Maximise return for spare cash

mojoask

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141
You've hit on a topic we've debated a lot. With taking the time off for maternity, she will only get relief at 20%, so we're more inclined to pursue goal #2 and overpay the mortgage, once her income comes back on stream later in the year.

For 2021, that's the big question.... Current thinking would be to continue with the same approach for two reasons 1) We have enough exposure to equities via my pension, 2) Debt is cheap right now, it might not always be this way. Spending a few years getting the mortgage down, so that if interest rates ever do go up, our exposure is reduced, seems like the prudent thing to do, even if returns may be better via her PRSA. Happy to hear other views however, it'll help us make an informed decision.

Re: my pension, yes I've looked, it's in a passive equity fund, with low charges. Will automatically move into more interesting (i.e. expensive) funds in my 40s, if I don't step in and take control. It's highly likely I will step in... another topic to plan for :)
 

RedOnion

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Normally 50k, would expect 30k in 2020 due to unpaid maternity.
Assuming you're jointly assessed, flip part of her tax band to you, she keeps 26,300 and anything over that will be high rate, therefore high rate relief if she puts in pension.
You're not talking about huge amounts, but might as well keep both pension pots growing.
 

SPC100

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677
Assuming you're jointly assessed, flip part of her tax band to you, she keeps 26,300 and anything over that will be high rate, therefore high rate relief if she puts in pension.
You're not talking about huge amounts, but might as well keep both pension pots growing.
That is a great idea about how to maximise relief for a couple where one is already at max contributions and the other is a lower earner. Worth a key post imo. It's first time I have seen this suggestion.
 

mojoask

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141
It's that time again folks, I've no idea whether anyone is interested in this, other than myself, but I find it useful anyway!

2020 Highlights:
  • Pension: Maxed out contributions, coupled with market performance & company contributions, pots now at about 350k. (Target met)
    • Mrs maintained her 4% contribution, pot at 22k (plan was to make AVCs, so target missed)
  • Mortgage: Now 420k (approx 50% LTV, no overpayments this year, the plan was to do this once my Mrs returned to work, there's no good reason why we didn't, so target missed!)
  • Income: Down to 30k (due to extended unpaid leave which was planned, target met)
  • Income: Up to 155k (moderate increase in base salary, improved performance bonus and RSU vest mean target exceeded)
  • Expenditure: Increased childcare costs (now ~2k/mth which is as expected, so target met, although a painful one!)
  • Savings & investments: 130k (no clear target for '21, area of improvement, see below)
Looking ahead...

2021 Plan:
  • Pension: continue to max my contributions / maintain Mrs 4% contribution (for employer match) & make use of AVC allowance to max her contributions.
  • Mortgage: Resume 10% overpayment
  • Income: Mrs, expect back to normal (~55k pa)
  • Income: Mine, expect to be in the 145-155k range (subject to final bonus / RSU vest)
  • Expenditure: No major expenditure planned, continued increased childcare costs (additional 12k pa)
  • Savings & investments: grow by 30k
We're very fortunate that the pandemic has had no real impact on our livelihoods, it's been a different year obviously, but in many respects there have been benefits as I've had less of the usual work obligations (travel, work dinners etc) which have improved work-life balance.

For the coming year, one of the ideas we're toying with is whether my wife opens a self-directed PRSA for her AVCs, rather than adding to her existing PRSA account with its high charges.
 

50andOut

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80
Actually its particularly interesting to see the journey as it develops and how decisions / thoughts may change over time so thanks for continuing on with it !
 

_OkGo_

Registered User
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116
You are clearly doing exceptionally well, very healthy pension, healthy equity in your PPR and very good income. My only question is why do you have so much in cash (€130k) and expecting this to rise by another €30k this year? I can understand keeping a larger buffer while your spouse was on mat leave but now surely you should just pay a big chunk (€100k) off your mortgage? If I have read the thread correctly, you have upgraded both cars in the past 2 years so you don't need to hold anything back for purchasing new cars so what other major expense do you see where you need (€130k+) on hand?

It would also have a positive impact on your monthly cashflow if you maintain the term length, reducing your minimum mortgage payment by ~25% (€420k >> €320k)

As RedOnion points out so regularly:
Just remember, you can pay as much as you want. The 10% is just the limit before the check if a break fee applies. Even if a break fee applies, it will ALWAYS be less than the amount of interest you will save.
But overall, well done on planning and controlling your finances so well!
 
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mojoask

Frequent Poster
Messages
141
You are clearly doing exceptionally well, very healthy pension, healthy equity in your PPR and very good income. My only question is why do you have so much in cash (€130k) and expecting this to rise by another €30k this year? I can understand keeping a larger buffer while your spouse was on mat leave but now surely you should just pay a big chunk (€100k) off your mortgage? If I have read the thread correctly, you have upgraded both cars in the past 2 years so you don't need to hold anything back for purchasing new cars so what other major expense do you see where you need (€130k+) on hand?

It would also have a positive impact on your monthly cashflow if you maintain the term length, reducing your minimum mortgage payment by ~25% (€420k >> €320k)

But overall, well done on planning and controlling your finances so well!
Thanks for the feedback, we're human at the end of the day, wanted to give an honest update on what we did well, and what we didn't, because that's life and nobody's perfect! If we can do enough of the right things year after year, figures crossed we should be okay.

Good question re: paying off the mortgage. We've only about 30% of the total in cash, the rest is invested, some of which can be easily liquidated, the rest only after a penalty. We've toyed with the idea of using some against the mortgage before, although we would keep the monthly repayments the same, with a view to paying the mortgage early, rather than lowering the monthly payment. It's a good prompt though, must run the numbers, thanks for the suggestion.
 
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