No mortgage - what to do with savings

billy_martin

Hi,
My wife (44) and I (45) currently have no mortgage.
Considering I'm currently saving (1,250 p.m.)
and we have two children 8yrs and 1yr.

Can we do something other than just save the money and get little or no interest?

Current Salary
=========
Me (75k)
Wife (45k)

Current Investments/Savings
==================
Irish Life - Quinn Life Regular Premium Savings - 55k (300p.m investment)
KBC Savings Account - 26k
Permanent TSB - 20k

Life Insurance
==================
Irish Life - Life Home Cover (Block) - 87k

Children's investments
==============
Child1: KBC Sivek Low/Medium - 15k
Child2: KBC Medium - 2.5k

Current Employer Pension
===========
Contributions (36k) Vs Current Value (39.8k) (375pm by me and 750pm by employer).
Other pension, don't have details to hand.

Life Assurance - With employer
===================
825k (Current Salary * 11)

topper_harley2

An enviable position indeed, well done!

You could boost your pension with AVC, 39k is quite small at almost 50, relative to 75k salary. Personally I'd up that up max allowed for your age (25%) to catch up.

You don't mention anything about risk with your money. If you want better than bank interest, you're definitely at risk of loggi losing money. How would that feel? Low cost ETFs are usually the recommendation here.

You have two children who will cost for (possibly) creche, schooling, clothes, college etc etc. Think 10 years in future - would you like just to have that 150k ready to put them through college (1250*12*10=150k)?

You have to think, you are not really making interest, but with inflation so low, your savings are not being eroded either.

billy_martin

topper_harley2 wrote: »

An enviable position indeed, well done!

You could boost your pension with AVC, 39k is quite small at almost 50, relative to 75k salary. Personally I'd up that up max allowed for your age (25%) to catch up.

You don't mention anything about risk with your money. If you want better than bank interest, you're definitely at risk of loggi losing money. How would that feel? Low cost ETFs are usually the recommendation here.

You have two children who will cost for (possibly) creche, schooling, clothes, college etc etc. Think 10 years in future - would you like just to have that 150k ready to put them through college (1250*12*10=150k)?

You have to think, you are not really making interest, but with inflation so low, your savings are not being eroded either.

Thanks for your detailed response.
Was just checking today re: my other pension which was there prior to my current employer.
Contibutions was 147k, Current Value is 171k.
So that makes (171k + 39k) = 210k pension in total.
I guess AVC's would still be good thing to do, regardless of this.

topper_harley2

Much better numbers there!! I honestly don't think you need do much different than now. You're in good position. Maybe go on nice holiday. Doesn't need to be all saving.....

billy_martin

topper_harley2 wrote: »

Much better numbers there!! I honestly don't think you need do much different than now. You're in good position. Maybe go on nice holiday. Doesn't need to be all saving.....

I was waiting for someone to say that LOL
You hear such horror stories in the press about the pension time bomb.
One last thing, is there any pension calculator online, where I could determine SORP (Statement Of Reasonable Projection) based on the overall 210k and see an approximation

topper_harley2

Aviva has one, pensions authority also. Google for same....

billy_martin

topper_harley2 wrote: »

Aviva has one, pensions authority also. Google for same....

That’s interesting, the calculator is telling me I need to save an extra 2,300 euro per month so that I can retire on 50% of my current income of 75k i.e. 37.5k at a retirement age of 65.
Yikes.

topper_harley2

Depends what you want to do in retirement. E37.5k pa could be loads or pittance depending.....

billy_martin

topper_harley2 wrote: »

Depends what you want to do in retirement. E37.5k pa could be loads or pittance depending.....

Yes. I assume they mean 37.5k in today’s spending power.

billy_martin

topper_harley2 wrote: »

Depends what you want to do in retirement. E37.5k pa could be loads or pittance depending.....

Just to clarify the pension calculator didn’t estimate 37.5k per annum for my retirement.
It said I would have to save an extra 2,300 Euro per month to achieve 37,500 per annum for my pension.
It seems strange.
Is there something I’m not understanding fully.

diomed

I think the advice about pension Additional Voluntary Contributions above is very sound.
When I was working I did that, starting at age 40 with almost zero pension I bought ten years service by increasing my monthly contributions (pension based on years service).

When I took early retirement at 56 in 2006 I also had also 35k AVC saved (reads real small now) that I could take in cash.
I put that in an online stockbroker for two years, then when the stock market tanked I put it all in US shares, doubled it, took it out, paid CGT, upgraded my car, and this week bought a thoroughbred broodmare.

If you have spare cash/savings have it available for share investment.
The US stock market hit another high today, about 100 new highs in 2017.
In about four years there will be shares available at one third today's prices.
Select the shares you want to buy now, wait for the panic, wait again, wait again, and invest the lot.
But I'm not a fan of the US economy, too much dollar printing.

Avoid technology, popular happening industries, the great new thing.
Buy long established food, personal hygiene, and stuff like that.

I wouldn't be a fan of all those investments managed by companies for you.
My guess is you paid a big up front commission (unseen) and you pay a fair bit each year to them (unseen).
But these takes are not disclosed to you.

noel100

You have 2 children 1, & 8
The cost of College is your new mortgage for your children. When they are older you'll be spending a lot of your income on them.

I'm in a similar situation. Mortgage paid age 47 wife 48. One income 70k. but the last few years were expensive. I had money saved and redundancy from previous job. 2 girls at college over a 6 year period was and all the money I had is completely gone on them. I'm on the other side now both are working. The youngest girl no.3 couldn't hack college.

I had close to 100k saved plus income from work which depleted very quickly and never live beyond my means.

My pension would not be anywhere near what you have saved.

billy_martin

diomed wrote: »

Avoid technology, popular happening industries, the great new thing.
Buy long established food, personal hygiene, and stuff like that.

What’s the best way, to buy shares in established food and personal hygiene etc.

colm_c

That seems like a low amount to be saving given your relatively high income and no mortgage.

Are there outstanding loans? If so I'd be paying those off first before anything else.

billy_martin

colm_c wrote: »

That seems like a low amount to be saving given your relatively high income and no mortgage.

Are there outstanding loans? If so I'd be paying those off first before anything else.

My monthly net salary is about 3.5k,
So I’m saving 1.25k and investing 300 per month.
Also investing 200 for each child in KBC Sivek medium fund, mostly funded from children’s allowance.
So let’s just say 1.6k savings/investment out of 3.5k net salary.
I also save for holiday etc.
Note, net salary is probably lower due to pension contributions, travel pass etc. etc.
No outstanding loans.

diomed

billy_martin wrote: »

What’s the best way, to buy shares in established food and personal hygiene etc.

I would look at companies like Johnson & Johnson, Proctor & Gamble and others like that.
Have an account open with a stockbroker. I have kept mine open with about 500 Euro in it, and I'll put money into it in a few years.

When I bought it was Berkshire Hathway B shares (BRKB) (today $196.66). The BRKA shares are $295,815 each share. 1500 B shares equal 1 A share.
People told me I was daft putting all my money into one share, but it was really over twenty big company shares held by one company.

Just search for companies like the ones mentioned above, take a note of the share price now, and write down a ridiculously low share price you would love to pay for them.
When the market collapses you need courage and ready cash to buy when everyone panics.
If you have patience those good companies will fall with the market.

billy_martin

diomed wrote: »

Just search for companies like the ones mentioned above, take a note of the share price now, and write down a ridiculously low share price you would love to pay for them.
When the market collapses you need courage and ready cash to buy when everyone panics.
If you have patience those good companies will fall with the market.

Thanks. Just a few quick 'novice' questions.
I see that Johnson&Johnson and Proctor & Gamble have current share prices of $141 and $91 respectively.
1. What would be a ridiculously low share price, are we talking the price in 2008 when the crash happened?
2. Is there a best stockbroker to use? I know there are online tools where alerts can be set to buy and sell, have never used them though.
3. Would there be currency risk involved?

diomed

billy_martin wrote: »

Thanks. Just a few quick 'novice' questions.
I see that Johnson&Johnson and Proctor & Gamble have current share prices of $141 and $91 respectively.
1. What would be a ridiculously low share price, are we talking the price in 2008 when the crash happened?
2. Is there a best stockbroker to use? I know there are online tools where alerts can be set to buy and sell, have never used them though.
3. Would there be currency risk involved?

1. Assuming there are no share splits (e.g. they issue two share for one but the share price halves) JNJ Johnson & Johnson are now $142.74 (I would like $70), and PG Proctor & Gamble are now $91.92 (I would like $55).
Read up on Warren Buffett and his investing strategy. He likes companies with little technology, no debt (shows you do not need to borrow to invest in expensive assets, and also an indicator of a company that generates lots of cash), and companies who buy back their shares with the excess cash they generate.
When Yahoo shares were selling at a PE of 630 (share price was 630 times annual earnings) he bought a basic foods company (flour milling or similar) that was selling at a PE of about 2.5 (memory not too sure here).
In other words you would have to wait 630 years for Yahoo to earn back your share price, the other company 2.5 years, or one was earning 0.15% profit, the other 40% profit. But one was trendy and happening (didn't happen, Google wiped them), the other as boring as mud.

2. I used E*Trade to buy and was unhappy with them. I left the money in the account for two years waiting for the low (bought Nov 2008, low was Mar 2009). They kept pressuring me to buy as obviously they wanted commissions, and me buying and selling ever week. Finally the told me they were closing my account, saying they were no longer operating in Europe. They wanted to force sell my shares (to generate commission for themselves) and send me the balance in cash. I refused, fought them, and eventually had the shares transferred to Goodbody Online in Ireland.
Trading in and out of shares is a good way to burn your capital.

3. Yes, there is a currency risk.
When I put my money into E*Trade the exchange rate was 1.55. When I finally sold using Goodbody the rate was something like 1.15.
Perhaps next time I will look to invest in a Euro zone company.
But a far bigger risk is being afraid to buy when everyone has been burned in the stock market, won't touch it, is predicting catastrophe. That is time to buy.

topper_harley2

How did this go from my advice of AVCs and saving for your children's future turn into a market timing and stock picking thread?! :-D

billy_martin

topper_harley2 wrote: »

How did this go from my advice of AVCs and saving for your children's future turn into a market timing and stock picking thread?! :-D

Yeah I noticed that myself. LOL.
AVC advice is great, no harm in at least knowing how to take calculated risk-reward with some savings.

diomed

The thread title was
No mortgage - what to do with savings

billy_martin

diomed wrote: »

The thread title was
No mortgage - what to do with savings

Yes I thought that too, just after my last post.
All great advice. Thanks.