General retirement financial advice sought

M

Magilla

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Hi all.

Firstly, we do intend to get some independent financial advice soon, but just thought I'd throw our situation out there for ideas/suggestions.

We are both almost 58. We will both be taking early PS retirement very soon (wife has been bullied out- long story; I've just had enough and want to go with her).

1. We own our house (worth maybe €375-425,000), no loans, youngest has finished college, older two well sorted career-wise.
2. We own a small house in Spain, no loan, worth maybe €180-200,000 once some much-needed renovation works in progress are finished. Obviously we plan to spend several months per year there.
3. Pensions will be roughly €29,000 for me, 26,500 for herself. Lump sums will be roughly €170,000. No entitlement to state pension, but I might qualify for a pro-rata payment if I boost my contributions (would still only be 40-50/week).
4. I have an AVC due on retirement. Will be able to take approx. 8,500 cash plus balance of 78,500 to be invested. Probably draw down 500-600/month on this (i.e. pay for the bills in Spain).
5. Herself is due an inheritance very soon from her late sibling's estate. I'm not involved in the detail but after tax it could be anywhere from 150-250,000, as far as I know.
6. About 15,000 in bank/credit union- we took out a good bit to buy Spanish property mortgage-free.
7. Two cars (7 and 5), good order, no loans.
8. Credit card used as needed, cleared every month.

Questions is, what should we do with the inheritance? We plan to use some of our lump sums to assist kids with mortgage deposits as needed, and keep the balance for ourselves/replace car in time etc. As of now, we don't need the inheritance but would like to invest it wisely for a rainy day/the kids. We are not big spenders (no flash cars, expensive clothes, jewellery, holidays etc).

Thoughts welcome, and thanks for reading.
 
Nice problem to have, retiring more or less as millionaires !

Is there anything that needs doing with the house, insulation, decoration, kitchen etc.? in effect, invest in your house to future proof it as, in due course, it may go to the kids/grandkids
Is there the bucket list trip?
Is there any interest in retraining/reskilling as you could still have a good 10 yrs working life in you if you were interested, maybe more
Are there any medical issues that you could get resolved privately?- invest in yourself
 
ClubMan said:
Maybe I'm missing something, but where do you get the million from?
Click to expand...
Even ignoring the lump sums, the home and the house in Spain, the €55,500 a year guaranteed for rest of life from age 58 is worth a lot more than a million euro!
 
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A related question would be -What do you plan on taking up in retirement and how is that likely to impact? For example golfing or travelling away more? factor in those costs too.
 
Magilla said:
Hi all.

Firstly, we do intend to get some independent financial advice soon, but just thought I'd throw our situation out there for ideas/suggestions.

We are both almost 58. We will both be taking early PS retirement very soon (wife has been bullied out- long story; I've just had enough and want to go with her).

1. We own our house (worth maybe €375-425,000), no loans, youngest has finished college, older two well sorted career-wise.
2. We own a small house in Spain, no loan, worth maybe €180-200,000 once some much-needed renovation works in progress are finished. Obviously we plan to spend several months per year there.
3. Pensions will be roughly €29,000 for me, 26,500 for herself. Lump sums will be roughly €170,000. No entitlement to state pension, but I might qualify for a pro-rata payment if I boost my contributions (would still only be 40-50/week).
4. I have an AVC due on retirement. Will be able to take approx. 8,500 cash plus balance of 78,500 to be invested. Probably draw down 500-600/month on this (i.e. pay for the bills in Spain).
5. Herself is due an inheritance very soon from her late sibling's estate. I'm not involved in the detail but after tax it could be anywhere from 150-250,000, as far as I know.
6. About 15,000 in bank/credit union- we took out a good bit to buy Spanish property mortgage-free.
7. Two cars (7 and 5), good order, no loans.
8. Credit card used as needed, cleared every month.

Questions is, what should we do with the inheritance? We plan to use some of our lump sums to assist kids with mortgage deposits as needed, and keep the balance for ourselves/replace car in time etc. As of now, we don't need the inheritance but would like to invest it wisely for a rainy day/the kids. We are not big spenders (no flash cars, expensive clothes, jewellery, holidays etc).

Thoughts welcome, and thanks for reading.
Click to expand...
How are you retiring from PS at 58 ?
Thought minimum would be sixty -excluding health issues ?
 
Iawoman lots of options for retirng early - buy back service - Defence forces and Gardaí can retire younger with specified service. They might be going on a reduced pension at an earlier age.
 
If there are any health issues due to the work related problems, sort those first. If Western medicine isn't working, try some form of Eastern. On frequent flights to the sun during the colder months I'm seeing pretty substantial zip-loc bags of medication being produced by some passengers that have really surprised me.

I don't see the need to draw down 8% of your ARF to pay the bills in Spain.

Will you need two cars lying idle here while you're away?

If you're going to mature your AVCs via the intermediary appointed to the PS Scheme and that's where you're seeking the independent advice I would say that you'll be advised to do an Irish Life ARF @ circa 1.4% AMC and invest the inheritance with Zurich Life @ 1.25% AMC. So, maybe start researching those product now before you have that meeting and negociate some value for yourself, either with them or somewhere else.

Gerard

www.prsa.ie
 
Magilla said:
Hi all.

Firstly, we do intend to get some independent financial advice soon, but just thought I'd throw our situation out there for ideas/suggestions.

We are both almost 58. We will both be taking early PS retirement very soon (wife has been bullied out- long story; I've just had enough and want to go with her).

1. We own our house (worth maybe €375-425,000), no loans, youngest has finished college, older two well sorted career-wise.
2. We own a small house in Spain, no loan, worth maybe €180-200,000 once some much-needed renovation works in progress are finished. Obviously we plan to spend several months per year there.
3. Pensions will be roughly €29,000 for me, 26,500 for herself. Lump sums will be roughly €170,000. No entitlement to state pension, but I might qualify for a pro-rata payment if I boost my contributions (would still only be 40-50/week).
4. I have an AVC due on retirement. Will be able to take approx. 8,500 cash plus balance of 78,500 to be invested. Probably draw down 500-600/month on this (i.e. pay for the bills in Spain).
5. Herself is due an inheritance very soon from her late sibling's estate. I'm not involved in the detail but after tax it could be anywhere from 150-250,000, as far as I know.
6. About 15,000 in bank/credit union- we took out a good bit to buy Spanish property mortgage-free.
7. Two cars (7 and 5), good order, no loans.
8. Credit card used as needed, cleared every month.

Questions is, what should we do with the inheritance? We plan to use some of our lump sums to assist kids with mortgage deposits as needed, and keep the balance for ourselves/replace car in time etc. As of now, we don't need the inheritance but would like to invest it wisely for a rainy day/the kids. We are not big spenders (no flash cars, expensive clothes, jewellery, holidays etc).

Thoughts welcome, and thanks for reading.
Click to expand...
Just to add myself and the wife are a couple of years ahead of you. Over past year or so and looking forward a couple of years we are spending a lot more than we did while working. This is no surprise to us as we are doing the big trips South Africa, Canada etc while our healthis still good etc. Keep such matters in mind looking forward Plan well and keep well.
 
lawoman said:
How are you retiring from PS at 58 ?
Thought minimum would be sixty -excluding health issues
Click to expand...

For people who were in the PS from years ago, it’s possible to retire from age 50 but the pension entitlement is actuarially reduced to reflect the longer period over which it is paid.

In the OP’s case, it’s likely he’s getting about 90% of the amount he would receive if he held on until 60.

As you’ve alluded to, those retiring early on grounds of ill-health may get added years that boost their pension closer to the max.

Different rules apply to public servants recruited in the last 10 years or so and the pensions are much less attractive.
 
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Hi all and thanks for the replies. To address some of the points-
1. I will be going on actuarial-reduced pension so will take a bit of a hit, but according to my Excel spreadsheet it will take 20 years for that to impact me negatively in real terms compared to pension at 60 (of course two years salary gone too). By then, I probably won't care.:eek:
2. Boss lady has agreed a deal re her exit but still trying to get this finalised. It wasn't how she planned to go but the situation is untenable. It's stress-related rather than physical health (extremely poor managers who have driven her and practically all of her colleagues out- Andrea Gilligan hasn't heard the half of it), but debilitating nonetheless.
3. The independent financial advice will be on how to invest the inheritance and possibly some/all of the lump sums. Separately, the AVC provider will be talking to me about that aspect, but I appreciate I have options here.
4. One car is getting to high mileage stage so we will probably just keep it going until it dies. Other car is newer and smaller and is used by returning emigrant children also. Long-term, I would only see the need for one car, so maybe buy an EV (and possibly a cheap runaround for Spain).
5. Kitchen was completely redone in 2021 and main bathroom in 2023 (hence low cash savings). Sitting room probably needs a good makeover, but otherwise it's all decorative and I can do all that. I would certainly consider solar PV panels or similar to reduce energy costs....
6. Some small health issues between us currently being dealt with, nothing major but we have VHI so getting everything checked out fully before we retire.
7. @GSheehy- Re AVC drawdown for Spain, I see that we would need maybe 500 a month or so to keep things ticking over there (electricity, water, property tax, community charge, maybe a car etc.). Obviously we would have our pensions also- are you suggesting we don't need to draw it down? Invest elsewhere?

Thanks all and I would appreciate any other comments.
 
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I presume you are pre 95.
You will need 260 full rate paid prsi contributions to qualify for a Pro Rata pension.
Have you checked your Prsi record to see how many reckonable paid contributions you currently have ? ( Pre establishment ).
If you retire at age 58 you could gain 8 years of full rate paid contributions by age 66.
If you currently have 2 or more years of reckonable paid contributions you could reach the 520 level required to qualify for a larger pension than the pro rata one.
Using your ARF to gain class S contributions could be an easy way to achieve this.
 
Magilla said:
Questions is, what should we do with the inheritance?
Click to expand...
No obvious answers here, unfortunately.

I'm not a financial advisor but some thoughts.

1. Invest some in EFTs? Cons - 41% CGT, 8yr Deemed Disposal, Market Decline, Brokerage Difficulty
2. Raisin Bank (3.45% APR achievable)? Cons - Inflation, 12month fixed term, 33% Dirt.
3. Individual Stocks with strong/growing Free Cash Flow that are at a discount? Cons - Requires time to learn, correct temperament, market decline, brokerage difficulty.
4. Property? Cons - Regulations and Government Policy (Now and Future), hassle factor is high!

I use a mix of the above.......
 
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« 6. Some small health issues between us currently being dealt with, nothing major but we have VHI so getting everything checked out fully before we retire. »

This is worth reflecting on. I remember someone saying to me to always get a full Medical NCT of yourself done before retiring early. You are likely to be losing things like paid sick leave, PHI etc once you leave employment. You’d hate to find out you had a serious health issue the month after ending your employment and no longer have those benefits available to lean on.

g
 
You should be able to manage on €250/300 pm for community fees, basura, rates, insurance and getting an Asesore to do a tax return and file the modest taxes for you (I'm presuming that you're not going to be renting it out when you're not there).

I honestly think that you can do without the car there. You should at least try it without one for a year or so. You'll have nothing to do and all day to do it. Walking is good.

Yes, I don't think you need to take anything from the ARF until you have to and then just the minimum that's imposed on you.

Gerard

www.prsa.ie
 
Just to update:
Yes, we are pre-95 so enjoy the better pension arrangements.
We won't be renting out the Spanish property other than short-term use by family/friends (once bills are covered). We expect to spend 6-8 months per year there in time ourselves. Hopefully running costs will be in the region suggested above. I think a car becomes more essential as you spend longer there- out house is in a pretty small town and transport links are only so-so. Having said that, it's definitely not a priority.

@S class-How do S class contributions work? I looked it up but seems to relate to self-employed persons. How could I contribute/benefit as a PS pensioner (and possible employee if I pick up some work)?
 
If you have an ARF, then the drawdowns are classed as self employment income. Provided you drawdown a least 5000 euro per year you will pay prsi at 4% and gain 52 S class contributions per year. This would continue until you reach age 66.
S class Prsi is reckonable for the contributory pension. You could possibly achieve the 520 paid prsi contributions needed to gain a larger pension than you would get from a pro rata pension. You will get these S class contributions regardless of whether you are a pensioner or do some work. These S class Prsi contributions will also allow you to qualify for treatment benefits.
 
Wow, that's really interesting and thank you.

I already have 167 A class contributions from my younger days (as well about 1.5 year's worth of UK contributions that I hope will be reckonable when the time comes-another 60-70).

So if I understand you correctly, I need 353 additional Class S contributions to reach 520 (ignoring UK aspect) to qualify for full (?) state pension at age 66. So in theory 7 years x 52=364 of ARF at 5,000/year minimum will get me there. Is that correct?
 
No you won't qualify for a full pension. You need 40 years (2080) Prsi contributions for full pension. With 520 contributions you would be guaranteed 25% of the full pension (66.32 euro per week). If you achieve more than 520 contributions you will get more than 25% of the full pension. (8 years of ARF could get you to about 74 euro per week). At present you would be guaranteed a weekly pension of 106 euro per week with 520 contributions using the averaging calculating method. Unfortunately this method of calculation will probably be phased out before you reach pension age.
 
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