Options for next 10 years before retirement

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blis100

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15
Age: 52

Spouse’s/Partner's age: 54



Annual gross income from employment or profession: €100K (including annual bonus)

Annual gross income of spouse: €35K (part-time)



Monthly take-home pay: €6500 (between the 2 of us)



Type of employment: PAYE (both of us)



In general are you:

(a) spending more than you earn, or

(b) saving? Saving, good cash flow



Rough estimate of value of home: €230K

Amount outstanding on your mortgage: €35K, 4 years left (€720 pm payment)

What interest rate are you paying? 0.95% (Tracker)



Other borrowings – car loans/personal loans etc.

Nothing - car loans paid off



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

If not, what is the balance on your credit card? No balance



Savings and investments: PTSB bank savings €10000 (instant access, not earning any interest), another €25000 with EBS (30 day access, regular savings account, very low return), €300 pm going into this, credit union €5000 on deposit, €100 pm going into this. My wife received a €35000 inheritance 2 years ago which is in a cash savings account.



Do you have a pension scheme? Yes - member of work DC scheme, I’m paying in €300 pm, employer is paying €600, pension is currently valued at €150K. My wife also has a work pension.



Do you own any investment or other property? Yes, 3-bedroom holiday home in sea-side village (close to my workplace, possible retirement home), we rent it out during the summer months which covers about ⅓ of yearly mortgage - house value is €130000, buy-to-let-mortgage has €67000 outstanding, 12 years left to pay @ 4.95% (fixed for 1 more year), regular €570 pm mortgage payment.



Ages of children: 20 and 17. Our eldest is 2nd year in college, €3500 college fees, I’m paying her rent of €450 pm (she has a part time job so minimum upkeep), our son will be going to college in 2 more years so we’ll need some savings for that (about €10-15K).



Life insurance: Yes, we’re both covered due to our mortgages, I also have employer’s life insurance cover if something was to happen to me.





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

We have excess income and savings earning a low rate of interest. My wife is risk-adverse and wants to keep her €35K inheritance in a cash savings account. I’m working from home for the foreseeable future which is saving me €200+ per month on fuel costs since March. I have €500+ left over at the end of each month - what should I do with this? More AVC’s into my pension? Should we pay a lump sum off the mortgage of our holiday/retirement home? One of our cars might need replacing in 1-2 years, probably buy another 2-3 year old car second-hand like I normally do (maybe put €10K from savings into that).
 
You have €75k sitting in cash earning practically nothing while carrying a mortgage on your holiday home of €67k @4.95%(!).

That's bonkers - pay off the mortgage on the holiday home ASAP.

And have a long hard think about whether you can really afford the luxury of a holiday home.
blis100 said:
pension is currently valued at €150K.
Click to expand...
Frankly, your retirement savings are way behind where you need to be. You really need to dramatically increase your pension contributions to have a meaningful pension pot in 10 years' time.

I'm sorry if my comments come across as unnecessarily blunt but you have a good income and 10 years out from retirement is the time to get really serious about your finances.
 
Hi blis100,

Sorry to be equally blunt, but you’re not in good shape at all.

You have cash savings and two mortgages, one of which is at 4.95%! Mad stuff!

You’re 10 years from retirement, yet you’re hardly putting anything into your pension. Again, crazy stuff.

Your wife’s idea about keeping that money in cash is also off the wall. Clear the holiday home mortgage ASAP at a minimum.

Then start maximising your AVCs. You can contribute €30k for 2019, less whatever you’re contributing on the drip, on or before 10 December. If you can find the money, do that ASAP, mindful of the fact that you may have used €67k to clear the holiday home mortgage. €30k would cost you €18k in effect. Then start maximising your AVCs through payroll from now, your wife too. Then also try to do a top-up AVC for the remainder of 2020 on or before mid-November 2021.

And review your investment strategy for the pension.

There is no room for complacency here at all; you’re a long way off where you should be.

Gordon
 
blis100 said:
My wife is risk-adverse and wants to keep her €35K inheritance in a cash savings account.
Click to expand...
Risk averse? This money is guaranteed to be worth less in the future than now. The thing she is trying to avoid is happening.
 
I'd echo what has already been said. Good earnings coming into the house but you have debt at 4.95% and 0.95%.

Get professional advice and s get s plan in place for the next ten years.
 
Like others, I'm sorry to be so blunt but this makes for very bad reading. You are not in a healthy financial position at all! I don't know where to start...

On a combined salary of €135k, you should be very comfortable by now. But instead, you still have €102k in mortgage debt on €360k of property with most of that on a crazy BTL mortgage.
  • Start maximizing your pension contributions
  • Can your spouse return to full time work and maximize pension contributions also?
  • You cannot buy a 2/3 year old car for 10k so you obviously intend to take out another loan??? Make do with what you have, you cannot afford to upgrade while ignoring your pension. It does not look like you will be able to afford the same level of car in retirement
  • You should not own a holiday home, you cannot afford it. Either sell it or pay off the mortgage and turn it into a full rental so that it is adding to your wealth, not costing you money. Do not continue to use this as a 2nd home
  • Do not even think about retiring early, you have no chance of doing it.
Even with all of that said, it is difficult to see where all of your money has been going? You need to take a long hard look at your lifestyle spending because you will not be able to maintain it into retirement. You will go from €135k/yr to state pension plus a little extra from whatever you build over the next 10 years. You have completely missed the benefit of having a cheap tracker by spending on lifestyle and not funding your retirement
 
I was thinking along the same lines as _OkGo_ but didn't want to be do blunt about it. But the single question that immediately came to me is what the hell was this fella doing with his money for the last 20+ years.
 
Couple of simple questions which might help focus the mind on your question
How much does it cost you to maintain your lifestyle at the moment ??
What lifestyle do you want in retirement and how much will that cost ??
 
Is the holiday home a 'plan' for retirement ? If it is then this could change things.
 
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