# Investing for Income - Advice Needed



## Davederave (19 Jan 2017)

Hi,

This is my first post so I hope I am posting in the correct section.

I am in the process of being made redundant and will have access to my pension fund once I finish. I am currently leaning towards taking cash and not opting for an annuity payment.

Between my redundancy payment and access to my pension fund I will have a sizable sum to invest. My intention is to use the sum to generate a regular income going forward. I hope to supplement this income with income from either new employment, my own (new) business or both.

I was considering investing in a number of properties however with all of the negative press around being a landlord these days I am having second thoughts. I any event I feel I need to speak to an investment adviser and was wondering if somebody could make a recommendation.

I would be grateful for any advice.

Thanks


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## Sarenco (19 Jan 2017)

Davederave said:


> I was considering investing in a number of properties however with all of the negative press around being a landlord these days I am having second thoughts. I any event I feel I need to speak to an investment adviser and was wondering if somebody could make a recommendation.
> 
> I would be grateful for any advice.



Welcome on board Dave.

Here's a link to a "key post" that Brendan put together on selecting an investment advisor - several of the contributors to that thread still post here on a regular basis -
http://www.askaboutmoney.com/threads/where-can-i-find-an-independent-financial-advisor.71012/

Personally, I don't really "get" the idea of income investing - to me total return (income plus capital gains) is all that ultimately matters.  Anything else is "mental accounting" as far as I'm concerned - and that's before you even start thinking about after-tax returns.

However, I do appreciate that not everybody shares that viewpoint.

One, of many, possible options to look at are income-focused investment trusts.  Something like City of London Investment Trust plc might be an appropriate holding as part of a wider portfolio -

http://www.thisismoney.co.uk/money/...s-stands-tall-legends-London-s-Guildhall.html

Hope that helps - come back to us if you have any follow up questions.


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## Brendan Burgess (19 Jan 2017)

Sarenco said:


> Personally, I don't really "get" the idea of income investing - to me total return (income plus capital gains) is all that ultimately matters. Anything else is "mental accounting" as far as I'm concerned - and that's before you even start thinking about after-tax returns.



Couldn't have said it better myself. 

Brendan


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## Brendan Burgess (19 Jan 2017)

To get meaningful suggestions, you would need to complete the following: 

*Basic information required for the "Money Makeover" forum*


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## Fella (19 Jan 2017)

Would investing for income make sense if the tax payer was on a lower tax rate or had no earnings? CGT rate is higher so does it make sense to invest for income in that case ?


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## Sarenco (19 Jan 2017)

Fella said:


> Would investing for income make sense if the tax payer was on a lower tax rate or had no earnings?



That is certainly a relevant consideration but you have to balance that with your view of the growth prospects of a company that distributes the bulk of its profits to shareholders rather than reinvesting in its business.


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## Davederave (20 Jan 2017)

Thank you for the replies and also the links provided. They are all very helpful.

As Brendan suggested I am providing some background info:

Age: 58, Spouse 59.
No dependents.

I have no debt except for an interest only mortgage on an investment property I own in the UK. Although currently valued at below the mortgage amount the property is let so I see it as a problem for later.

I will be made redundant effective end of March this year. I will not have a regular income at that point and am looking at a combination of the following to address that:

1) seeking alternative employment on a part time basis
2) starting my own business
3) investing

On being made redundant I will receive a  settlement payment and will also get access to my pension fund. These funds combined with savings will provide me with approximately 750k for investment purposes. As mentioned earlier I was considering purchasing a number of properties however as so much has changed in that space in the last six months I am now questioning that approach.

The financial adviser post will be helpful and I intend making contact and seeking some advice but if there are other suggestions as to how I might proceed I would be grateful to hear them.

Thanks

Dave


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## North Star (21 Jan 2017)

Hi Davederave,

I think before jumping into the 'investment' discussion, you might be better served to take  step back and do a proper financial review or plan. That might give you clarity on comfort on the key questions "Do or will I have enough money for my needs?". Once you have quantified what level of overall income you will need and what level of returns you require, then you will probably be better placed to review various investment options. Please see below comments we made in a previous forum. I think they are probably relevant to your post.

http://askaboutmoney.com/threads/can-i-stop-worrying-abut-money.198972/

"However rather than make an educated guess, we would recommend that you pay a fee to a financial planner to fully map out your financial position both current and projected over the likely remainder of your lives. This should be based on conservative/realistic assumptions. Then you can stress test the plan to see how your finances hold up against any adverse scenarios. These could include partner/wife loses job, long term care cost for either/both of you, material fall in pension/PRSA values due to market crash and also what is probably a key risk, long term impact of inflation.
This should bring clarity to the question you are asking, which we find is always the key financial question ' Do or will I have enough money to support my lifestyle for the rest of my life?' I suspect the results will be reassuring but there is real benefit in being accurate and quantifying key metrics on liquid assets, net worth etc. especially in the adverse scenarios.
We find that the exercise provides both clarity and comfort in most cases. It can also help both partners to get a handle on their finances, which is relevant when one partner exclusively deals with the finances. We always recommend that both partners have at least a working knowledge of key financial info.
Given the sums involved, for a relatively modest fee, I believe such thorough financial planning or analysis would be money well spent, and should confirm that you can indeed stop worrying..."

Once you are armed with your personal financial plan, and having seen the impact of various stress test, you will probably be better placed to make an informed decision re various investment options.

All the best Vincent


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## cremeegg (21 Jan 2017)

Davederave said:


> I was considering investing in a number of properties however with all of the negative press around being a landlord these days I am having second thoughts [



You shouldn't believe all you read in the press. While I am sure all of the scare stories are true, they don't paint a representative picture of the business of being a landlord. In the vast majority of cases if you treat people fairly, they will do the same. In the present climate, tenants are delighted to secure good accommodation and happy to treat it responsibly.

The work in being a landlord is real. It is not particularly time consuming, however it can be quite responsible. If you enjoy dealing with people and like exercising your skill and judgement, you may enjoy the business of being a landlord. 

You will not get a better regular cash return on your money that by investing in property. Long term total return, taking capital appreciation into account, studies show that shares have out performed property. Thats the respectable academic opinion, to my mind it tells us nothing about the future. I suspect that management will take an increasing share of the rewards of business in future.

If you have both the time and the cash, you wont do better than property.


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## Brendan Burgess (21 Jan 2017)

The key area you need professional advice on is what to do with your pension fund. You say you have access to it. But do you need to access it? Would you be better off leaving it where it is , or putting it into an ARF and drawing down the income from that as you need it, subject to the minimum drawdowns? 

I can see why you would want income as, in your case, it will be taxed at less than the CGT rate. You will pay no tax at all on the first €25,000.  You can earn up to around a further €40,000 at the 20% tax rate with a bit of planning. 

So the ideal investment would be to give your wife any spare cash, so that the income in her name increases the 20% tax band. 

You could increase your drawings from the ARF to bring it up to €65k a year. 

I would strongly advise against further investment in property. You have an investment in your own home.  You have a property in the UK. If property performs well over the next few years, your wealth will increase. 

So you should invest your pension fund and cash in the stock market.  It should provide you with the best long term returns with the least hassle and risk.  It also has the advantage of being liquid. You have ideas of setting up a business.  If your capital is tied up in property you won't be able to access it quickly. If you have a portfolio of shares, you can cash part or all of them immediately. 

Brendan


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## Brendan Burgess (21 Jan 2017)

To answer your questions about advisors, a few of them contribute to Askaboutmoney and seem to have a fairly good idea of what they are talking about. They certainly would know all the pension options backwards, which is the key requirement for you. Make sure to get your advice on a fee-only basis so you are free to buy whatever products you wish.

Vincent Digby  from Impartial.ie who has answered your question above.

Steven Barrett from  www.bluewaterfp.ie

Marc  Westlake    from www.globalwealth.ie  

Brendan


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## Davederave (22 Jan 2017)

Once again, thanks to all for the feedback.

The posts above have been extremely helpful and have given me a different perspective on how I might move forward. It is clear that I need to discuss my situation with a financial planner. Thank you Brendan for the links in your post.

I will also do some further investigation into property investment. If there is an experienced landlord out there that might be willing to share some experience/advice I would be grateful.

Dave


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## mister32 (31 Jan 2017)

Given the entry costs to property would you not consider paying down your existing investment, (keep some debt for tax relief)

How much of the pension is permitted to access? Is that not restricted?

Finally with time and energy, would you consider buying a franchise?


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## Davederave (1 Feb 2017)

Hi Mister32,

Thanks for the comments.



mister32 said:


> Given the entry costs to property would you not consider paying down your existing investment, (keep some debt for tax relief)



I am still evaluating whether to go into property but I feel with 750k available I would have adequate funding.

The mortgage on my investment property is interest only and with interest rates so low there is not much tax benefit. I am paying it down gradually however.



mister32 said:


> How much of the pension is permitted to access? Is that not restricted?



I am working on clarifying this at present.



mister32 said:


> Finally with time and energy, would you consider buying a franchise?



Yes, is the short answer. Looking at this also.

Dave


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