Too much money on deposit

Dalai_Alpaca

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4
Love reading this site. Am hoping for some insights.

Age: 45
Spouse’s/Partner's age: 46

Annual gross income from employment or profession: 64K
Annual gross income of spouse: 50K

Monthly take-home pay: €1,500 fortnightly, spouse - not sure ((!)

Type of employment: Both public sector

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

saving

Rough estimate of value of home: 250,000
Amount outstanding on your mortgage: 145,000
What interest rate are you paying?: 3.15%

Other borrowings – car loans/personal loans etc
None

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

If not, what is the balance on your credit card?

Savings and investments:
Prize bonds: €5K
AIB: €101K
PTSB: €5K

Do you have a pension scheme?
Yes, both public sector DB schemes. However neither will have the full 40yrs service...one 37 yrs..one approx 35yrs (don't know exact as due to parental leave)

Do you own any investment or other property?
No

Ages of children:
12 & 8

Life insurance:
Minimal mortgage prot
Also have income protection on the higher salary

What specific question do you have:

The obvious problem is the large sum in various AIB a/C's that are earning virtually nothing. They all started off well - various on demand / regular savings accounts etc..- but rates have steadily been eroded to make them worthless.

Am currently overpaying mortgage to the tune of €150 per week.

Should we attack the mortgage more?

Should we look at saving more for pension (this confuses me so I haven't given this any proper thought...I don't know really understand how AVCs work)?

Should we look at state savings? (A cursory glance at the rates doesn't excite me). Although the tax free end of things is nice.

Should we look at shares? Haven't a clue about these so a managed fund would probably be the only option. But are these heavy on the fees side?

Should we consider property?

We'll, hopefully, have to fund two children through university in a few years time. What's the best way to plan for this?

We're all ears.
 
I suggest you put 106k off mortgage.
That will save you 3,340 per year in interest.

Then start a saving fund from income towards the college fees
 
I'd definitely be using the savings to pay down mortgage. It's earning nothing for you, while the mortgage is costing you.

Like BigBoots says, I'd hold back a reserve in case of an emergency need. I'd pay off €85,000, leaving a mortgage balance of €60,000 (which would look good on the balance sheet every time you'd look at it) and you'd still have €20,000 in a rainy day fund... a nice comfortable sum.
 
Looks like an almost exact replica of my own situation, except we have out mortgage down below €70k. Just thought even if you get it below €125k you could be elegible to pursue a lower interest rate for <50%LTV.

We're also looking at public sector pension shortfall similar to yours, though I have bought back some years (3 ish). However I suspended my buy back 2 years ago but I do have a minimal AVC of €25 p/w ongoing which I can apparently put towards further buy back.

We also have been investing the majority of our children's allowence towards the children's education fund in State savings and this is currently around €30k. First of the 10 year bonds will be maturing next year so will be looking for a good alternative to reinvest that where it can be accessed for college in 7-8 years time

Have some money in PtoP funding divested from Savings with an avg return of about 11% although the opinion of that on AAM is largely negative due to the percieved risk and lack of financial and authority oversight.
 
We're also looking at public sector pension shortfall similar to yours, though I have bought back some years (3 ish). However I suspended my buy back 2 years ago but I do have a minimal AVC of €25 p/w ongoing which I can apparently put towards further buy back.

Out of curiousity, what is the thinking with this? Perhaps, you prefer the flexibility of AVCs? But if you are sure you want to buy back your 3 "missing years" why not do it directly rather than first incur the fees and charges that go with an an AVC?
 
Out of curiousity, what is the thinking with this? Perhaps, you prefer the flexibility of AVCs? But if you are sure you want to buy back your 3 "missing years" why not do it directly rather than first incur the fees and charges that go with an an AVC?
Can't seem to get a definative answer on advisability of Buy Back v's AVC's and had set up AVC 16 years ago before I'd heard of buy back option so have just kept it going. The buy back option seems very expensive at initial glance (Approx €120 p/w) v's the "flexibility" of an AVC and also there's the "fatalistic" view of whats the benefit in the expense of buying a full public sector pension if one is unsure about how long one will benefit from it, or even if the state will (be able to) honour it in full, but perhaps that's a misguided view. I'm also wondering with the prospect of changes in pension age is it likely l'lI be able to continue working beyond 65 to make up the missing years?
 
You have €120k in cash.
It's clear that you should put most of this against your mortgage.

People have suggested that you need a rainyday fund of up to €30k.

You are both civil servants. So your jobs are secure.
You have a combined gross income of €114k
You are both presumably in good health.
You are savers.

You hardly need an emergency fund at all.

Pay the €120k off the mortgage.

Your mortgage payments will be reduced. You can build up your savings again to about €10k. Pay that off the mortgage, and rebuild your savings to €10k. Repeat until mortgage is cleared.

Brendan
 
As public servants depending on the solvency of the state, you should not have state savings.

Clearing your mortgage is the least risk option.

Brendan
 
I'm also wondering with the prospect of changes in pension age is it likely l'lI be able to continue working beyond 65 to make up the missing years?

Is this not provided for already in the 2018 ACT - that you can continue in pensionable service until 70 ?

"Any public servant covered by the legislation will continue to be a member of the relevant pension scheme and any additional years of service between the ages of 65 and 70 are reckonable for pension purposes, subject to the statutory maximum of 40 years’ service. As is the case at present, the 40 year rule means that no more than 40 years’ service can be taken into account when calculating retirement benefits. "

Anyway, I take your general point. I would prefer the flexibility of AVCs myself. That is unless I was absolutely certain that I was going to purchase the notional years later.
 
You have €120k in cash.
It's clear that you should put most of this against your mortgage.

People have suggested that you need a rainyday fund of up to €30k.

You are both civil servants. So your jobs are secure.
You have a combined gross income of €114k
You are both presumably in good health.
You are savers.

You hardly need an emergency fund at all.

Pay the €120k off the mortgage.

Your mortgage payments will be reduced. You can build up your savings again to about €10k. Pay that off the mortgage, and rebuild your savings to €10k. Repeat until mortgage is cleared.

Brendan
Just wondering how often do ye change your cars? It's nice to be able to replace cars about every 3 years without financing so you have to look at the benefit of being able to do that without a financing rate of say 7-10% APR v's your mortgage interest of 3.1%
 
I'm wondering why civil servants shouldn't have state savings such as prize bonds?
 
In addition to using the bulk of the cash savings to pay down the outstanding mortgage, I think the OP should look at switching to a mortgage product with a lower interest rate.
 
the bit that strikes me (aside from the fact that you are in a nice financial position) is that you dont know what your spouse takes home?

I could probably guess. Just wasn't sure what deductions were on the gross due to union fees etc... But I take your point!
 
I'm wondering why civil servants shouldn't have state savings such as prize bonds?

We're public sector workers, not civil servants, but I suppose it makes sense not to be too dependant on the state for salary & savings. I would speculate that the chances of the state defaulting on savings is very low. Either way, I won't be putting all the eggs in that basket.
 
Just wondering how often do ye change your cars? It's nice to be able to replace cars about every 3 years without financing so you have to look at the benefit of being able to do that without a financing rate of say 7-10% APR v's your mortgage interest of 3.1%

We're fortunate that cars are of no interest to us, as long as they run. We've a car each and between us we've owned 4 cars in 15 years. We've never financed one. We tend to spend ~8K when changing.
 
We're fortunate that cars are of no interest to us, as long as they run. We've a car each and between us we've owned 4 cars in 15 years. We've never financed one. We tend to spend ~8K when changing.
Are you my long lost sibling?
 
I'm wondering why civil servants shouldn't have state savings such as prize bonds?
I would speculate that the chances of the state defaulting on savings is very low. Either way, I won't be putting all the eggs in that basket.

While the chances are low, the impact could be very serious.

There is no need for any public servant to take that risk. They should diversify it away.

It's discussed at length here:

 
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