Our advice to anyone reading this is to start thinking about these questions 3-5 years before retirement.
There are many trade-offs that need to be considered and starting this process ahead of time simply gives you more time to consider options fully.
Would you be willing to complete an annual self-assessment tax return?
The reason being that your gross taxable income (before investment income) is €39,208pa
A married couple aged 66 have an annual income tax exemption of €36,000pa so the amount of income tax you pay is currently likely to be relatively modest.
Your average rate of tax deductions is likely to be only about 4%pa.
Under these circumstances, I'd certainly avoid life assurance company contracts entirely where all income and gains are subject to a flat rate of exit tax of 41% currently.
You would be considerably better off with an income in the form of dividends (marginal rate of 20% plus USC) or capital gains tax 33% (less annual exemptions of 2 x€1270pa)
The example portfolio (below) has an expected real return (over inflation) of CPI plus 2.20% net of costs.
Assuming the ECB inflation target of 2%pa that implies an expected nominal return of around 4%pa.
The probability of making a 20% loss in real terms in any 1 year for this portfolio is less than 1%.
We can be 50% confident that the worst one year loss is less than 5% and 95% confident that the worst one year loss is less than 15%.
I'd also suggest deferring the AVC until age 75 as you will also obtain tax free growth on this.
Marc Westlake CFP, APFS, EFP, TEP, QFA
Chartered, Certified and European Financial Planner and Registered Trust and Estate Practitioner