# Another Start A Pension Question – But At 57



## twofor1 (21 Dec 2016)

I have been reading with interest another current tread here on starting a pension at 43. Could I ask much the same question but for someone 14 years older. It’s a new question as I’d guess the advice given will be totally different for someone so much nearer retirement age.

 What would people here recommend for a 57 year old who has recently finished paying kids college fees, recently paid off mortgage and now has no debts.

Because of the above he has no private pension, he will qualify for the contributory state pension at 67. He currently earns €40K and health permitting intends working to 67.

He has a reasonable emergency fund in a 30 day notice account.

He could probably put €10K annually, maybe more into whatever for 10 years to age 67.

Simply putting it in the best of current saving accounts will earn next to nothing and will effectively be losing value over time.

PRSA’s / Pensions have the benefit of tax relief, though he is mostly on the lower rate, and with charges, levy’s etc  and the relatively short time left, would it still be beneficial in his circumstances ?

He knows that in pension terms any pot will be small and therefore any pension will be small, so all the more reason to get the best he can from it, if indeed this is a viable option at all.

What would people here advise ? pension wise or whatever in his circumstances.


Thanks.


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## Merowig (21 Dec 2016)

Personally I would have said its never too late - as the tax incentive helps - even if you are on the lower rate.

There is no pension levy anymore - charges - 1% AMC or even less if you go for a self directed PRSA. The pension scheme will have most likely a higher return - so you already make money tax free.


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## LS400 (21 Dec 2016)

Ahh here,
Just pre empting, if anyone here recommends taking out a pension, Im writing to Ripleys believe it or not..

Twofor1, My advice is being put through the mill, so take it at your peril, but, 10 years is a great opportunity to create yourself a nice modest income. Your contribution of 10k plus rent, taxed as it is, will still go a long way towards achieving your goal. 

Yes there are risks involved, but there are risks involved in any venture.


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## Sarenco (21 Dec 2016)

LS400 said:


> Twofor1, My advice is being put through the mill, so take it at your peril, but, 10 years is a great opportunity to create yourself a nice modest income. Your contribution of 10k plus rent, taxed as it is, will still go a long way towards achieving your goal.



Any chance you could elaborate on this cunning plan?

Are you suggesting Twofor1 borrows money to buy a rental property?


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## Conan (21 Dec 2016)

LS400,
Having read your comments on the other thread, your are at least consistent - in making no sense. In the case of this 57 year old your refer to "10k plus rent", but what rent? Are you suggesting that he buys a property? On what, 40k a year income? What could he borrow (and buy) on the basis of his income and age? What would any lender give him on an investment property? Not enough to buy any reasonable property (if any).
The rational for pension investment in this case is limited in that he will only get relief (perhaps?) at 20% but equally may only pay tax at 20% on his income (above the Income Tax threshold). But if his income is below the 20% threshold (based on a State Pension and a modest private pension) he may pay no tax (not enough information given on this point). In addition he will get a portion of the accumulated fund (perhaps 25%) as a tax free lump sum.
So if he can invest 10k each year for 10 years and get tax relief at 20% then the net "cost" is c80k. Even if he only earned a modest return (to cover the management costs) he turns 80k into c100k. He gets c25k back as a lump sum and uses the 75k to generate an income (perhaps c4k p.a.). That plus the State Pension (c 16.5k at current levels) will not generate any tax liability.


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## LS400 (21 Dec 2016)

Conan, neither you or I know what finances this guy has, 
Let's cut to the chase. 
He's 57, with no liabilities, hopefully with a reasonable property deposit in the bank. He's actually financially in a better position than most starting out and with a good track record. 
Don't rule it out.


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## LS400 (21 Dec 2016)

Looking at this again, locking himself into a commitment,  it costs him 80k, to get back 25k with a miserable probably 4K a year, which with inflation that 4K will have even less buying power.

No, I don't get it.


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## Sarenco (21 Dec 2016)

LS400 said:


> No, I don't get it.



That, at least, is becoming increasingly clear.

With the greatest of respect, if you don't understand something then why offer a view?  It's really not very helpful.

What gives you the impression that the OP has anything like 30% of the purchase price of a rental property lying around?

Read his post again.  Anything at all to suggest that there is spare cash lying around that's just waiting to be deployed in a risky, highly concentrated property venture? 

Seriously?  (As the young 'uns might say!).


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## Bronte (22 Dec 2016)

What I would do is buy an investment property and aim for it to be mortgage free at age 67.

If you can't do that I'd be building a granny flat and make sure there's a door into your house and maximise it to get rent of 12K. Tax free.

If that doesn't work. I'd sell my house, buy a house with a granny flat in situ (they exist) and take 12K rent right now tax free.

But if some of the bright posters can show me how his 10K, ie 100K will give him a better return I'm all ears.

The other think the OP might think of.  Build up your 100K.  Then whatever it's invested in, take out 5K each year for 20 years.  Gives you minimum 20 years on top of your 67 years of age, bringing you to 87.  If you're a smoker or otherwise, make it 10K annually.  Bringing you to 77 years of age and no doubt the smoking will have got you by then so you don't care how much you have left.


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## Gordon Gekko (22 Dec 2016)

LS400 said:


> Looking at this again, locking himself into a commitment,  it costs him 80k, to get back 25k with a miserable probably 4K a year, which with inflation that 4K will have even less buying power.
> 
> No, I don't get it.



What about setting up some kind of leveraged magic beans hedge fund?


A simple idea really...I'll put up the seed capital, Brendan Burgess can be the cornerstone investor, and Sarenco can run the money...Sarenco will assess the gullibility of a poster and then the fund will take long or short position in respect of magic beans as appropriate.


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## Gerry Canning (22 Dec 2016)

With Bronte,
+
By saving  k10 per year in a pension those funds are hard to access ie spend, and as Bronte says he then has an income k5+ extra in retirement .
Whats not to like about that .  Seems like sense to me.


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## Sarenco (22 Dec 2016)

Bronte said:


> If you can't do that I'd be building a granny flat and make sure there's a door into your house and maximise it to get rent of 12K. Tax free.



It's an interesting idea but I doubt many people would want to take in lodgers when they're approaching their 70's.  Or would want to start any property rental business at that age.

Trading down to a smaller home (perhaps an apartment) might well be a good way of freeing up some capital and the ongoing running costs (heat, maintenance, insurance, etc.) of a smaller home are likely to be much lower.

As Conan says above, the case for starting a pension here is limited because of (a) the age of the OP (limited time for tax-free compounding of investment income/gains to work its magic); and (b) his tax bracket (limited tax relief on the way in).  It might well still be just about worthwhile to start saving through a pension vehicle (versus simply saving after-tax income) but it's going to be fairly marginal. 

I think I would be inclined not to bother with the pension in these circumstances and simply save as much as possible from your after-tax income in (tax-free) State savings certificates.  They certainly won't earn you a fortune but they are ultra-safe and hopefully your savings will keep pace with inflation.


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## trasneoir (22 Dec 2016)

LS400 said:


> [re pensions] ...locking himself into a commitment,  it costs him 80k


Again, you are presenting "commitment" as a disadvantage of pensions. Can you elaborate? While some occupational schemes may have penalties/charges for reducing/stopping contributions...



pensionsauthority.ie said:


> PRSAs are flexible; you can increase, decrease or stop your contributions at any time without any charge or penalty


This is mostly true, and 100% true for many PRSAs (discuss)


This line of argument seems strange to me, particularly when you cite mortgaged BTL property as an alternative. Nobody will try to reposess your mortgage if you fail to make your planned payments.


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## Steven Barrett (22 Dec 2016)

His options are limited. A pension isn't that attractive at this point. Say he has €100k at retirement, he gets €25k tax free. Under the annuity option, he'll get €3,000 back for the rest of his life. Under the ARF option, he'll have to put €63,500 into an AMRF and only have access to 4% of it each year. That only leaves €11,500 in an AMRF...probably best option on this is withdrawing all of it over a few years with minimum tax. 

Not sure if gearing up his savings to purchase a property is the best way to go either. It's fine if everything works out but how much will it cost him over the next 10 year to clear off the mortgage? A lot of risk and costs involved. 


Steven 
www.bluewaterfp.ie


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## Gerard123 (22 Dec 2016)

Definitely would not buy a property. Risk, hassle, etc.
Don't see a lot of options.  The suggestion re putting money into a pension and getting tax break is about the best of a limited lot. If he can get a tax benefit that is.


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## twofor1 (23 Dec 2016)

Seems pensions is not the way to go in this case, some of the other suggestions have been thought about and are being considered.

Even if a loan could be got, an investment property is not a burden or commitment he would take on heading into retirement, I’m sure some do it successfully, but it’s not for him.

Granny flat is an option, the house could easily be separated into upstairs and downstairs apartments, there would be some initial cost, but no mortgage. 2 bed apartments in the area are getting €1.7K monthly, the upstairs of a house might not get the same but I’m sure something near it. Not without it’s problems though, many scary stories on here that would make one reluctant to be a landlord. Some of his neighbors make handy money taking students during term time, Sunday evening to Friday morning from nearby UCD, this might be the better option.

Downsizing to an apartment is an option, has many benefits and would probably release €300K, they like their house though, but this option can’t be ruled out if ever needed.

 In this person’s circumstances, it seems there is a lot of merit in simply banking the cash in state savings or whatever is the best available and spending €5K annually, given the average Irish life expectancy, realistically, it’s unlikely it will ever be all spent.

Thanks for the replies.


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## Bronte (23 Dec 2016)

Sarenco said:


> It's an interesting idea but I doubt many people would want to take in lodgers when they're approaching their 70's.  Or would want to start any property rental business at that age.
> 
> .



I never suggested that he take in a lodger. Do you not understand the rent a room scheme and how it works with a granny flat?

And now you've given me another idea for him. 

OP, have you any part of your house that could be used for Air BnB.  I have such a room, it's a bedroom on the ground floor, and is the only room on that level.  It has it's own entrance and a shower and sink.  Only problem is the toilet for me, it's not off the room, so I'd have to think about putting in a toilet and the room is big enough.  The beauty of that business is that you don't have to have them in the house if you have the layout that makes it separate to the house. 

That can be a nice earner to boost your savings.  And you don't have to do breakfast or have them in your living room.  Nice clean business.  Easy too.  And little cost or work to it.


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## Bronte (23 Dec 2016)

LS400 said:


> Conan, neither you or I know what finances this guy has,
> Let's cut to the chase.
> He's 57, with no liabilities, hopefully with a reasonable property deposit in the bank. He's actually financially in a better position than most starting out and with a good track record.
> Don't rule it out.



He probably also owns an asset.  His home.  And rent plus his 10K - it's easily doable.  As long as he can put up a deposit, and prove he has enough income to service it (without the rent - which is crazy - but such is Ireland now) than I don't see the problem.

Ideally he'd have a 10 year mortgage, and the rent plus that would pay it off and then he'd have a rent roll for all of retirement.

It's best if the mortgage kicks in then when his income is reduced.  That way he won't be hitting 50% tax on it. 

People forget that those who don't pay the top rate of tax are able to make more of return.


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## Sarenco (23 Dec 2016)

Bronte said:


> I never suggested that he take in a lodger. Do you not understand the rent a room scheme and how it works with a granny flat?



Yes, I understand the rent-a-room scheme very well Bronte.

The bottom line is that a self-contained unit, such as a converted garage or a basement flat, does not qualify for the relief.

A lodger is someone who rents accommodation in another person's house.  Someone who rents accommodation in a self-contained unit is a tenant.


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## LS400 (23 Dec 2016)

Well, with a little more time to look at AM now the last few days are sorted, as its been mayhem here in work, I am amazed that any of our fine intelects here here would suggest this guy start a pension at his age. Pure Madness

I notice Bronte has softened the cough of many here. Her Plan is, in my opinion brilliant. Albeit on a somewhat similar platform to mine only, so much better put. But thats what makes Bronte Queen of the property, a very well informed poster.

Again, as said in another thread, Ideas although directed to the op, are read by others who may also benefit.


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## Merowig (23 Dec 2016)

Why is it madness to put money in an investment vehicle where you get tax back from your contributions, and where the investment growth is not taxed either? The disadvantage with the age is only that the timeframe for compounding is small.


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## Bronte (24 Dec 2016)

LS400 said:


> Well, with a little more time to look at AM now the last few days are sorted, as its been mayhem here in work, I am amazed that any of our fine intelects here here would suggest this guy start a pension at his age. Pure Madness
> 
> I notice Bronte has softened the cough of many here. Her Plan is, in my opinion brilliant. Albeit on a somewhat similar platform to mine only, so much better put. But thats what makes Bronte Queen of the property, a very well informed poster.
> 
> Again, as said in another thread, Ideas although directed to the op, are read by others who may also benefit.



AAM doesn't like property. They like shares and bonds and stuff. There is also an Irish bias against landlords.

I know little of shares and bonds. But I do know property, albeit in a small way. And I can tell you this, I'm very glad to say this is the first year I didn't have to use our own money to pay the rental tax. And next year we will finally start getting the money from the rents. I was over the moon this year to take out 1K and now my OH is in early retirement it is heartening to know we will have a source of income that we can't get elsewhere. I wouldn't like to live on the state pension solely.


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## Bronte (24 Dec 2016)

Sarenco said:


> Yes, I understand the rent-a-room scheme very well Bronte.
> 
> The bottom line is that a self-contained unit, such as a converted garage or a basement flat, does not qualify for the relief.
> 
> A lodger is someone who rents accommodation in another person's house.  Someone who rents accommodation in a self-contained unit is a tenant.



You're wrong. As long as it is connected, that's rent a room. But if you convert your separated chalet, it is not.


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## Bronte (24 Dec 2016)

twofor1 said:


> Seems pensions is not the way to go in this case, some of the other suggestions have been thought about and are being considered.
> 
> Even if a loan could be got, an investment property is not a burden or commitment he would take on heading into retirement, I’m sure some do it successfully, but it’s not for him.
> 
> ...


I missed this post.

You should bear in mind that the horror stories, while they are real, they are not the true story. That is because we don't have posters telling the reality. That is because this website is about problems. So you're going to buy hear bad news. 

It is a no brainier to me to convert, live in one half and spend retirement in luxury. You would have to pay tax on the 20k income of 50%. So you might as well go for just the 12k rent, and if you're not a landlord, ie you are rent a room, then you have stronger property rights.


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## moneybox (24 Dec 2016)

Bronte said:


> AAM doesn't like property. They like shares and bonds and stuff. There is also an Irish bias against landlords.
> 
> I know little of shares and bonds. But I do know property, albeit in a small way. And I can tell you this, I'm very glad to say this is the first year I didn't have to use our own money to pay the rental tax. And next year we will finally start getting the money from the rents. I was over the moon this year to take out 1K and now my OH is in early retirement it is heartening to know we will have a source of income that we can't get elsewhere. I wouldn't like to live on the state pension solely.



At least property is a tangible asset unlike stocks and shares that could well flop over night. Good on you Bronte, here is to a prosperous new year


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## Bronte (24 Dec 2016)

I'm with you moneybox. I like bricks and mortar. I'm thinking of doing renovations on the rentals with the extra money. I'd like to put in an extra toilet in one house as the family there now are about to have a fourth child. It's my old home. It has a granny flat (garage I converted) but needs mega work. I had the builder nephew in it last year, rent free as I consider it in an unliveable state,  but he and the girlfriend were desperate, he fixed it up, but the damp is too bad now so they moved out, and now I found out the tenant in the house has his brother living with him too, and he wants it. But I'm not letting him in there because of the state of it.

If the government incentivised me I'd knock the garage and build a lovely two bed unit. (I has planning, but wasn't going to tell the corporation it would be a separate unit) And I'd also build a chalet in the large garden. But the cost is high, it won't increase house value so there it rots. so I could easily house four people. Simon Coveney are you listening.


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## Gordon Gekko (24 Dec 2016)

Sarenco said:


> The bottom line is that a self-contained unit, such as a converted garage or a basement flat, does not qualify for the relief.



That's not the case.


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## Sarenco (24 Dec 2016)

Bronte said:


> You're wrong. As long as it is connected, that's rent a room. But if you convert your separated chalet, it is not.



Sorry, I stand corrected - you're quite right.


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## moneybox (24 Dec 2016)

Bronte said:


> It's my old home. It has a granny flat
> 
> Must hold very previous memories for you, nice to keep in the family. Hopefully you can attack that granny flat soon and resolve the damp issue.
> 
> Forget about Coventry, he is about as useful as a rats tail


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