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AVC's... Can you pay in too much?

  • 08-12-2020 11:49pm
    #1
    Blub123
    Registered Users, Registered Users 2 Posts: 166 ✭✭


    Other half is 43, having started teaching at 19.
    Took 1 year abroad teaching.
    Apart from that has had constant service. Began paying into AVC's month 1.

    Total contribution @ 63K
    Annual contributions @ 6,800
    Current value @ 80,600
    Projected value at age 65 @ 275k

    Notional idea of early retirement at 55.
    At this point, growth rate at current avg rate would give an AVC value of €187K

    Another teacher mentioned that there is a point at which you are paying too much into AVC's and she has probably passed that point.

    Is this true?
    What are others opinions given above and hopes for early retirement?
    Are there many others in the same position? and if so what are they doing with Avc levels etc?

    Many thanks!


Comments

  • #2
    Jim2007
    Moderators, Business & Finance Moderators Posts: 10,605 Mod ✭✭✭✭Jim2007


    What are others opinions given above and hopes for early retirement?

    Make an actual plan and ignore random comments from people at the water cooler. Without clear objectives and a plan to achieve it, that you actively track, you can’t determine if a particular financial product is appropriate for you.

    If you want to retire at 55, you need to come up with a wrong estimate of how much cash you will need to have accumulated at that point to live for say 30 years, so get out the spreadsheet...

    A first pass might be to assume you will need about 65% of your current income. A state pension and occasional pension will form part of that in the later years, but what about the early years? How much are you going to need? And how are going to achieve it?

    This is an on going process, that you need to revisit annually.


  • #3
    The J Stands for Jay
    Registered Users, Registered Users 2 Posts: 5,876 ✭✭✭The J Stands for Jay


    It is possible to pay too much of an AVC. The only thing is it's usually quite a bit more than most employees could afford to pay, especially if they have long service. I'm guessing your AVC is with Cornmarket, and they're well paid for it. Go to them and get some advice; you've already paid for it.


  • #4
    beachhead
    Registered Users, Registered Users 2 Posts: 2,985 ✭✭✭beachhead


    The amount of AVCs you can pay into a policy is limited by how old you are,if you want to take advantage of tax allowances.The insurance companies love AVCs because they are a seperate stand alone plan.Luvely jubbly more fees


  • #5
    beggars_bush
    Registered Users, Registered Users 2 Posts: 4,755 ✭✭✭beggars_bush


    Blub123 wrote: »
    Other half is 43, having started teaching at 19.
    Took 1 year abroad teaching.
    Apart from that has had constant service. Began paying into AVC's month 1.

    Total contribution @ 63K
    Annual contributions @ 6,800
    Current value @ 80,600
    Projected value at age 65 @ 275k

    Notional idea of early retirement at 55.
    At this point, growth rate at current avg rate would give an AVC value of €187K

    Another teacher mentioned that there is a point at which you are paying too much into AVC's and she has probably passed that point.

    Is this true?
    What are others opinions given above and hopes for early retirement?
    Are there many others in the same position? and if so what are they doing with Avc levels etc?

    Many thanks!

    Why is he paying into an avc?
    For lump sum on retirement? There is a ceiling on how much you can claim tax free


  • #6
    The J Stands for Jay
    Registered Users, Registered Users 2 Posts: 5,876 ✭✭✭The J Stands for Jay


    beggars_bush wrote: »
    Why is he paying into an avc?
    For lump sum on retirement? There is a ceiling on how much you can claim tax free

    If you take a lump sum of €0.5million, you only pay 20% tax on €300k, an effective tax rate of 12% on your lump sum. Better than paying 40% on it now.


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  • #7
    The J Stands for Jay
    Registered Users, Registered Users 2 Posts: 5,876 ✭✭✭The J Stands for Jay


    McGaggs wrote: »
    It is possible to pay too much of an AVC. The only thing is it's usually quite a bit more than most employees could afford to pay, especially if they have long service. I'm guessing your AVC is with Cornmarket, and they're well paid for it. Go to them and get some advice; you've already paid for it.

    Actually, of they're on the old teachers' pension scheme, the benefits are quite generous. Some teachers started AVCs with the intention of topping up their lump sums, but the main scheme maxed this out (or came close) leaving an AVC balance to go into an ARF or annuity.


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