37 year old , just received inheritance where to next?

C

confsued

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Age: 37
Spouse’s/Partner's age: 37

Annual gross income from employment or profession: €22,800 after tax
Annual gross income of spouse:€22,500 after tax

Monthly take-home pay - combined after tax €3480

Type of employment: e.g. Civil Servant, self-employed
Both civil servants
In general are you:
(a) spending more than you earn, or
(b) saving? saving a small amount €300-400 a month which we can use for holidays etc.

Rough estimate of value of home €280,000
Amount outstanding on your mortgage: €180,000
What interest rate are you paying? ECB +1%

Other borrowings – car loans/personal loans etc
None

Do you pay off your full credit card balance each month? No cards currently
If not, what is the balance on your credit card?

Savings and investments:
€14,000 in civil service credit union
€5,000 in bank accounts
€350,000 split* across 3 accounts (*bank guarantee )

Do you have a pension scheme?
Both will have civil service pensions ( I assume as we have worked here since leaving school).

Do you own any investment or other property?
No

Ages of children:
6&10

Life insurance:
We have life insurance with the mortgage

What specific question do you have or what issues are of concern to you?
Hi guys , thanks if you have read this far. Myself and my wife are job sharing hours in civil service , as such we do not have childcare expenses. Our mortgage payments are very manageable and we where getting by no problems.

We unexpectedly received a windfall in the form of an inheritance in 2016, everything in relation to tax and whatever else was sorted and the net result was just over 350k been transferred to our joint account last year.

We have done nothing since but ponder what to do. I realise these problems are very much first world problems, any direction guidance or advice be much appreciated. My wife suggested a rental property but I am wary with the regulations around rent controls.

Thanks in advance.
 
You can as father ted said leave it "rest in my account"......ha! Enjoy your windfall and spend or invest wisely!
 
Different experts will no doubt be on here telling you different avenues you can go in order to maximise your savings. The An Post certs with tax paid are as good as you'll get over different time periods, eg, 16% over 10 years but that's quite a long time because it's impossible to know what's going to happen. You would get €17,500.00 tax free over the next 5 yrs for a 5 yr saving cert in An Post at the moment for the €350k. If you don't need the money for a while i'd stick it in there for the 5 yrs and see the lie of the land then. Others may not agree, my option is State guaranteed (sort of) I don't know who guarantees the state though.
I've had great luck and returns with the An Post Certs over the years but even though the returns may not be great at the moment compared with years ago, i'd say they're going to decrease the return again one of these days. Get in NOW if you want to avail of the present rates.
 
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the current an post savings option to me is unambitious to the point of being outright depressing , its a pitiful return , its a terrible waste of so much capital to simply leave it in a savings account earning less than 1% each year

my widowed mother had a sizeable sum in an post from 2010 for a few years and if memory serves correctly , the return was close to 4% per annum , those were very different times indeed
 
I would suggest that, if you do not intend to move house in the short term, you should clear your mortgage in the first instance. No bank deposit will give you a return equivalent to what you are paying in interest. You will be mortgage free and still have pretty much half of your inheritance. Your monthly cashflow will also improve greatly making it less likely that you will eat into your savings. A nice way to be!!
 
Thirsty said:
They have a good tracker rate, is clearing the mortgage the best option?
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there's a few variables there - if they're planning to move in the future then it might be worth holding onto the mortgage to transfer it to the new property, but that assumes that their bank allows transfer of tracker mortgages for someone not in negative equity. Also if wherever they buy costs < 450K then they could just buy with cash after selling their current home.

If they're not planning to move then paying off the mortgage is probably a good option as savings rates are so low; they'd still have a decent amount left if they also wanted to invest in something more high risk, or put it in a pension, or blow it on cocaine and blackjack.
 
i would not pay off any loan with an interest rate below 3.5% , its not often someone has a hefty amount of capital at their disposal , its all very well being ultra conservative and paying down debt and using terms like " risk reward on an adjusted basis " but no one ever grew their wealth by always choosing the most safe option , you need to have higher ambitions than simply not going broke , you should put your money to work in some shape or form IMO though take your time and perhaps study your options for six months , the interest on your current mortgage wont break you over six months even you decide at that time to pay down some of said existing mortgage
 
galway_blow_in said:
i would not pay off any loan with an interest rate below 3.5% , its not often someone has a hefty amount of capital at their disposal , its all very well being ultra conservative and paying down debt and using terms like " risk reward on an adjusted basis " but no one ever grew their wealth by always choosing the most safe option , you should put your money to work in some shape or form IMO
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So, your suggestion is?????????
 
Thanks guys , we did consider paying off the mortgage but at 1% its cheap money. We have considered options for a year now and spoke to a couple of family members in the finance field. Between advice received here and our own research it was a toss up between buying an investment property or the 5 year State Savings.

My wife suggested we visit a financial adviser but I wonder what they could bring to the table aside of what is mentioned here.
 
Hi Confsued,

Here's what I would do with the €350k windfall if I was in your shoes:-

1. I would pay off the mortgage balance. However, I would leave the mortgage protection policy in place - it's cheap life assurance and, when coupled with the civil service death in service, it should provide adequate cover.

2. I would leave ~€20k in an instant access savings account and use ~€50k to buy 5-Year State Savings Certificates.

3. I would then use the balance (~€100k) to buy shares in a global equity investment trust (something like Foreign & Colonial Investment Trust plc).

That would leave you mortgage free with an investment portfolio that should generate modest growth over the medium to long term.

However, only you can decide what you want to achieve with your windfall and how much investment risk you are willing and able to bear.

Hope that helps.
 
I would also bear in mind that if both yourself and your wife are joBsharing over an extended period you may not be entitled to a full pension
 
I would second @Sarenco 's advice.

You've obviously got a risk-averse outlook if you're talking about 5 year state savings. Obviously your tracker is 'cheap money', but there's no point borrowing at 1% to lend it back at 0.98% fixed. If ECB rate goes up at all in the next 5 years, you'll be losing even more money.
The best 'risk free' return you can get on your money is to pay off the mortgage.

Once you've paid off the mortgage, set up a standing order for the same amount as your mortgage was, and build up a nest egg to invest if you so wish.

Just one point re investing. If you are to continue to job share, you are both in the lower Tax bracket. The usual advice is to invest for capital growth rather than dividends as it's more tax efficient, but in your case, if I've done my maths right, you can earn close to 10k per year currently at 20% tax bracket. It's worth having a look at what's the most efficient from a tax point of view.

Good point re pensions from @Meath Lady . I don't know the first thing about Public Sector pensions, and I'd question if it's worth putting extra salary into a pension when you're only getting relief at 20% rate - it all depends on how long you both plan to be in the lower tax bracket. Once you've mortgage paid off it'll give you lots of options.
 
confsued said:
Thanks guys , we did consider paying off the mortgage but at 1% its cheap money. We have considered options for a year now and spoke to a couple of family members in the finance field. Between advice received here and our own research it was a toss up between buying an investment property or the 5 year State Savings.

My wife suggested we visit a financial adviser but I wonder what they could bring to the table aside of what is mentioned here.
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I'd buy a commercial property myself , with that kind of money , you could afford something worth near half a million were you to put a hundred grand of debt on it , half a million will buy you a commercial property in any of the main cities with an income of close to 50 k per annum in many cases , even you just bought a property to the value of your cash available and put no debt on it , you should easily get somewhere delivering over 25 k per annum
 
Some very interesting posts thanks all , going to have a read up on Investment trusts and commercial property. I was reading about property investing and came across IRES- REIT , I can't find the yield on this? , does anyone recommend these as an alternative to purchasing a property directly ?
 
confsued said:
Some very interesting posts thanks all , going to have a read up on Investment trusts and commercial property. I was reading about property investing and came across IRES- REIT , I can't find the yield on this? , does anyone recommend these as an alternative to purchasing a property directly ?
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i would be slow to invest in REIT,s , its really the same as buying a stock but you are entirely in one sector , you would never know how much the managers of the trust were awarding themselves , yields are very low in the irish ones , they are very new to this country , if your only getting 3% , you might as well just invest in a broad based fund which delivers the same yield but with proper diversification

IRES is a residential REIT , GREEN is the reit which focuses on commercial property , hibernia is another one , it has a mix of both , think friends first have a reit too
 
Re IRES-REIT, have a look here https://www.bloomberg.com/quote/IRES:ID
12 month total return is c. 23.5%, and dividend gross yield 3.66%

Without getting into a discussion about specific shares, one of the benefits of a REIT investment over investing directly in property is that it's spread over several properties. You're not dealing with the risk of a single tenant not paying rent, void periods, or any of the general stress of being a landlord (but you are paying someone else to do it for you).

One of the downsides is that while the value has moved in the same direction as the property market, they haven't increased as much as general property prices.

One of the rules of a REIT structure is they have to pay a certain amount of their rent income as dividend each year - in your case you'd only be paying 20% tax on this at the moment, but if you get into higher tax bracket it'll be taxed at the higher rate.

Do a search on the forum for REIT and you might find other discussions. As with all investments, you'll need to be comfortable that you could lose some of your capital value.

galway_blow_in said:
i would be slow to invest in REIT,s , its really the same as buying a stock but you are entirely in one sector , you would never know how much the managers of the trust were awarding themselves , yields are very low in the irish ones , they are very new to this country , if your only getting 3% , you might as well just invest in a broad based fund which delivers the same yield but with proper diversification

IRES is a residential REIT , GREEN is the reit which focuses on commercial property , hibernia is another one , it has a mix of both , think friends first have a reit too
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Some mixed messages there? You're advising now against investing in a single sector, but a few minutes ago you'd borrow even more money to buy a commercial property. I understand concerns about management fees, but unless you've enough money to invest in a fairly large property portfolio I'd consider it a good way to get some exposure specifically to property without taking on massive risks?
 
RedOnion said:
Re IRES-REIT, have a look here https://www.bloomberg.com/quote/IRES:ID
12 month total return is c. 23.5%, and dividend gross yield 3.66%

Without getting into a discussion about specific shares, one of the benefits of a REIT investment over investing directly in property is that it's spread over several properties. You're not dealing with the risk of a single tenant not paying rent, void periods, or any of the general stress of being a landlord (but you are paying someone else to do it for you).

One of the downsides is that while the value has moved in the same direction as the property market, they haven't increased as much as general property prices.

One of the rules of a REIT structure is they have to pay a certain amount of their rent income as dividend each year - in your case you'd only be paying 20% tax on this at the moment, but if you get into higher tax bracket it'll be taxed at the higher rate.

Do a search on the forum for REIT and you might find other discussions. As with all investments, you'll need to be comfortable that you could lose some of your capital value.


Some mixed messages there? You're advising now against investing in a single sector, but a few minutes ago you'd borrow even more money to buy a commercial property. I understand concerns about management fees, but unless you've enough money to invest in a fairly large property portfolio I'd consider it a good way to get some exposure specifically to property without taking on massive risks?
Click to expand...

no mixed message , investing in REIT,s is investing in the financial markets and the yield on those irish REIT,s is no better than many funds which are of course diversified across many sectors , im advising against investing in a single sector in the financial markets

a real property can deliver three times that yield if the OP goes commercial , he can also take on some debt to buy the property he wants , big difference

those irish REIT,s have underperformed the real property market for the last number of years
 
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