Retirement planning for a 62 year old.

[Evie1962]

Hello all,
I'm 62 in a couple of months. Like many women of my age group I gave up work in the early 90s when my children were small. We had no career breaks, part time etc available in the financial institution in which I worked so I left. Went back part time doing admin in a couple of non profits in the late 90s for fairly poor pay much of the time. I'm reasonably well paid now for what I do, and have lovely colleagues so not looking to move jobs even for more money.
I've completed the money makeover template so you can all see where we're at.

Personal details

Age: 62 - soon!
Spouse's age: 67
Partner's age if not married:

Number and age of children: All grown up and self sufficient except for one aged 20 in third level.


Income and expenditure
Annual gross income from employment or profession: 35k
Annual gross income of spouse/partner: 21k civil service pension plus 2.5k social welfare pension

Monthly take-home pay: 4300 approx

Type of employment - e.g. Employee or self-employed. Employee and spouse is retired
Employer type: e.g. public servant, private company. Private non profit.

In general are you:
(a) spending more than you earn, or
(b) saving? Saving about 1200 a month


Summary of Assets and Liabilities
Family home value: 550k
Mortgage on family home: 0
Net equity: 550k

Cash: 76k
Defined Contribution pension fund: 120k
Company shares : 0
Buy to Let Property value:0
Buy to let Mortgage:0

Total net assets:


Family home mortgage information N/A
Lender
Interest rate
Type of interest rate: tracker, variable, fixed.
If fixed, what is the term remaining of the fixed rate?
If tracker, what is the margin e.g. ECB + 1%

Remaining term: (Original term is not relevant)
Monthly repayment:

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?

Pension information

Value of pension fund: 120k

Buy to let properties N/A
Value:
Rental income per year:
Rough annual expenses other than mortgage interest :
Lender
Interest rate
If fixed, what is the term remaining of the fixed rate?

Other savings and investments:
20K in State Savings - maturing March 2026


Other information which might be relevant

Life insurance: 50k


What specific question do you have or what issues are of concern to you?
I'll be retiring at 65 in a little over 3 years. My defined contribution pension fund will give me a very small pension of about 3.5k a year but I will be entitled to a full social welfare pension. I'm thinking of doing an AVC to contribute 40% of my income - at the moment I'm only contributing 5% and the company contributes 5%. Is it worth it for 3 years I wonder to do that?
In case anyone wonders why I didn't do this years ago, we put 3 through college and are on the 4th now! I think we have done reasonably well considering we had modest enough jobs. We've had some amazing holidays in the last few years also.

We could rent a room too in the future as we are well situated for access to any of the colleges in Dublin. Our older two are living abroad at the moment so we'd like to be able to travel to see them if they remain where they are.

Has anyone any advice or recommendations - particularly re the AVCs

Many thanks,
Evie

 

[Flybytheseat]

..

 

[Sarenco]

Makes sense for any income that you pay 40% income tax on to get you (and your partner) down to paying max 20% income tax. I wouldnt go beyond that though and certainly not 40% of your income.

The OP’s income is below the 40% threshold.

It still makes sense to maximise pension contributions that are relieved at 20% in the OP’s circumstances because all drawdowns will be tax-free, given her circumstances.

€14k (40% of €35k) a year for three years adds €42k to her €120k pension pot (ignoring the employer contributions and any investment returns).

That’s not to be sniffed at.

 

[Flybytheseat]

..

 

[Sarenco]

Don't agree as with your partners pension your'e probably in the 40% band and will taxed at least 20% on withdrawal.

You don’t combine the incomes of a married couple and then tax them as though they were a single individual!

 

[Gordon Gekko]

Don't agree as with your partners pension your'e probably in the 40% band and will taxed at least 20% on withdrawal. Feel free to take Sarenco's advice and knock yourselves out but doesn't make any sense to me..

You should read up on it so, because Sarenco’s advice is on the money.

 

[Bronte]

Current Income 4300 - savings 1200 = 3100, minus cost of college child = income needed. Start there.

How much is your husband's take home pay? Is it 2K monthly.

If he predeceases you how much income from his pensions are you entitled to. And vice versa.

Irish state pension is 253 X 52 = 13K, plus 3.5K makes 16.5K. Monthly €1400. With husband 3400. So that looks ok. You should travel while you both are healthy. But that costs.

Any possibility to make any part of your home a self contained granny flat to get the 14K rent a room tax free income?

 

[Bronte]

The OP’s income is below the 40% threshold.

It still makes sense to maximise pension contributions that are relieved at 20% in the OP’s circumstances because all drawdowns will be tax-free, given her circumstances.

€14k (40% of €35k) a year for three years adds €42k to her €120k pension pot (ignoring the employer contributions and any investment returns).

That’s not to be sniffed at.

Would the extra 42K give her about one third more of the pension income of €3500 +/-? So 1100 yearly. Because if yes, than if you just take 42K divide it by 20 years it gives her 2K a year for that time. Bringing her to 85 +/-.

Of course there's inflation and tax to be considered too.

 

[Evie1962]

My husband's income is €1666 per month plus another €200 social welfare pension. I have all the tax allowances I can have - my monthly income is €2450. I will be entitled to half his occupational pension if he dies before me - about 11k per annum.
Our college going child is more or less self sufficient with a good part time job.
The rent a room is definitely on the cards. We couldn't do anything self contained but could give a student a double bedroom with en-suite and study area.

 

[Sarenco]

Would the extra 42K give her about one third more of the pension income of €3500 +/-?

Well, let’s say the additional contributions and investment returns brings the OP’s pension pot up to €200k (for simplicity) at 66.

The OP could take €50k as a tax-free lump sum and the remaining €150k could buy an annuity of (very) roughly €7,500 per annum.

Add that to a full State contributory pension of almost €14,500 per annum and you’ve got a pretty reasonable retirement income, particularly when combined with her husband’s retirement income.