45 year old with spare cash looking for advice

A

angryInch

Registered User
Messages
24
Age:
45
Spouse’s/Partner's age:
41

Annual gross income from employment or profession:
E200k
Annual gross income spouse:
E30k

Type of employment:
I'm private sector, spouse is public sector

Expenditure pattern:
We are both generally 'savers', neither of us spend extravagantly or have expensive taste. Living within about 30% of take home pay.

Rough estimate of value of home
E450k
Mortgage on home
fully paid off last year

Other borrowings – car loans/personal loans etc
2 buy to let mortgage, one with 100k remaining, other 60k, both tracker at +0.75 above ECB.
No other bowerings or debt

Do you pay off your full credit card balance each month?
Yes

Savings and investments:
E850k savings mostly cash
Also have around 3 million USD with of RSU's with a company that are likey to go public in the next year or 2.

Do you have a pension scheme?
Yes, private pension, fully maxed every year, about 350k in it
Spouse has full public sector pension

Do you own any investment or other property?
2 other houses, both more than covering mortgage. One house worth 270k, other worth 240k
Combined rental income 22k per year

Ages of children:
6 and 9

Life insurance:
Yes.

What specific question do you have or what issues are of concern to you?
Have sizable amount of cash lying around and want to invest it. Also possible large amount of money that could come via IPO of the company I hold shares with.
Basically, I want to have this money beat inflation (in the long term) and provide for a good retirement, and a future for my kids.

Thanks.
 
How well is your pension funded? And if the stock is in RSUs that will be subject to income tax is the 3m gross or net?
 
Blackrock1 said:
How well is your pension funded? And if the stock is in RSUs that will be subject to income tax is the 3m gross or net?
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Pension fund is currently worth 350k, been maxing it out for the last few years and will keep doing that, as it's the most tax advantageous thing to do.
3m is gross, so roughly half that after tax.
 
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angryInch said:
Pension fund is currently worth 350k, been maxing it out for the last few years and will keep doing that, as it's the most tax advantageous thing to do.
3m is gross, so roughly half that after tax.
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Think of it this way I'm assuming you spend circa 3.5-4k a month at the moment? At that rate 1.5m would last you over 30 years so in reality you'll already be set for retirement leaving aside your actual pension, rental income and state pension and cash already accumulated.

So what else would you like to do? Having that kind of cash lying around is great and I'm sure someone else will come along with a sensible idea of how to invest it, but personally I'd be spending a little more of it now as your objective of a comfortable retirement has already been met.
 
Blackrock1 said:
Think of it this way I'm assuming you spend circa 3.5-4k a month at the moment? At that rate 1.5m would last you over 30 years so in reality you'll already be set for retirement leaving aside your actual pension, rental income and state pension and cash already accumulated.

So what else would you like to do? Having that kind of cash lying around is great and I'm sure someone else will come along with a sensible idea of how to invest it, but personally I'd be spending a little more of it now as your objective of a comfortable retirement has already been met.
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I probably spend more like 2-3k a month
I have made some large purchases/spends over the last year (paid off mortgage, spent 100k on a car). The figures above are after that spend has been taken out.
So not living miserly, we go on nice holidays, our house is perfect and don't want to make any changes (bar minor makeovers to certain rooms).
Really don't desire to spend needlessly on anything else, wealth accumulation for me has always been about financial security, and not trying to afford some lifestyle (I am perfectly happy with my current lifestyle).
The large amount of cash is due to moving back to Ireland from abroad so many investments abroad had to be liquidated, I don't want to leave that cash sitting there depreciating (have much of it in raisin and similar savings accounts for now). So mostly looking for advice about good ways to put it to work, with only aim being to beat inflation and make modest returns in the long term.
Advice may be to get a financial advisor, and would really appreciate any recommendations people may have.
 
angryInch said:
only aim being to beat inflation and make modest returns in the long term.
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That almost certainly means equities. Ideally direct investments given the lower charges and tax, but indirectly via unit linked funds or ETFs is also an option.

You already have property investments so equities would balance this out in terms of risk. Also, reducing or clearing these mortgages would make these investments more efficient.

Your RSUs seem to be more of a potential future windfall so shouldn't impact any equity investment decisions as far as I can see.

But at your level of actual and potential net worth, you should probably get independent professional advice on finances, retirement planning, succession planning etc
 
@angryInch

As your age, levels of wealth, income, and spending you will have more money than you ever need!

You should be focussed on minimising a very large tax bill for your children when their inheritance arrives.

A few points:
  1. You and spouse should already start making a €3k a year transfer to each of your kids that will not count for CAT purposes under the small gifts exemption. So that's €12k a year. There are various products and I've seen bare trusts recommended here on aAM;
  2. Uncrystallised capital gains expire when you do so there is no point in you being taxed on capital gains and then your kids being taxed on their inheritance some years later. That's a kind of double taxation. So it makes sense to have wealth in a form that can be liquidated if necessary but ideally held for a lifetime to contributed to inheritance. So for me this favours direct holdings of a diversified basket of equities. ETFs would be subject to deemed disposal taxation while the properties would likely have a large capital gain the longer you hold them. To do this right you might need professional advice;
  3. I don't think bank collapse is likely but you should still spread €850k across several institutions, up to the guaranteed €100k per depositor or €200k per couple;
  4. Company going public is not a sure thing. There are lots of cases of failed IPOs out there and you should make plans for what happens if it doesn't work out;
  5. Finally and most importantly enjoy your wealth! You can easily live in a bigger house and spend more per month. Money doesn't automatically bring happiness but for sure there are things where it could bring you pleasure.
 
Have you considered funding or donating to a good cause, perhaps a local one? This is a serious suggestion - it can bring many benefits in many ways.
 
angryInch said:
I probably spend more like 2-3k a month
I have made some large purchases/spends over the last year (paid off mortgage, spent 100k on a car). The figures above are after that spend has been taken out.
So not living miserly, we go on nice holidays, our house is perfect and don't want to make any changes (bar minor makeovers to certain rooms).
Really don't desire to spend needlessly on anything else, wealth accumulation for me has always been about financial security, and not trying to afford some lifestyle (I am perfectly happy with my current lifestyle).
The large amount of cash is due to moving back to Ireland from abroad so many investments abroad had to be liquidated, I don't want to leave that cash sitting there depreciating (have much of it in raisin and similar savings accounts for now). So mostly looking for advice about good ways to put it to work, with only aim being to beat inflation and make modest returns in the long term.
Advice may be to get a financial advisor, and would really appreciate any recommendations people may have.
Click to expand...
2-3k a month as a family or just you personally? I presume that's just you? I'm not saying you are living miserly but I'm just making the point that you have probably already hit your goals if the RSUs materialise so as the other poster said start transferring to the kids in a tax efficient way and look into a good financial advisor and maybe think about when you'd like to retire and what that would look like.
 
NoRegretsCoyote said:
@angryInch

As your age, levels of wealth, income, and spending you will have more money than you ever need!

You should be focussed on minimising a very large tax bill for your children when their inheritance arrives.

A few points:
  1. You and spouse should already start making a €3k a year transfer to each of your kids that will not count for CAT purposes under the small gifts exemption. So that's €12k a year. There are various products and I've seen bare trusts recommended here on aAM;
  2. Uncrystallised capital gains expire when you do so there is no point in you being taxed on capital gains and then your kids being taxed on their inheritance some years later. That's a kind of double taxation. So it makes sense to have wealth in a form that can be liquidated if necessary but ideally held for a lifetime to contributed to inheritance. So for me this favours direct holdings of a diversified basket of equities. ETFs would be subject to deemed disposal taxation while the properties would likely have a large capital gain the longer you hold them. To do this right you might need professional advice;
  3. I don't think bank collapse is likely but you should still spread €850k across several institutions, up to the guaranteed €100k per depositor or €200k per couple;
  4. Company going public is not a sure thing. There are lots of cases of failed IPOs out there and you should make plans for what happens if it doesn't work out;
  5. Finally and most importantly enjoy your wealth! You can easily live in a bigger house and spend more per month. Money doesn't automatically bring happiness but for sure there are things where it could bring you pleasure.
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I agree with NRC's points and would make some further points.

1) Half of your wealth seems to be in one company. As soon as you can, you should sell these shares and take the CGT hit. When everything is going well, especially at IPO time, people think that the company can only ever improve. Great companies can suddenly fail. Personally, I would sell all of them, but if you decide to hold onto €500k worth of them, fair enough.

2) As Coyote says - invest the proceeds in a diversified portfolio of directly held equities. Hold them for the long term. You will probably still own these when you die and the capital gains liability will disappear.

Don't forget when choosing a portfolio to diversify away from the company you have the potential €3m in shares. So if that is a tech company, then don't invest anything in tech companies. There is a tendency for people to "invest in what they know" which can result in a very narrowly focused portfolio.

3) It is tax-efficient to give €6k a year to each of your children. However, that is immaterial in the context of your wealth. Over 20 years you will give them €120k and thus save €40k CAT. So decide for yourself if it's a good idea to give a 6 year old €6k a year.

I would say that you should do your own investment plan based on the discussion here and then sense-check it against an advisor. Make sure that you use a fee-based advisor and not someone who will earn commission by selling you products. Maker sure that they are a Certified Financial Planner which is the highest qualification for financial advisors.

Two such fee based CFPs are

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Steven posts on Askaboutmoney so you can assess the quality of his advice for yourself.


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I enjoyed the profile of one of the advisers recommended:


He set up his own pension firm more than 20 years ago from which he retired in 2020. In February this year he decided to come out of retirement.

Barry’s vast experience allows him guide clients through their ever changing life stages and he specialises in retirement planning,
 
angryInch said:
3m is gross, so roughly half that after tax.
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Unless you are tax resident in a country where there is 0% CGT at the time you divest.
That's where my head would be at if I were in your lovely shoes.

3M vs 1.5M by moving to another lovely country of your choosing for a while. Give it some thought.
 
angryInch said:
Advice may be to get a financial advisor, and would really appreciate any recommendations people may have.
Click to expand...
Yes, definetly in your situation. Money well spent.

You may want to consider securing the services of a Certified Financial Planner with expertise in global markets for globally mobile clients such as yourself.
A Financial planner with an Ireland centric outlook / client base may be limiting, but maybe that would be fine by you if you are intent on seeing out your days in Ireland.
 
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llgon said:
I enjoyed the profile of one of the advisers recommended:


He set up his own pension firm more than 20 years ago from which he retired in 2020. In February this year he decided to come out of retirement.

Barry’s vast experience allows him guide clients through their ever changing life stages and he specialises in retirement planning,
Click to expand...
Just because he came out of retirement and went back to work doesn't necessarily mean that his own personal retirement planning failed which is what you may be implying?
 
angryInch said:
Also have around 3 million USD with of RSU's with a company that are likey to go public in the next year or 2.
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There's a lot of focus on this bit but I'd be cautious about counting my chickens on this one. My wife's pre-IPO employer has been 1 year away from IPO for about 4 years now, and if anything it looks further away now than when she joined. Also you should be realistic about valuations - her employer barely cut their internal valuation in 2022 despite comparable public companies valuations falling >50%. You would also find your holdings being significantly diluted in an IPO.

I'm not trying to pour cold water on this and thankfully you are in a very strong position outside of the RSUs. Personally I would treat these RSUs closer to a lottery ticket than an asset. Hopefully some day it comes good and you get a windfall, but in the meantime I would ignore them in my financial planning.

Are all the holdings in your employer RSUs or are do you have some options as well?
 
interested21 said:
There's a lot of focus on this bit but I'd be cautious about counting my chickens on this one.
Click to expand...

This is the big uncertainty.

Giving €6k a year to his kids is irrelevant in the scheme of things.

He is not making any plans on the basis of receiving €1.5m in the near future.

But he should gear himself up now to sell these shares as soon as he can.

Brendan
 
Horatio said:
Unless you are tax resident in a country where there is 0% CGT at the time you divest.
That's where my head would be at if I were in your lovely shoes.

3M vs 1.5M by moving to another lovely country of your choosing for a while. Give it some thought.
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RSUs tend to be subject to income tax not cgt.
 
Brendan Burgess said:
Giving €6k a year to his kids is irrelevant in the scheme of things.
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I don't think so. Saving 33% CAT on €12k a year is €4k - do it for two decades and it's €80k saved. It's not nothing. OP should find a product, set up the standing order for the benefit of the kids and just leave it alone for years.
Brendan Burgess said:
He is not making any plans on the basis of receiving €1.5m in the near future.
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I fully agree. This is where almost all of the financial risk lies.
 
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