Retirement Target - Overall Financial Situation

[nowhere123]

Age:
48
Not married.

Annual gross income from employment or profession:
€90,000
Monthly take-home pay: €3250

Type of employment:
Permanent - Private Sector (Multinational)

Expenditure pattern:
Save more than spend

Rough estimate of value of home
€350,000
Mortgage on home
€110,000
Mortgage provider:
EBS
Type of mortgage: Tracker, interest only, fixed rate
Tracker
Interest rate
Tracker rate of 4%

Other borrowings – car loans/personal loans etc
None

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

Savings and investments:
Savings: €20,000
Company Shares: €15,000

Do you have a pension scheme?
Yes, I pay €1750 per month into company pension scheme
Pension is worth €125,000
PRSA worth €65,000 (0.9% management fee)

Do you own any investment or other property?
Yes.
Land (¾ acre site) worth €250k with mortgage of €100k. (Long term plan is to sell my current home and build a house).
Tracker rate of 4%

Ages of children:
1 Adult son (Age 26)

Life insurance:
Yes.
€300,00 Policy.
Also have a Death in service benefit (4 x Salary)

What specific question do you have or what issues are of concern to you?
Should I consolidate my PRSA into my Company pension account (where the management fee is paid for by my employer)?

I would like to retire at 60 and believe I need a pension pot of 1million euro to live the lifestyle that I want to have. Is this realistic and/or am I on the right path to reaching this goal?

Any other advice / opinion on my overall financial situation?

Thanks in advance.

 

[NoRegretsCoyote]

Life insurance:
Yes.
€300,00 Policy.

If you don't have dependents I'd query why you need life insurance at all.

Land (¾ acre site) worth €250k with mortgage of €100k. (Long term plan is to sell my current home and build a house).
Tracker rate of 4%

So you're paying €4k a year in interest for a site you don't live on and only have a "long-term" plan to build on. This is a lot of money today for something so far off. In your shoes I'd either get going on building the house or sell the site.

I would like to retire at 60 and believe I need a pension pot of 1million euro to live the lifestyle that I want to have.

If you have low spending (and you seem to) then you probably don't need that much if you enter retirement with a mortgage paid off and no dependents.

Is this realistic and/or am I on the right path to reaching this goal?

Unfortunately not. You have around €200k in pension assets and with 12 years go to it's highly unlikely that any combination of contributions and growth are going to get you remotely near a million. I would say that half a million is more realistic.

Overall however you have a good salary, a reasonable pension pot for your age, and own property that is not heavily mortgaged. In your position I would get rid of the site and reduce your borrowing a lot (although not immediately to zero) and max out pension contributions to the age-related ceiling which is 25% for your age, and is 30% when you turn 50.

With good habits and a bit of luck you might be in a position to comfortably retire at 60.

 

[nowhere123]

If you don't have dependents I'd query why you need life insurance at all.

That policy was taken out when I owed close to 300k in mortgage payments and when my son was much younger.
Do you think I should still cancel it?

So you're paying €4k a year in interest for a site you don't live on and only have a "long-term" plan to build on. This is a lot of money today for something so far off. In your shoes I'd either get going on building the house or sell the site.

Good point. Worth considering

If you have low spending (and you seem to) then you probably don't need that much if you enter retirement with a mortgage paid off and no dependents.


Unfortunately not. You have around €200k in pension assets and with 12 years go to it's highly unlikely that any combination of contributions and growth are going to get you remotely near a million. I would say that half a million is more realistic.

Overall however you have a good salary, a reasonable pension pot for your age, and own property that is not heavily mortgaged. In your position I would get rid of the site and reduce your borrowing a lot (although not immediately to zero) and max out pension contributions to the age-related ceiling which is 25% for your age, and is 30% when you turn 50.

Why "not immediately to zero" ?

With good habits and a bit of luck you might be in a position to comfortably retire at 60.

Thanks for you advice.

 

[ThisisMax]

Build on site or sell it, if not selling site then sell house. Put proceeds into savings, pension. Save 4k a year in interest by topping up your pension to ceiling.

 

[NoRegretsCoyote]

Do you think I should still cancel it?

Maybe just bring it down to the point where mortgage is paid off in full if you pass away. Otherwise if you don't have a child or adult dependent there isn't anything to be insured.

Why "not immediately to zero" ?

Over the long run the return you will get from your pension is likely to be more than the 4% return you get from paying off your mortgage. If you have a comfortable level of mortgage debt (as you do right now) you shouldn't be in a rush to pay it all off immediately at the expense of pension contributions.

 

[Dermot]

You have an interest only tracker. You still owe and will continue to owe €110 K while you keep on interest only and you are paying 4% on it. Can you start reducing the amount owing on the mortgage aggressively or are you tied into a fixed term.

 

[Pinoy adventure]

Sell company shares and put it off mortgage

 

[nowhere123]

You have an interest only tracker. You still owe and will continue to owe €110 K while you keep on interest only and you are paying 4% on it. Can you start reducing the amount owing on the mortgage aggressively or are you tied into a fixed term.

No I'm paying principal + interest on both tracker mortgages.

 

[ThisisMax]

No I'm paying principal + interest on both tracker mortgages.

It was not clear in original post. I think the difficulty is having a site and house are essentially two mortgages which is a big drain. Both at 4% and a good bit of capital left to pay. Id get rid of site (would you achieve the value you state?) And put those repayments off house mortgage, thats an extra 4k a year off your house. You could then afford to up your pension. Your site is costing you more than you think.

 

[_OkGo_]

I would like to retire at 60 and believe I need a pension pot of 1million euro to live the lifestyle that I want to have. Is this realistic and/or am I on the right path to reaching this goal?

Any other advice / opinion on my overall financial situation?

It's not just retiring at 60. You also want to build a new house.

You are 48 and single so while you could get a mortgage until 66-70, you should really be planning to be debt free by 60 if you want to retire early.

On a 3/4 acre site, you are unlikely to be building a little cottage. You are likely to face build costs of 300-400k minimum. Even after selling your PPR, you will likely be carrying €200k+ of a mortgage.

While you are in a healthy financial position overall, I don't think you are anywhere close to being able to retire early and build your own house. It's one or the other.

As others have suggested, I would sell the site and focus on maxing the pension contributions for the foreseeable future

 

[NoRegretsCoyote]

Unfortunately not. You have around €200k in pension assets and with 12 years go to it's highly unlikely that any combination of contributions and growth are going to get you remotely near a million. I would say that half a million is more realistic.

I think I was a bit pessimistic here. With the tax relief you are making €35k a year in contributions which is over €400k in 12 years on top of the €200k you already have.

I think with good investment returns you could get close to the million mark.

But as others have advised it's probably safer to make plans on the basis of the new house or early retirement, but not both.

 

[moneymakeover]

The question is about reaching 1m pension by age 60

If you start with 200,000
Contribute 3k per month
Growth at 6%

In 12 years you'll reach 1,026,000

You just need to contribute more
And hope the pension grows at 6%