Semi-early retirement

J

James399

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2
Personal details

Your age: 33
Your spouse's age: 33
Location: Dublin
Number and age of children: 0 (see below)

Income and expenditure

Annual gross income from employment or profession: ~ €500'000
Annual gross income of spouse/partner: ~ €150'000
Monthly take-home pay: Not sure exactly, I would guess €50'000
Type of employment - Me: self employed, spouse PAYE

In general are you:

(b) saving
We probably save the guts of ~€20-25k/month

Summary of Assets and Liabilities

Family home value: €850'000
Mortgage on family home: €0

Other Assets:

Cash: ~ €700'000 (earning 4% p/a)
Stocks: €140'000

Pension:

I don't have a pension set up (yet)
Spouse has a small pension built up of around €40'000

No Debt

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

What would people's thoughts be on my spouse semi-retiring early (10 hours a week) and joining me in my business consulting company, at the moment our spending is around €60k/year but they are nervous about the idea. They have worked in a similar PAYE role and I believe that we would have a good emergency fund that would last for several years if they found they didn't like the self-employment and found it hard to get back into employment. I could se the benefits for them being more time and flexibility during the week to do what they/we want and no real stress to speak of.

Doubts/questions that they have and I have to some extent are:

- expenses if we were to have children and how much our €60k/year would increase to
- no maternity leave for either of us if they were to join me in business
- We have no pension to speak of, I would hope that the €700'000 cash and €140'000 in stocks could act as a rainy day fund/pension
- possibly using the €700k to purchase a BTL to give us a more diversified income than just my business (and possibly our business hopefully), ideally let through an agent
- My business could be described as quite volatile, and while I have had 15 years of good income especially in the last 5 years, I am not sure if this will always be the case, so is this "too many eggs in one basket".


Thanks in advance and please do let me know if I’ve left out anything helpful and I can hopefully edit this,

Cheers
 
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Why do you want them to 'semi retire'?

If it's to have children then you're giving up the benefits and safety net completely, of course they are nervous.

Why not let them try to return to work afterwards and decide then?

I hope your cash is spread out as 100k only is guaranteed by a bank.
 
There’s a few alarm bells within this post that would suggest to me you should seek out a professional financial adviser immediately before you tackle some of the other questions.

1. €650k gross as a couple is nowhere near €50k a month net. It’s more like €28k. So if you’re saving €40k a month you’re either not paying taxes or have underestimated your own income by about 50%.
2. As a high income earners your pensions are extremely low. Particularly for you having none is a massive missed opportunity. This should be addressed as a priority
3. Having 700k in cash as age 33 is extremely conservative and you should almost certainly look to invest this either through BTL or an equity portfolio or ideally a combination of multiple asset classes. Based on comment 1 & 2 above I’d guess you’re either not particularly financially inclined or have no time to think about it so you should probably engage an expert to help you with this.
 
Thanks for the replies,

@boomshine I would see the benefits as being able to move away from a 9-5/6 and have some flexibility there. Thanks for asking, yes I have it split across several banks


@Zion2022

1. Yes you are correct, thank you. I did more looking and it's been closer to €20-25k/month, not sure where I got those figures from. I've edited my original post.
2. My view there is that I would prefer to have the freedom of using this income before I am 50, rather than being tied away in a pension. I know I am foregoing the 20% tax relief up to €115k and tax free gains there, but I think this offers me more freedom/options going forward, say if my business collapsed.
3. A large portion of that cash has come from a recent property sale and I thought this was a clever move while we thinking about the best route forward. I agree that if we decide not to use this money I should move more to equities at a minimum.

Thanks again for the replies.
 
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James399 said:
What would people's thoughts be on my spouse semi-retiring early (10 hours a week) and joining me in my business consulting company, at the moment our spending is around €60k/year but they are nervous about the idea. T
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Would your relationship stand it?

Not one of my strong subjects, but I would think that if you work and live together, that it could well put a strain on your relationship. You double the amount of things you can fight about.

This is far more important than any financial issues.

So when your spouse says that they are nervous about it, they are probably telling you that they do not want to be with you 24/7.

It doesn't make much sense for a 33 year old to cut back to 10 hours a week if they don't have kids.

But if they really wants to cut back, then would they not be better off working for someone else?

Another issue to consider is that if anything goes wrong with the business and you are both employed by it, you both lose your income.

So think this bit through. Have a full and frank discussion with your spouse.

You are well off enough to do what you want to do without worrying too much about the financial implications.

So decide that first and then come back and discuss your mistaken understanding of pensions.

Brendan
 
James399 said:
Thanks for the replies,

@boomshine I would see the benefits as being able to move away from a 9-5/6 and have some flexibility there. Thanks for asking, yes I have it split across several banks


@Zion2022

1. Yes you are correct, thank you. I did more looking and it's been closer to €20-25k/month, not sure where I got those figures from. I've edited my original post.
2. My view there is that I would prefer to have the freedom of using this income before I am 50, rather than being tied away in a pension. I know I am foregoing the 20% tax relief up to €115k and tax free gains there, but I think this offers me more freedom/options going forward, say if my business collapsed.
3. A large portion of that cash has come from a recent property sale and I thought this was a clever move while we thinking about the best route forward. I agree that if we decide not to use this money I should move more to equities at a minimum.

Thanks again for the replies.
Click to expand...
Just two little things to point out.
Pension tax relief is 40%
You mention being self employed, but also mention your consulting company. Are you a sole trader, or a proprietary director of a limited company?
 
Fortune said:
Just two little things to point out.
Pension tax relief is 40%
You mention being self employed, but also mention your consulting company. Are you a sole trader, or a proprietary director of a limited company?
Click to expand...

James399 said:
Thanks for the replies,

@boomshine I would see the benefits as being able to move away from a 9-5/6 and have some flexibility there. Thanks for asking, yes I have it split across several banks


@Zion2022

1. Yes you are correct, thank you. I did more looking and it's been closer to €20-25k/month, not sure where I got those figures from. I've edited my original post.
2. My view there is that I would prefer to have the freedom of using this income before I am 50, rather than being tied away in a pension. I know I am foregoing the 20% tax relief up to €115k and tax free gains there, but I think this offers me more freedom/options going forward, say if my business collapsed.
3. A large portion of that cash has come from a recent property sale and I thought this was a clever move while we thinking about the best route forward. I agree that if we decide not to use this money I should move more to equities at a minimum.

Thanks again for the replies.
Click to expand...
On 2. You’ll get 40% relief and given your income level you could fund your pension to an extremely healthy level with it having almost no impact on your ability to accumulate wealth outside your pension also (you also already have a €840k safety net plus a paid off home!).

On 3, fair enough I had assumed this was accumulated cash from €40k monthly savings over time which would not be wise.

I generally believe that for most people, there is no need for professional financial advice. Aggressively pay down debt from most expensive to cheapest, Pay into a pension. Once you’re done with that, throw some money into a diversified equity fund. It’s simple enough.

Given you have €650k of annual income, are self employed, currently have no pension and not much of an investment portfolio given your level of wealth I would suspect you fall into the cohort that should absolutely seek out holistic financial advice, likely on an ongoing basis and as a matter of urgency. Best of luck!
 
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You mention your business is quite volatile and too many eggs in one basket in your original post. I presume that means you are over dependent on a small number of clients (or perhaps even one) and were they to walk away, your business would collapse? On that basis alone, my advice would be for your spouse to keep on working in the PAYE job until such time as you've had kid(s) and then you can make a decision on whether or not she wants to return to work at that stage. In effect, her role right now is your insurance policy if your company was to fail.
 
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