Money makeover pension and redundancy questions

[beachy2024]

Personal details

Your age: 43
Your spouse's age: 43

Number and age of children: 2 kids 12 and 14

Income and expenditure
Annual gross income from employment or profession: 100k
Annual gross income of spouse/partner: 65k

Monthly take-home pay: 7k jointly (25% of gross goes into pension)

Type of employment - e.g. Employee
Employer type: private company.

Summary of Assets and Liabilities
Family home value: 500k
Mortgage on family home: 280k
Net equity: 220k

Cash: 85k

Family home mortgage information
Type of interest rate: tracker ECB + 0.6%

Remaining term: (23 years)
Monthly repayment: 1800

Other borrowings – none

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

Value of my pension fund: 350k


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


If I stop contributing to my pension is it likely (I know no one can can confirm) that I could get to a pension pot of 700 or 800k?

I may be made redundant soon and if I got 100k should I take 40k from savings and pay off half the mortgage ?

 

[AAAContributor]

If I stop contributing to my pension is it likely (I know no one can can confirm) that I could get to a pension pot of 700 or 800k?

A 3.83%* return net of fees will result in a pension pot of €800,000 in 2046 (assuming a normal retirement age of 65 years). How does that sound to you? What kind of historic annualized performance has the pension fund delivered? How is your pension invested (i.e. what's the rough allocation to equities, fixed income, property, cash etc)?

However, it's worth noting that €800k in 2046 money is equivalent to c.€517k in today's money (assuming 2% inflation).

I may be made redundant soon and if I got 100k should I take 40k from savings and pay off half the mortgage ?

What are your future employment prospects?

How long do you intend to be looking for a new role?

Will it be at a similar salary?

Have you determined that you have no other claims on your cash (home improvements etc)?

How secure is the employment of your spouse?

After paying half the mortgage, your household will be left with:
- €45k cash,
- a household with one earner, and
- a reduced mortgage payment of €842 per month (assuming you keep the mortgage term intact).

Whether €45k savings leftover after knocking €140k off the mortgage is reasonable will be informed by the answers to the above questions.

*(800,000 / 350,000)^(1/yrs to retirement)-1 = 3.83%

 

[beachy2024]

Thank you for the detailed reply.

For the pension pot, what would I need to have now to get a lump sum of 150/200k at 66 and then 40k per year 'salary' including the 13k from the govt.

In terms of future employment I would like change role to less stressful position earning 40k per year, so a big drop in salary. I think I could be in employment within a couple months as I would do contract work while looking for a permanent post.

Other claims on the money would be college and braces for kids.

Spouse employment very stable and secure.

 

[AAAContributor]

For the pension pot, what would I need to have now to get a lump sum of 150/200k at 66 and then 40k per year 'salary' including the 13k from the govt.

A 5.25% - 5.50% return on your current fund of €350,000 will get you in the ball park of your target (assuming 2% inflation and no further contributions).

If average inflation works out to be higher over the period and/or annuity rates fall from the present rates payable for a 65-yr old, your fund would have to work harder.

 

[beachy2024]

A 5.25% - 5.50% return on your current fund of €350,000 will get you in the ball park of your target (assuming 2% inflation and no further contributions).

If average inflation works out to be higher over the period and/or annuity rates fall from the present rates payable for a 65-yr old, your fund would have to work harder.

Thank you that's good information for me to think about