Making the best of savings and investing in the future

[saver21]

Age: 42
Spouse’s/Partner's age: N/A (Recently broke up)

Annual gross income from employment or profession: 55,000
Annual gross income of spouse: N/A

Monthly take-home pay: 3200

Type of employment: e.g. Civil Servant, self-employed : Civil (University contract employee)

In general are you:
(a) spending more than you earn, or
(b) saving?

SAVING around 400-600 a month.

Rough estimate of value of home: N/A
Amount outstanding on your mortgage: N/A
What interest rate are you paying? N/A

Other borrowings – car loans/personal loans etc: N/A

Do you pay off your full credit card balance each month? : YES
If not, what is the balance on your credit card?

Savings and investments: 34K as Cash in Savings Accounts. No investments.

Do you have a pension scheme? : Working in a University. PRSI paid.

Do you own any investment or other property? : NO

Ages of children: N/A

Life insurance: N/A (Have Private health Insurance cover)

What specific question do you have or what issues are of concern to you?

I am trying to put my savings to the best use. Investments or Pensions or both. Recently single so an scope of a family has been put down the road for a few years again.
(Paying PRSI for last 10 years; I am unsure how PRSI payments do provide for a Public sector pension; any reading material on this appreciated).

1. Would there be room to max out the Public Pensions?
2. What happens to my pensions if I move to another EU country for a job?
3. Opened a DeGiro Account recently and thinking of investing in ETFs/Shares etc from the savings. Any thoughts if this is a good strategy.
4. Is buying an apartment a better strategy as an investment (with the sky high prices currently)? I am already paying 950 PM rent.
5. Hoping to retire a few years before the 68 timeline (60 or so).

Thanks a mil for your suggestions.

 

[Protocol]

First, PRSI is linked to the State Pension, it is not directly linked to PS pensions.

Look at your pay slip, are there deductions for a PS pension? That is one way to know if you are in a PS pension scheme.

 

[messyleo]

First, PRSI is linked to the State Pension, it is not directly linked to PS pensions.

Look at your pay slip, are there deductions for a PS pension? That is one way to know if you are in a PS pension scheme.

Also how many years service do you have in the public sector - this is key in terms of your planned retirement age and how best to proceed. When did you join the public sector - are you on the pre-2013 pension scheme?

 

[_OkGo_]

5. Hoping to retire a few years before the 68 timeline (60 or so).

You need to be realistic about your retirement age. In your circumstances, 60 seems to be extremely optimistic. You don't currently own your own property so if that doesn't change, you will have a very high cost of living (because of rent) into retirement. How do you plan to fund your retirement. You are currently spending €2600-2800/m on rent and lifestyle.

4. Is buying an apartment a better strategy as an investment (with the sky high prices currently)? I am already paying 950 PM rent.

When you say 'as an investment', do you mean to live in or rent out to rental income? Hopefully you don't mean renting it out because that would be a bad idea?? Purchasing a sensibly priced property would be the best use of your €34k savings and will dramatically improve your cost of living. It would also allow you to consider the rent-a-room scheme where you can receive up to €14k tax free rent. Purchasing a property for yourself to live in is a sensible option

3. Opened a DeGiro Account recently and thinking of investing in ETFs/Shares etc from the savings. Any thoughts if this is a good strategy.

In your situation, I think this is a bad idea. You need to prioritize home ownership first and then target clearing your mortgage. If you have no experience with investing and start picking shares at random, you are running a real risk of losing money.

As for 1 & 2, I'm not particularly knowledgeable on on PS pensions but as a starting point, contact your payroll/HR and they should point you in the right direction to find relevant info

Other than that, I think you need to have a good look at your spending and budgeting habits. After rent and savings, you are spending €1650-1850/m on everything else. This sounds high to me, especially for someone who wants to retire early and currently only has €34k of wealth. You should really be saving an awful lot more than €400-600 if early retirement is your goal

 

[saver21]

First, PRSI is linked to the State Pension, it is not directly linked to PS pensions.

Look at your pay slip, are there deductions for a PS pension? That is one way to know if you are in a PS pension scheme.

Thanks. I dont have PS pension deductions on my scheme. But PRSI leads to that down the line is my understanding. I will be talking to HR about this.

 

[saver21]

Also how many years service do you have in the public sector - this is key in terms of your planned retirement age and how best to proceed. When did you join the public sector - are you on the pre-2013 pension scheme?

I am in public sector for almost 10 years now. Yes it was pre-2013. (although I did change institution but I understand that as long as its public sector it doesn't matter).

 

[NoRegretsCoyote]

Thanks. I dont have PS pension deductions on my scheme. But PRSI leads to that down the line is my understanding. I will be talking to HR about this.

No it doesn't. PRSI entitles you to a contributory state pension which is currently €238 a week at the max rate. This is the same as any worker paying PRSI.

A public service pension is basically an occupational defined-benefit scheme and is nothing to do with your PRSI contributions (although the rates of payment interact a bit).

I don't know much about university pensions and eligibility. You would do well to put any queries in the public service pensions forum here on AAM as there are some very expert posters.

 

[Protocol]

Thanks. I dont have PS pension deductions on my scheme. But PRSI leads to that down the line is my understanding. I will be talking to HR about this.

If you do not have pension deductions on your payslip, then you are not a member of a PS pension scheme.

This may be due to your contract status.

 

[Protocol]

I am in public sector for almost 10 years now. Yes it was pre-2013. (although I did change institution but I understand that as long as its public sector it doesn't matter).

During the ten years, have you ever paid PS pension contributions?

It is important to establish this. Look at all payslips.

 

[Protocol]

Age: 42

(Paying PRSI for last 10 years; I am unsure how PRSI payments do provide for a Public sector pension; any reading material on this appreciated).

Can I clarify? You started paying PRSI at age 32?

This implies that you never worked in Ireland before age 32.

 

[Clamball]

It sounds like you are not a public servant at all, that you are employed on a contract of probably short term duration? I think your responsibility to pay for a pension falls to you. If I am correct this should be a priority for you.

 

[saver21]

Thanks for all the info and shedding light on this.
I have contacted HR to get further clarification.
Yes I started at 32 since I was involved in higher education till then.

 

[saver21]

You need to be realistic about your retirement age. In your circumstances, 60 seems to be extremely optimistic. You don't currently own your own property so if that doesn't change, you will have a very high cost of living (because of rent) into retirement. How do you plan to fund your retirement. You are currently spending €2600-2800/m on rent and lifestyle.


When you say 'as an investment', do you mean to live in or rent out to rental income? Hopefully you don't mean renting it out because that would be a bad idea?? Purchasing a sensibly priced property would be the best use of your €34k savings and will dramatically improve your cost of living. It would also allow you to consider the rent-a-room scheme where you can receive up to €14k tax free rent. Purchasing a property for yourself to live in is a sensible option



In your situation, I think this is a bad idea. You need to prioritize home ownership first and then target clearing your mortgage. If you have no experience with investing and start picking shares at random, you are running a real risk of losing money.

As for 1 & 2, I'm not particularly knowledgeable on on PS pensions but as a starting point, contact your payroll/HR and they should point you in the right direction to find relevant info

Other than that, I think you need to have a good look at your spending and budgeting habits. After rent and savings, you are spending €1650-1850/m on everything else. This sounds high to me, especially for someone who wants to retire early and currently only has €34k of wealth. You should really be saving an awful lot more than €400-600 if early retirement is your goal

Thanks. I am hence looking to make amends. Any online calculators that let you calculate how to set aside for earlier retirement?
I provided the salary and savings based on only the latest which came into effect this month only.
My bad !
My salary in Dec 2020 was 2700 PM (note: its lower in the years before) with savings around 400-600 a month.
On the current salary of 3200 PM I plan to save at least 1 -1.2 K a month.

Indeed; as to live in. Since I am paying 950 already for rent. My issue is however the huge investment upfront for this in a market that is out of control on prices. For where I would like to live, most apartments (1 or 2 bed) are at least 210 to 240 K. Given the upfront investment and additional costs (duties, maintenance fees etc), its a sizeable investment.
Not to mention that being on contracts, I expect mortgage lenders to cause significant issues ( from a case of a colleague who didn't get one because he was single and on contracts going for a 1 bed apt). Hence my hesitation going down that road.
Any advice specifically on the mortgages?

As for DeGiro, I am only looking at long term ETFs for now. Is that still too risky? Indeed I would rather put investments towards pensions.

I am cutting spending but its not as easy given the massive cost of living in Dublin to live a decent life (and continued rise of living costs).
I am planning now (with the new salary), to save at least 1 -1.2 K a month. Wish me luck.
I also have health issues that sometimes cause the spending to rise (hence putting a dent into the savings).

 

[messyleo]

From your salary of 55k - I would have estimated take home pay to be around 3k per month not 3200 so this would suggest you may not be paying a pension contribution as other posters have indicated. This should be a first port of call given your age imo

Is your job relatively secure given you have been employed for 10 years in universities, albeit on temporary contracts? Is it just one of those technical issues and you will likely get your contract renewed or move to a new research project etc? This could influence your ability in terms of a mortgage and even what you should consider investment-wise

 

[_OkGo_]

On the current salary of 3200 PM I plan to save at least 1 -1.2 K a month.

That sounds much better

My issue is however the huge investment upfront for this in a market that is out of control on prices. For where I would like to live, most apartments (1 or 2 bed) are at least 210 to 240 K. Given the upfront investment and additional costs (duties, maintenance fees etc), its a sizeable investment.

It is sizeable but the best investment that you can make right now. Build your savings towards €50k and then buy the best value apartment that you can. If you can (and are willing to) rent a spare room, this can be a very profitable investment for your future

Not to mention that being on contracts, I expect mortgage lenders to cause significant issues ( from a case of a colleague who didn't get one because he was single and on contracts going for a 1 bed apt). Hence my hesitation going down that road.
Any advice specifically on the mortgages?

That is unfortunately a common problem of contracts but I would advise going through a broker. They can deal with multiple banks for you and should be able to help you show that you have regular employment even though it is contract

As for DeGiro, I am only looking at long term ETFs for now. Is that still too risky? Indeed I would rather put investments towards pensions.

It is not that DeGiro or ETF's are bad or too risky in general, it is more specific to your situation. If you put most or all of your savings into an ETF, you will not be able to purchase a property. You will end up renting for several more years and ultimately costing you a fortune. The value of your ETF may increase but you will have cost yourself multiples of this amount in rent so it is not a good idea.

If for example, you had €200k tomorrow and you could buy an apartment for €200k or €200k worth of ETF's and rent that same apartment, what would you do? Always buy the apartment. It gives you security in short term and long term, you are rent free, you can focus your future earnings elsewhere on pensions and investments. If you chose the €200k of ETF's, you would need to continue renting which for the same apartment would cost you at least €1k/m. Even in the most ideal scenario where your ETF grows at 7-8%, you are clearing 3-4% net of taxes. So your cost of renting is at least 6% of the €200k and your investment is at best returning 3-4% net income. Basically, your investment will never give you a return capable of giving you the same standard of living as buying your own property.

I think your main priorities for the next 6-12months should be:

• Purchase a sensible property and use rent-a-room scheme if at all possible
• Figure out your pension situation as soon as possible, set up your own through a financial advisor if necessary and start maxing your age related tax relieved contributions
• If both of the above are in order, use any excess savings to overpay the mortgage, keeping some cash available for your ad hoc medical expenses
• Don't invest in anything outside of your pension until your mortgage is cleared
• And finally, you mentioned health issues, if you don't have any medical insurance, then that is another priority for you to get. Lots of good advice in the healthcare forum of AAM