Married with 2.5 kids and looking for advice

M

mmouse

Registered User
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1
My Age: 47
Spouse’s/Partner's age: 37

Annual gross income from employment or profession: approx. 130,000 PA (80K base and rest made up with on-call and overtime allowance)
Annual gross income of spouse: 0

Monthly take-home pay: Varies, 5,500 to 7,500 depends on on-call allowance and overtime worked.

Additional monthly Income: None

Type of employment: Private Sector

In general are you: Saving. Save about 1,750 a month

Rough estimate of value of home: 370,000
Amount outstanding on your mortgage: 103,000
What interest rate are you paying? 2.75% variable Borrowed over 20years paying 840 a month

Other borrowings: None

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

Savings and investments: 105K savings. No investments.

Do you have a pension scheme? Yes. Currently about 170,000 in the pot. Performing badly, no gain to speak of since I started it in 2009, just what I've contributed. Currently employer contributes 8% I contribute 6% and then another 8% as an AVC (1470PM)

Do you own any investment or other property? No

Ages of children: 8yrs, 4yrs and 6 months. (When last one starts school I expect my wife will return to the work)

Life insurance: Benefits at work: 4 X base salary (80K) death in service. Windows pension of 33%. Wife has no cover. No illness cover or income protection for either of us.


What specific question do you have or what issues are of concern to you?
Financially we are doing OK year to year and not big spenders.
My concerns, or should I say aspirations, I expect are relatively normal. I want to provide for my children’s 3rd level education and get them started in life as best I can and that I also need to provide for our old age/retirement. Retiring somewhere around 65 to 70 is what I have in mind. 65 would be nice.
House extended and cars fairly OK so no big expenses on the horizon in short to medium term.
I have never really invested money, only saved it but now I suppose quite late, thinking I should invest some or most of my savings.
I'm considering looking for paid independent financial advice but thought I give this forum a go first.

How much should I invest long term (thinking 10 to 20 yrs) and how much should I keep on deposit?
Wondering should I invest my savings something like an investment fund or maybe pay off my mortgage? If investing in a typical well diversified fund what would be a good equity-bond-other split for someone in my situation? Would an index linked fund be a better idea? What’s a good index these days?
Should I be considering some other type of investment e.g. property? Any other options I should be considering?
Am I contributing too much towards my badly performing pension or not enough? My pension does give me some options/choices in terms of investment management/fund selection but always left them to it. Going by lunch time conversations some colleagues have done much better by managing it themselves.
Is getting income protection and maybe illness cover advisable? Possibly a no brainer?
At my age and in my situation how adverse should I be to risk in terms of investment? Appreciate that question could have a lot of dependencies but based on info given any opinion welcome. Personally I feel I have a "medium" appetite heading towards "low" as I get into my sixties.
As you will probably guess from the above I'm not financially minded so apologies if any questions or statements a tad dumb.
 
As you are paying 2.75% interest on your mortgage, paying it off is the same as investing it in
  1. A guaranteed investment
  2. paying 2.75%
  3. Tax free
  4. No charges
It's absolutely clear - clear your mortgage.

Brendan
 
Without mortgage payments to make, you will be saving €2,500 per month.

With that surplus and level of income, you don't need an emergency fund. If you have some major expense, you can get an overdraft or credit union loan or pay it with your credit card. You will clear it quickly.

Max your pension contributions now while the 40% tax deduction is still available. A few years before your kids go to college, you can take a contribution holiday and start building up an education fund.

Brendan
 
mmouse said:
Is getting income protection and maybe illness cover advisable? Possibly a no brainer?
Click to expand...

These are very expensive and can be very hard to claim on.

As your wife will soon be in paid employment, you have a form of insurance there.

Brendan
 
What exactly is your pension invested in? You're probably in a very low risk fund. Find out.

Outside of a pension wrapper the best risk free return you can get is paying down your mortgage.

There is capacity for your wife to earn an income on any investment she makes and only pay 20% tax if it's her only income. But it won't be risk free. Personally, I'd be putting the pension into higher risk and keep low risk with everything else.

You're saving 20k per year. Plenty of capacity to get rid of the mortgage in very short term, bump up your pension contributions, and have enough in a college fund in 10 years time (without a mortgage it's even easier!).

You've a big age gap, so you retiring at 65 means your wife retiring at 55. That's something you need to plan for how to fund.

Work out any planned expenses over short term, and keep another 30k in cash. Pay the rest off mortgage, and look at your pension. You've capacity to make a very large contribution before October and back date to last year to get tax relief.
 
Agree with RedOnion on all fronts (although your wife doesn't have to retire at the same time as you!).

The stock market has been on a rip since 2009 so you must be in an inappropriately low risk fund if you haven't caught any of that wave.

On illness protection, I have to disagree with Brendan. It's certainly expensive but critical, IMO, at least until your wife goes back to work.
 
Clear the mortgage immediately.

Max out your AVCs for last year, this year, and going forward.

Reallocate the pension fund to 100% equities.

Build up an emergency cash fund equal to six months’ net pay.

Then start to build a diversified investment portfolio in your spouse’s name ensuring that it’s subject to income tax and CGT rather than 41% tax with a view to using your spouse’s 20% rate band. REITs (which have to generate income) and possibly a real property could form part of that portfolio.
 
Max your pension contributions up to 25% at your age

Put 50k into 10 year post office ntma savings

That guarantees nest egg for children's 3rd level
 
Gordon Gekko said:
Clear the mortgage immediately.

Max out your AVCs for last year, this year, and going forward.

Reallocate the pension fund to 100% equities.

Build up an emergency cash fund equal to six months’ net pay.

Then start to build a diversified investment portfolio in your spouse’s name ensuring that it’s subject to income tax and CGT rather than 41% tax with a view to using your spouse’s 20% rate band. REITs (which have to generate income) and possibly a real property could form part of that portfolio.
Click to expand...

How can you max out your avcs for last year ?
 
RedOnion said:
Make a once off payment, and say it's for last year. Once it's done before the end of October you can do it.
Click to expand...

Excellent, would i do that via my employer or directly to the pension provider ? I presume the addition of this would have to be still within the max limits of the avc for the year ?
 
@coolaboola12
Yes, must be within limits for the year.
Contact pension administrator and they'll tell you how. In my case if I give them a copy of P60, they'll calculate the max I can contribute. I'm sure they're all similar.
 
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