# Retirement lump sum - where to invest



## Scouser2 (13 Jun 2018)

I have just retired with a lump sum of €120,000.  I received advise to split it in 3 ways i.e. hold  an amount of approx €20,000 on deposit for expenses and quick access, put approximately €60,000 into government savings such as 3 and 4 year savings bonds and 5 year savings certs and the balance of approximately €40,000 into longer terms Managed funds - Zurich Active Asset Allocation Fund has been recommended - for a minimum 6 year plus period.

I would welcome any views on this advice - particularly the Zurich recommendation.  I previously  (many years ago) invested in an Irish Life managed fund and was lucky to get back what I had paid in after 10 years - there was life cover involved in this also which is not part of the recommended Zurich investment.  There is an annual management charge of 1.5% on the Zurich Fund.  I am 62 years of age, married and, thankfully, in good health.  Any advice welcome.


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## Gordon Gekko (14 Jun 2018)

It’s impossible to say without looking at your overall asset allocation.

What does the rest of the Scouser2 story look like in terms of assets, income, and liabilities?


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## Steven Barrett (14 Jun 2018)

Agree with Gordon. You've just retired at 62, what are the plans. You are still quite young, do you have things you want to do? The next few years of retirement are probably the years that you will spend the most while you have the energy. 

I would be cautious about the Savings Bonds. While they are tax free, the rates are very poor. For example, you put €60,000 in it for 3 years, you will get €600 back. However, if you need the money after a year, you will get €30 or €360 after 2 years. 

It's hard not to let it effect you, but don't compare your Irish Life experience. Having life cover in your plan (crazy!) is a cost deducted from your fund that slowed the growth of your fund. You could also have been unlucky with how markets performed over that period. And what were the charges? Irish Life are one of the more expensive providers in the market and the longer back you go, it's likely the charges were even higher. 

The 1.5% AMC is pretty high too and that doesn't include the cost of running the fund e.g. buying an selling assets, stamp duty etc. 


Steven
www.bluewaterfp.ie


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## Duke of Marmalade (14 Jun 2018)

As others have said we need the full picture.  But let me assume you have an adequate pension.  My recommendation is 20k cash and 100k in 5 year Savings Certs earning 1% p.a. tax free.  Don’t go near anything which charges 1.5% p.a.  Alternatives are low cost ETFs but there is risk, effort and possibly unfavorable tax treatment.


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## Steven Barrett (14 Jun 2018)

Duke of Marmalade said:


> As others have said we need the full picture.  But let me assume you have an adequate pension.  My recommendation is 20k cash and *100k in 5 year Savings Certs earning 1% p.a. tax free*.  Don’t go near anything which charges 1.5% p.a.  Alternatives are low cost ETFs but there is risk, effort and possibly unfavorable tax treatment.



...if you keep it in for the full 5 years. If you access it before then, you get drastically less than that. Scouser is young and after decades of work, every day is annual leave, why stick most of the lump sum in a deposit account where you get penalised for taking the money out? That will act as a disincentive to spending the money on things he will really enjoy. 

The first thing I'd do, is draw up a list of all the things I'd talked about doing over the years but never got around to. Then decide whether I still wanted to do these things. If I did, I'd start pricing them to see if I could afford it (this is where some financial planning comes in handy). 


Steven 
www.bluewaterfp.ie


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## Scouser2 (14 Jun 2018)

Thank you for your replies which are very helpful and make me think twice about the Zurich option.  My situation is that I have a pension of approx €43,000 and have a mortgage with around €30k outstanding on a tracker rate of Euribor +.5% - about 5 years left.  Because of tracker I intend to let the mortgage run.  I cleared other personal loans.  I like travelling and intend to take a number of long haul trips over the coming years.  My idea is that the pension will cover day to day expenses with the €20k in deposit covering unforseen and holiday expenses over next 3 years.  The idea of 3 year investment bond was that interest rates may increase over coming years and it would be an option to be able to re-invest some of the money after 3 years rather than having it all tied in for 5 years.  My main concern was the Zurich option and whether it represented the best option to try and beat inflation or if there is some other option I could consider? Does the breakdown of how I am planning to divide the lump sum seem reasonable given my situation as outlined?  Thank you for any advice and for the comments already provided


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## Duke of Marmalade (14 Jun 2018)

You seem to have a good handle on the situation.  Whether to invest in 3,  4 or 5 year state savings is all very marginal.  Personally I would go for the 1% p.a. 5 year option and sure, if interest rates pick up you can always exit and repurchase, though as SBarrett says you will get little more than your money back on premature surrender.  

The 0.5% Tracker is of course a valuable "asset" (pardon the contradiction) but only if you can earn more than ECB +0.5% after tax on where you put the 30K.  State savings fits this bill.  I don't really see much merit in investing in risk funds in your case.  I'm afraid there is no hedge against inflation, in fact cash is as good as you can get as if inflation picks up so to should interest rates.


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## Sarenco (14 Jun 2018)

I agree with Duke that there doesn't appear to much merit in investing the lump sum in taxable investment funds in your circumstances.

This is all very marginal but I think if was in your shoes I would apply the €120k as follows:-

Use €30k to pay off the remaining mortgage;
Put €20k in an instant access deposit account;
Put €20k in a one-year term deposit (check out the "Best Buys" to see who is offering the best rate); and
Use the €50k balance to buy 5-year State Savings Certs.


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## Scouser2 (14 Jun 2018)

Thanks for your feedback.  I have decision to make then, as to whether I pay off my mortgage.  I guess if interest rates increase,as they will, then that would definitely make sense.


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## Steven Barrett (20 Jun 2018)

Scouser2 said:


> Thanks for your feedback.  I have decision to make then, as to whether I pay off my mortgage.  I guess* if interest rates increase*,as they will, then that would definitely make sense.



ECB do not expect to increase rates before the summer of 2019.

Steven
www.bluewaterfp.ie


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## Ndiddy (26 Jun 2018)

SBarrett said:


> Irish Life are one of the more expensive providers in the market and the longer back you go, it's likely the charges were even higher.?



IL seem to manage many DC plans, what are other less expensive providers


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## Steven Barrett (26 Jun 2018)

Ndiddy said:


> IL seem to manage many DC plans, what are other less expensive providers



Everyone else


Steven
www.bluewaterfp.ie


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## Ndiddy (28 Jun 2018)

only have access to IL through work so don't know any other names....can you suggest 3?


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## Steven Barrett (29 Jun 2018)

In no particular order:


Zurich Life
New Ireland
Standard Life
Aviva
Friends First
They are all the other providers in the market (Aviva & Friends First are merging) and they are all cheaper than Irish Life.



Steven
www.bluewaterfp.ie


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