Trying to optimise Finances, pls advise

A

AugustaRory

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Hi. My wife (44) and I (43) are trying to optimise our finances and have been lurking on this site for a while, it's superb, thank you!

Our position can be summarised as follows:

2 kids, 15 and 11, both in private schools.

Family Home: €2m
Mortgage: €620,000 - PTSB Fixed at 2.2% for 4 more years

Pension Fund (Me) - €550k invested in the Zurich Equity Fund; Contributing €28,750 a year and Employer €18,750, total €47,500
Pension (Wife) - State Employee, retirement age 60

No debt, other than mortgage

Cars - Around €160,000

Life Cover: 4 x Salary for me Death In Service, mortgage cover, plus around €180k of mortgage life cover we retained linked to an investment property (€20 a month).

Income Protection and Illness: I have the 66% or 70% of income covered that seems to be the max. My wife has whatever benefits State employees get. We're not sure about those and that information is hard to get.

Investments: None

Savings: €120,000...our logic is we spend 10k a month so if we've a problem, we have a year of money

Income: My salary is €240k, my wife's is €100k. I get a share award of €60k each year which releases after three years, and which I sell. My cash bonus (not guaranteed) is generally around €200k and I have an additional €1.2m of RSUs releasing over the next 5 years.

The Money comes in / goes out as follows monthly:

In - €14,800

Out -
Mortgage €2,700
Salaries (we pay ourselves €2,000 each for clothes, meals out, gyms, doing stuff) €4,000
Savings €4,000
Schools €1,400
Groceries €1,200
Cleaner €200
Sky/Broadband €163
Club Sub €200
Life cover €100
Petrol €200
Insurance (home and cars) €150
Mobiles x 3 €90
Subscriptions (Netflix, Newspapers. Spotify, etc) €75
Motor Tax etc €70

We've used surplus money to tidy up our finances over the last few years but now feels like the time to start consolidating and planning properly. I suppose the question is, what should we do? We paid back 10% of the mortgage this year and plan to keep doing the same. We do spend a lot on holidays, probably €50,000 a year. The other type of things we're discussing are buying an overseas property, setting up a portfolio, gifting some money to the kids, but it's all up in the air and we're open minded. Thank you in advance.
 
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You are obviously in a very highly remunerated position, many congratulations.

However, I’ve no doubt that the role is pressurised so, as an overarching objective, I think you should arrange your affairs on the assumption that you will be retiring at 55. Now, you obviously might keep working beyond that but burnout is a real thing so plan accordingly.

It looks like you are pretty much making all the right moves to this end so I don’t think you need to make any major adjustments.

I would be inclined to further accelerate paying down your mortgage, maybe with a view to clearing it completely by 50.

Does your wife have any scope to make AVCs or purchase notional service?

I think you will need to diversify out of your employer’s stock when the RSUs are released so it’s worth putting some thought into your options in this regard.

You might think about establishing bare trusts for your kids, utilising the €6k annual small gift exemption from yourself and your wife.

Beyond that, enjoy the ride and keep taking your holidays!
 
Firstly, thank you for replying, it's much appreciated.

To deal with your observations/points -

1) The 55/burnout point is a strong one, although I'm sick in some way because I kind of love work. But it would be nice to have flexibility to choose whether to go or not to go, so that's definitely something to consider.

2) We can only pay off 10% of the balance each year at the moment, but our draft plan is to probably do the 10% each year for the remaining 4 years to take it to around 380k and to then look at finishing it ASAP.

3) On AVCs and her pension, there probably is something there but I don't profess to understand it. She will have 39 years service at age 60 which seems to be the retirement age and our loose plan would be for her to retire then and me at the same time (I'll be 59). She has a small AVC investment worth 4k. From reading stuff here I think we might be able to pay some money to get her 40 years service at age 60, but beyond that, we're clueless, and the HR people aren't much help to her.

4) With the RSUs or shares, I just sell them and pay 52% tax to get the cash. It's what to do with this that's making us think TBH.

5) the 6k is a good shout, we'll do that I think, thanks for that...
 
AugustaRory said:
Firstly, thank you for replying, it's much appreciated.

To deal with your observations/points -

1) The 55/burnout point is a strong one, although I'm sick in some way because I kind of love work. But it would be nice to have flexibility to choose whether to go or not to go, so that's definitely something to consider.

2) We can only pay off 10% of the balance each year at the moment, but our draft plan is to probably do the 10% each year for the remaining 4 years to take it to around 380k and to then look at finishing it ASAP.

3) On AVCs and her pension, there probably is something there but I don't profess to understand it. She will have 39 years service at age 60 which seems to be the retirement age and our loose plan would be for her to retire then and me at the same time (I'll be 59). She has a small AVC investment worth 4k. From reading stuff here I think we might be able to pay some money to get her 40 years service at age 60, but beyond that, we're clueless, and the HR people aren't much help to her.

4) With the RSUs or shares, I just sell them and pay 52% tax to get the cash. It's what to do with this that's making us think TBH.

5) the 6k is a good shout, we'll do that I think, thanks for that...
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you arent limited to 10% of the mortgage per year, thats just the amount that you can pay without penalty, if you wanted to pay the whole lot off tmrw you could they would calculate a break fee for you.

There may not be a break fee payable, so if you have an amount you want to pay off the mortgage contact the bank, tell them you want to make a partial redemption of X and if there is any break fee on that.

with your level of income you should be dealing with private banking in PTSB (presume mortgage came from ulster and that PB team moved across)
 
Unless you intend on going back to the same place every year instead of going to different places, I don't see the point of buying a property abroad. It sucks out a big lump of cash that you have and puts it in something that doesn't produce an income (I am assuming you won't rent it) but it in fact a cost to you.

In a nutshell:
  1. Both make sure you are maximising your pensions. You are, it doesn't look like your wife is.
  2. Bare trusts for children, €12,000 a year total.
  3. Ask bank what the breaking fee is. As Blackrock said, sometimes the amounts are very small
  4. Invest the rest
The objective is to get yourselves into a situation of financial independence. That doesn't mean you have to stop working, it just means you don't have to work to pay the bills. It opens a lot of different opportunities and choices to you. You can go into lower paid consultancy roles or take positions on boards. Or there may be other things that you want to do in life that's a bit different (I want to spend time eating BBQ in Texas).

You and your wife should talk over the weekend over what life without the need to work would look like and what you would really love to do that you can't do now because you are both working and raising a family. Then put the structures in place and ensure you have the correct habits around money and the rest will look after itself.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
Blackrock1 said:
you arent limited to 10% of the mortgage per year, thats just the amount that you can pay without penalty, if you wanted to pay the whole lot off tmrw you could they would calculate a break fee for you.

There may not be a break fee payable, so if you have an amount you want to pay off the mortgage contact the bank, tell them you want to make a partial redemption of X and if there is any break fee on that.

with your level of income you should be dealing with private banking in PTSB (presume mortgage came from ulster and that PB team moved across)
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Thanks for replying. I didn't know that private banking was still a thing TBH. We have never spoken with anyone in PTSB or had any dealings with them and we didn't bank with Ulster Bank previously other than for the mortgage. At 2.2%, my gut feeling would be to leave things as is and just pay the 10%, but the loose plan would be to pay off the mortgage at the end of the four years.

I should also add that we had given some thought to trading up, but I think we have knocked that on the head. We are happy where we are and feel that stretching for a more expensive home would be foolish and unnecessary.
 
AugustaRory said:
Thanks for replying. I didn't know that private banking was still a thing TBH. We have never spoken with anyone in PTSB or had any dealings with them and we didn't bank with Ulster Bank previously other than for the mortgage. At 2.2%, my gut feeling would be to leave things as is and just pay the 10%, but the loose plan would be to pay off the mortgage at the end of the four years.

I should also add that we had given some thought to trading up, but I think we have knocked that on the head. We are happy where we are and feel that stretching for a more expensive home would be foolish and unnecessary.
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thats fine but the option is there at least,

yeah on trading up its really up to you but with 2 older kids i guess you have plenty of space and they wont be around forever so maybe no need?
 
my understanding as a state employee myself, is sick pay is full pay for 3 months, half pay for 3 months, then nada - hence the suggestion by many that we maintain income protection
 
Blackrock1 said:
thats fine but the option is there at least,

yeah on trading up its really up to you but with 2 older kids i guess you have plenty of space and they wont be around forever so maybe no need?
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Thank you, yes, on balance we don't see the need. It would probably just be doing it for the sake of it.
 
All the advice above is good. Sarenco is right for you to think about age 55 as a goal, it happened to us, unexpectedly, but we were in a good financial position to deal with the ramifications. You need to get there.

No way should you move, based on what you've said. It's clear where you are is working. Especially based on the children's ages.

Definitely think you should pay for some proper advice, try Stephen above, he consistently gives great advice on here. But you have to pay for individual tailored advice, even if it's to stay as you are and do nothing.

Keep doing the holidays, a day may come when you no longer can. An that is round the corner. We are so glad we did the amazing places. I'd give anything right now to go on another holiday. Family time is the most precious time of all.

One thing not covered, think about a future home for you and your wife. As in the Downsizing, Suitable place.

Lastly, health check. Pressurised jobs cause heart problems and other issues. Make sure you, particularly men, do a fully comprehensive health check. And pay for the top medical insurance. Don't underestimate the importance of exercise.
 
Thank you all for your guidance, it means a lot. In relation to my wife's civil service pension piece, what could be done (at a high level)?

She earns 100k roughly and will have 39 years service at her retirement age of 60. There's about 4k in an AVC.

I guess she/we could retire early but the current plan is for her to go at 60 or maybe 61 to get her full pension, but that could change. Maybe she retires at age 50 if she can get her pension early. The HR and pension people are very unresponsive.
 
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