Where to invest from here?

B

Bouncehouse

Registered User
Messages
5
Personal details

Your age: 43
Your spouse's age:40

Number and age of children:

3 x children from 10 to 5


Income and expenditure
Annual gross income from employment or profession: 130k – private sector employee
Annual gross income of spouse/partner: 42k – public sector, currently part time

Monthly take-home pay: 8,700


In general are you:
Saving

Summary of Assets and Liabilities
Family home value: 725000
Mortgage on family home: 200000
Net equity: 525000

Cash: 20,000
Defined Contribution pension fund: 120,000

Total net assets: 660,000

Wife has a defined benefit pension worth about 1,400 per month from 65


Family home mortgage information
Lender BOI
Type of interest rate: fixed for next 2 years.
Remaining term: 22 years
Monthly repayment: 1090

Other borrowings – car loans/personal loans etc

Do you pay off your full credit card balance each month? Yes
No other loans

Pension information

Value of pension fund: 120,000


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

We are comfortable and feel very lucky. My work has been steady but is in an industry that is generally unstable. With that in mind I had been pushing hard on house equity for some time towards a recent move that is now complete. Now that our housing side is comfortable and savings are back up I want to decide where I should be putting my money? Particularly keen to support the kids as they grow up and I live in an expensive housing area. I think there are a few options and would love peoples thoughts:

A: Savings accounts for each of the kids within the gift threshold – Will this be enough if we start now and will it leave us able to also get the right level of pension will my wife and I will need? Also they get control of the money from 18.

B: Investment property – they can take it over in due course, rent helps pay the mortgage and it tracks the market. I’m ok on doing odd jobs and live in a rental suitable part of the country. But there are tax earnings implications and I would have to be a landlord.

C: AVC to my own pension / stocks and shares? Eldest will be over 30 when I hit 65 but maybe that’s ok?
 
The disadvantage of savings accounts for the kids is that the money sits there not invested for years.

Investment property is fine but takes time to manage, has the risk of bad tenants and is not well diversified.

I would prioritise the mortgage and pension. You should also check if your pension is invested in diversified equity-based funds.

It might be worth figuring out what you need to live on retirement. Once you are confident that your combined pensions can provide that, then you can start to think about a plan for how to pass your wealth to your kids.
 
Your pension is underfunded and you need to play catch up by maxing out your pension contributions each year.

If you live in an expensive area, will you also be sending your children to fee paying secondary school? If so, you should be building up the funds for that. If you have school fees for three at the same time, that could be the guts of €30,000 a year.

I wouldn't be thinking of investment properties that the kids would take over at all. There is no need to be taking on a load of debt and then give it away. Bare trusts can be in the future too. You need to get your own financial future straight first before thinking of paying into a plan for the children.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
Bouncehouse said:
Income and expenditure
Annual gross income from employment or profession: 130k – private sector employee
Annual gross income of spouse/partner: 42k – public sector, currently part time

Monthly take-home pay: 8,700
Click to expand...
Is this correct?
I calculate that it should be c. €9,400 (plus €5k child benefit p.a.).


Are you making pension contributions via payroll?
Are you sure that you're claiming all available tax credits and are on joint assessment?
 
I agree with Stephen,

You hopefully will live for another 40-45 years
Your pension fund is very low
You have a 22 year mortgage,
you are likely to have kids in full time education for the next 17 years

You should give yourself a solid financial basis for the next 45 years before thinking about giivng money to your kids.
 
TomEdison said:
You can get investment accounts for kids — Aviva offers one, and I think Davy does, and there may be other providers.
Click to expand...
Yes- those products do exist but your pension would give a better return. No point investing in a product with higher charges and lower returns just to use up the small gift exemption.
 
Steven Barrett said:
Your pension is underfunded and you need to play catch up by maxing out your pension contributions each year.

If you live in an expensive area, will you also be sending your children to fee paying secondary school? If so, you should be building up the funds for that. If you have school fees for three at the same time, that could be the guts of €30,000 a year.

I wouldn't be thinking of investment properties that the kids would take over at all. There is no need to be taking on a load of debt and then give it away. Bare trusts can be in the future too. You need to get your own financial future straight first before thinking of paying into a plan for the children.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
Click to expand...
Thanks everyone. The answer seems obvious. I struggle with the underfunded part though so perhaps someone could help me understand? I had read a comfortable pension for a couple today is 60k. Seems reasonable based on current spending and removing kids and mortgages.

Given state pensions, my wife's DB pension and the compound gains on my existing DC pension(4% ahead of inflation feels reasonable, giving 300k +) I'd expect I am not far from that already?

In that context and given another 20 years of earning I'd expect to end on net worth around 2 million in which case I'd expect to want to share with the kids. I'm sure I'm wrong but not sure where!
 
Bouncehouse said:
Thanks everyone. The answer seems obvious. I struggle with the underfunded part though so perhaps someone could help me understand? I had read a comfortable pension for a couple today is 60k. Seems reasonable based on current spending and removing kids and mortgages.
Click to expand...
Where is the €60K figure coming from and what does it relate to?
 
Bouncehouse said:
Thanks everyone. The answer seems obvious. I struggle with the underfunded part though so perhaps someone could help me understand? I had read a comfortable pension for a couple today is 60k. Seems reasonable based on current spending and removing kids and mortgages.

Given state pensions, my wife's DB pension and the compound gains on my existing DC pension(4% ahead of inflation feels reasonable, giving 300k +) I'd expect I am not far from that already?

In that context and given another 20 years of earning I'd expect to end on net worth around 2 million in which case I'd expect to want to share with the kids. I'm sure I'm wrong but not sure where!
Click to expand...
Just a question.

So say in 20 years time you expect to have maybe the following.

Family home worth maybe ~1.5M
Pension ~560k (assuming 8% growth and no further contributions)
Wife's DB Pension ~17k/yr + inflation
2 state pensions ~ 29k/yr + inflation
Expected expenditure in retirement = 60k/yr + inflation

Do that sound right?

(Note I edited this post to account for inflation after I saw the post from Premos below.)
 
Last edited:
What I don't get there is that inflation seems to be taken into account to value future assets but retirement needs in terms of income seems to stay at 60k?
 
Steven Barrett said:
each year.

If you live in an expensive area, will you also be sending your children to fee paying secondary school? If so, you should be building up the funds for that. If you have school fees for three at the same time, that could be the guts of €30,000 a year
Click to expand...


I dont get this. Why the assumption thats kids be sent to fee paying school?!

Personally i think it stupid and a big waste of money to ever send kids to a "fee paying" school. Its pure snobbery and evidence shows that kids do as well when not attending such schools.

I feel sorry for folks that feel they need to send their kids to such schools.
 
It might be that the nearest school to them is fee paying, or one that they are on the feeder due to primary school. And in Dublin there re fewer choices for non fee paying. So to avoid a long commute them sometimes a fee paying school is the only option.
 
misemoi said:
It might be that the nearest school to them is fee paying, or one that they are on the feeder due to primary school. And in Dublin there re fewer choices for non fee paying. So to avoid a long commute them sometimes a fee paying school is the only option.
Click to expand...
The original poster never mentioned fee paying schools!
 
Bouncehouse said:
Personal details

Your age: 43
Your spouse's age:40

Number and age of children:

3 x children from 10 to 5


Income and expenditure
Annual gross income from employment or profession: 130k – private sector employee
Annual gross income of spouse/partner: 42k – public sector, currently part time

Monthly take-home pay: 8,700


In general are you:
Saving

Summary of Assets and Liabilities
Family home value: 725000
Mortgage on family home: 200000
Net equity: 525000

Cash: 20,000
Defined Contribution pension fund: 120,000

Total net assets: 660,000

Wife has a defined benefit pension worth about 1,400 per month from 65


Family home mortgage information
Lender BOI
Type of interest rate: fixed for next 2 years.
Remaining term: 22 years
Monthly repayment: 1090

Other borrowings – car loans/personal loans etc

Do you pay off your full credit card balance each month? Yes
No other loans

Pension information

Value of pension fund: 120,000


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

We are comfortable and feel very lucky. My work has been steady but is in an industry that is generally unstable. With that in mind I had been pushing hard on house equity for some time towards a recent move that is now complete. Now that our housing side is comfortable and savings are back up I want to decide where I should be putting my money? Particularly keen to support the kids as they grow up and I live in an expensive housing area. I think there are a few options and would love peoples thoughts:

A: Savings accounts for each of the kids within the gift threshold – Will this be enough if we start now and will it leave us able to also get the right level of pension will my wife and I will need? Also they get control of the money from 18.

B: Investment property – they can take it over in due course, rent helps pay the mortgage and it tracks the market. I’m ok on doing odd jobs and live in a rental suitable part of the country. But there are tax earnings implications and I would have to be a landlord.

C: AVC to my own pension / stocks and shares? Eldest will be over 30 when I hit 65 but maybe that’s ok?
Click to expand...

In previous posts I have stated that I do not consider my Principal residence as a asset. I am in my early sixties and own a house probably worth around 650k. In the future I might need to downsize. I reckon currently to downsize and choose a suitable spot I would need to spend 500k. Have to live somewhere.
I also have an investment property paid for. I do consider this part of my net worth.
No investments in Ireland can match investing in your pension.
Max out pensions to the last.
 
KOW said:
In previous posts I have stated that I do not consider my Principal residence as a asset. I am in my early sixties and own a house probably worth around 650k. In the future I might need to downsize. I reckon currently to downsize and choose a suitable spot I would need to spend 500k.
Click to expand...
In which case your PPR asset would have provided you with a "spare" €150K in liquidated capital after the downsizing.
 
  • Like
Reactions: KOW
ClubMan said:
In which case your PPR asset would have provided you with a "spare" €150K in liquidated capital after the downsizing.
Click to expand...
Exactly. Hopefully I might be able to add that 150k to the bank balance pending what housing is available that meets my needs.
The other 500k equity I have in my property will probably end up with the next generation.
While not true technically.
I consider my net assets in real terms as assets can be changed into cash while still having somewhere to live. Thats just me.
 
Premos said:
What I don't get there is that inflation seems to be taken into account to value future assets but retirement needs in terms of income seems to stay at 60k?
Click to expand...
Hey, so I'm presuming state pension kinda tracks inflation, as does my wife's DB pension which will be based on her final salary.

Then on the DC side I assumed 4% growth ahead of inflation.

With those in mind I think it's around 60k in today's money.

I got the 60k from a willis calculator on how much to live as a couple comfortably.

This is amateur hour but that's how I think of things. In this context I think of my financial future as secure given I expect to work for most of the next 20 years.

Happy to learn where I went wrong, I assume the gap is the difference between my current salary and the pot, which was due to a desire to go hard on the housing side.
 
Last edited:
You must log in or register to reply here.
Back
Top