# Newly-Retired and Looking for Advice



## Cricketer (16 May 2020)

We're a newly-retired couple in our late 50s, each of us with good public service pensions, total gross annual income circa €80,000.

We're lucky; health good, all debts paid off, money in the bank and adult children living away from home. No dependents, parents deceased. €440,000 saved as follows:

€160,000 in State Savings (medium - long term various issues)

€80,000 in three Zurich Life (Prisma and equity) funds started in the past last year, put away for the long term. (Today's value €83,000)
€5,000 with LinkedFinance, due to be repaid within next 24 months (I know...)

€195,000 in cash (€30,000 earning 0.9% gross, the rest earning diddly squat)

Our adult children are shelling out circa combined €1,200 per month for rent. Is there any point in considering the purchase of a property with a view to one or other of them renting it? What are the issues that could arise, financial and otherwise? Relationships are very good and would like to keep them that way!

Or should we continue as we are with mix of cash, bonds and investments, increasing some?

Was hoping to spend €20,000 on the garden and some on various travels but that looks to be a bit down the line now! Other than that, we're easy. Opinions welcome.


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## Sarenco (16 May 2020)

Hi @Cricketer

Is your priority to boost your (taxable) income or to give your kids a leg up?

If it's the latter, would you consider simply gifting them deposits for house purchases?  A child is entitled to a lifetime tax-free threshold of €335,000 in respect of gifts and inheritances taken from his or her parents.

Personally, I'm not a big fan of unit-linked funds offered by life companies.  The taxes and investment expenses are pretty horrible.  If you think you could handle the hassle of filing an annual tax return, I would suggest a globally diversified investment trust (something like F&C Investment Trust plc) for the equity component of you portfolio.

Given your substantial (and secure) pension income, I think you could probably nudge up your equity exposure somewhat as a long-term inflation hedge.  In your shoes, I think I would aim to have roughly half your savings in State savings products/cash deposits and the other half in equities.

And LinkedFinance?  Eh, no....

Hope that helps.


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## Cricketer (16 May 2020)

Thanks @Sarenco,

I await a bit of a trim on the LinkedFinance hairdo!

I omitted to say we're already gifting each child monthly in cash, allowing them to build up a savings record. I'm not particularly keen to get into the property end of things, seeing many possible snags. It does nag at me though that we have capital sitting idle while they're shelling out 'dead money'. I'm happy to let them fend for themselves, I just wonder if money is going to waste.

Where would one start an interest in something like F&C Investment Trust? And what are the pros and cons?


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## Sarenco (16 May 2020)

Here's a link to the factsheet for FCIT -




__





						F&C Investment Trust & Global Trusts
					

Discover how the F&C Investment Trust, the world's oldest collective investment fund, can help you grow your capital & income. Capital@risk.




					www.bmogam.com
				



It's well diversified and the fees are reasonable (probably about half what you are paying Zurich).  Dividends are subject to income tax and gains are subject to CGT (unlike the exit tax regime that applies to your Zurich funds).

You would have to set up a brokerage account to buy the stocks.


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## Brendan Burgess (17 May 2020)

You probably have around 30 years left to live.

30 years is a long time and there is a significant risk that your savings will be wiped out by inflation.  So I would be avoiding deposits.

As Sarenco points out, you can comfortably handle the risks of equity investment.

Your current asset are
A mortgage free home
An annuity in the form of a pension from the government
€440k

People accuse me of scaremongering, but I really don't think that any public servant depending on the solvency of the state should have any investments in state savings.  The risk that the state will go bust might be seen as small, but the impact would be huge.  There is no advantage to you in taking this risk when you can diversify it. 

I discus this further in this thread: 






						Key Post - What is the risk to State Savings?
					

I have copied this from another thread where two retired public servants had a substantial part of their savings in State Savings.   Rather than take that thread off topic, I will start a new thread as it will affect other cases.   I do not expect the Irish Exchequer to default.  However, you...



					askaboutmoney.com
				




When you die,  you will leave your children your house and whatever savings you have at that stage.

They will be in their 50s at that stage and will find their inheritance useful to help their children get on the housing ladder.

I think that the €440k should be in a property. The simplest would be for you to buy a house and let them live in it rent-free so that they can save for their own home.

Or you could do some version of the following:

Lend the money to one or more of your children to help them buy a property.  It is best to have it interest-free so that you do not have to pay income tax on payments from your child. 

Set up a repayment plan, so that they do repay the loan to you over a set number of years and this would enable you to fund a loan to your next child.

You don't tell us the ages or financial circumstances of the children. 

If they are single and work in the same city, you could lend them the money to buy a house together.  But you have to provide for the fact that they will want houses of their own and they will need an agreement as to what happens at that stage.

Brendan


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## Cricketer (17 May 2020)

Thank you Brendan,

The children are both in their late twenties, both in the public service.
One lives in Dublin, one in the midlands. We live in Kilkenny.
Them getting on the ladder is obviously an issue.

I understand that the state could get into big trouble; we've seen enough in the last ten years to know that anything is possible.

If I was to buy another property then our assets would be (including the family home) something like:

An annuity in the form of a pension from the government
€600,000 in property
€85,000 in investments (mainly equities)
€55,000 in cash

Could one not make the argument that we'd be 'property-heavy'?
We'd obviously be limiting our financial freedom.
It would be helping the children, practicalities notwithstanding.


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## Brendan Burgess (17 May 2020)

Your main asset is your public service pension.  So €600k in property is not excessive. 

Neither property is an investment as such. It is the prepayment of future living costs. 

How much would a property in the midlands cost? 

I am guessing that if you lent  your child in the midlands €220k, it would be enough to buy a property outright or with a very small mortgage. 

Your child in Dublin would need more than €220k  to buy in Dublin. 

But it seems to me that you can put both of your children on the home ownership ladder with what you have got. 

So lend them the money but insist on getting it back.  With the child in the midlands, make sure your solicitor actually draws up a mortgage.   You could do a second mortgage on the property in Dublin, but the main mortgage lender might  not like that.  

Brendan


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## Baby boomer (17 May 2020)

I'd agree broadly with both Brendan and Sarenco.  A few comments:

1.  You have nearly 200k in cash, earning you buttons!  In fact, it may even be costing you money after inflation.  Frankly, that's crazy. This should be in equities or property straightaway.  Optionally, for "fun" you might like to set aside a small amount (say 5% of your equity portfolio) for stock picking and research some small-cap shares that have growth potential. 

2.  If you look at the family unit as a whole, the rent outflow is a waste of resources, while your cash sits idle (as you have already identified.) I would concentrate immediately on setting the kids up with property.  I'd gift them a deposit, maybe even more, and encourage them to get a mortgage.  This should be easy enough for the Midlands; Dublin is different, but still doable.  If your kids earn under 50k, then the Rebuilding Ireland Home Loan is an excellent product and one my own daughter availed of recently.

3.  I'd suggest it's a lovely time to assess your own housing situation.  You have the resources to move, extend, refurbish or update exactly as you wish.   And you have the health and energy to take on the project.  Assuming you like the area, an extension or even a new build nearby could be ideal.  You can have the dream home you've always wanted.  (If you have it already, fair enough!) You can also future proof your home against oncoming old age.  Ground floor living and sleeping areas is a good idea, as is separate space for live-in assistance (and/or visiting children and grandchildren.) You don't want to be stuck doing major house alterations in your later years.   Additional space is always useful and can be repurposed in the interim, eg home gym, cinema room, sauna, whatever. 

And remember, enjoy life and take some holidays when the opportunity becomes available again!


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## moneymakeover (17 May 2020)

I suggest you tell them the deposit is waiting for them if they want it for buying their own place.
Then wait for them to do the rest eg find their own place. Find their own mortgage approval. 

Their choice


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## Brendan Burgess (17 May 2020)

moneymakeover said:


> I suggest you tell them the deposit is waiting for them if they want it for buying their own place.



That is a good strategy. Tell them that if they save up half the deposit, you will match it. 

And then, more than match it.

Brendan


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## Baby boomer (17 May 2020)

Brendan Burgess said:


> That is a good strategy. Tell them that if they save up half the deposit, you will match it.
> 
> And then, more than match it.
> 
> Brendan


That's exactly what I did!


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## Leper (17 May 2020)

Cricketer said:


> We're a newly-retired couple in our late 50s, each of us with good public service pensions, total gross annual income circa €80,000.
> 
> We're lucky; health good, all debts paid off, money in the bank and adult children living away from home. No dependents, parents deceased. €440,000 saved as follows:
> 
> ...



Cricketer, with respect you're in a terrific financial situation and you got there under your own steam. I think you could be giving advice to the posters here rather than taking it. Well done!


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## Cricketer (18 May 2020)

Thank you all so much for your replies. If anything they have helped me to clarify that housing the children is the priority. I think I will (continue) on what I would call the 'qualified gifting' route; our monthly gifting is already contingent on them matching the gift and once a year I ask them for a glance at a statement just to confirm all is being saved. Any idea then what I should do with one or two hundred thousand euro cash for between 2-5 years? 

Las Vegas is out for the time being....


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## Sarenco (18 May 2020)

Cricketer said:


> once a year I ask them for a glance at a statement just to confirm all is being saved.


I'm not sure that's a good idea - they are adults after all.


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## Saavy99 (18 May 2020)

[





Cricketer said:


> . Any idea then what I should do with one or two hundred thousand euro cash for between 2-5 years?
> 
> Las Vegas is out for the time being....



You are young retirees with the means to have a great retirement. Buy yourselves a holiday villa abroad and enjoy winters in warm sunny weather from here onwards.


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## Purple (27 May 2020)

Saavy99 said:


> You are young retirees with the means to have a great retirement. Buy yourselves a holiday villa abroad and enjoy winters in warm sunny weather from here onwards.


I wouldn't do that. Think of the holidays you'd get all over the world for the cost of the purchase and upkeep of a holiday home that will tie you to the same place. If they spend €10k a year, every year until they are unable to travel, it would still be cheaper than the total cost of a holiday home (purchase, upkeep and cost of getting there). Each to their own though.


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## Cricketer (27 May 2020)

I tend to agree with you @Purple, though of course if one bought a holiday home there would be an asset at the end of it. We considered this when deciding whether or not to sell or keep (a share of) our late mother's home which is near the coast. We reckoned we could go and stay a couple of weeks a year in a very nice hotel in the area for what it would cost us to maintain the house. We sold and have never regretted it. I'm firmly of the view that one house is enough to be keeping!


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