get tax relief on contributions of up to 20% of your net relevant earnings (subject to a cap of €115k), regardless of any employer contributions.
My goal is that I will need a chunk of cash when changing house as ideally I will get a bigger house whilst keeping the same LTV
Wouldn't you also achieve that by having a lower mortgage balance on your current PPR when you trade up?

In any event, if you think you are going to need a large chunk of cash in the next four years, you should just keep your (after-tax) savings on deposit. Maybe look at setting up a regular savings account if you want to eek our some extra interest.
 
Wouldn't you also achieve that by having a lower mortgage balance on your current PPR when you trade up?

Yes that is true, I suppose that I am just tied to the old saying of cash is king. I have a concern that I overpaid for my property in 2019 and see the sale price eroding rather than going up. So the way I look at is the ultimate Equity I would walk away with ends up with the final sale price and whilst this doesn't matter if there is a price reverse in the entire market, I am more concerned that the area I bought in is a bit of micro economy in property prices, if that makes sense?
 
So the way I look at is the ultimate Equity I would walk away with ends up with the final sale price and whilst this doesn't matter if there is a price reverse in the entire market, I am more concerned that the area I bought in is a bit of micro economy in property prices, if that makes sense?
Not really. The equity is the sales price less the outstanding mortgage. Less mortgage, more equity.
 
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