# Couple retiring this month, what to do?



## Silversurfers (13 Oct 2018)

We are a married couple and both of us are retiring this month. We are looking for advice on what to do with our cash. We will each receive the state pension, totalling €486 weekly. In addition we will have two small work pensions adding up to €268 per week. Our tax free lump sums added to a downsize  benefit give us a total cash amount of €355,000 plus an AVC surplus of €45,000.
We wish to keep €100,000 somewhere accessible, but are unsure how to best invest the €255,000 and the AVC surplus. Any advice would be most welcome.


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## Gordon Gekko (13 Oct 2018)

Hi,

What’s your income requirement? i.e. are your pensions enough to live on and to do the things that you both want to do?

And what’s your attitude to investment risk? e.g. if you invested €250,000 and it temporarily fell in value to €200,000, how do you think you’d feel and what do you think you’d do?

Gordon


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## Silversurfers (13 Oct 2018)

Thanks for your reply Gordon. We think that our income and the cash on deposit should keep us going for about 10 years. A 20% fall in an investment would set off alarm bells for my wife, therefore us. Consequently, I assume that our options are limited.


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## Gordon Gekko (13 Oct 2018)

When you refer to “the cash on deposit”, do you mean that you’ll be withdrawing it to supplement your income?

And are you referring to the 100 grand?


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## Silversurfers (13 Oct 2018)

Gordon Gekko said:


> And are you referring to the 100 grand?



We'll be using the 100 grand as required.


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## Gordon Gekko (13 Oct 2018)

But is that because you need an extra 10 grand a year of income for 10 years?


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## Silversurfers (13 Oct 2018)

We should just about live on our pensions. The 100 grand is backup to cover unforeseen expenses like illness or for the odd trip abroad or a change of car.


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## Gordon Gekko (13 Oct 2018)

If I was you, I’d invest €250k in a Zurich Life/Standard Life/Irish Life multi-asset fund like Prisma, MyFolio or MAPS.

Something in the Medium Risk space with 50-60% equity (i.e. share) content, whatever that is on their scales, 3 or 4 maybe.

A drawdown/fall of more than 20% would be financial crisis type stuff and it’s clean from a tax perspective as all taxes are taken at source and you don’t have to submit a return.

With that, your €100k, and your pensions, you should be in good shape.


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## Silversurfers (13 Oct 2018)

Thank you so much for your advice. It's much appreciated. I'll look into your recommendations.


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## Tintagel (14 Oct 2018)

We retired some time ago.  We have no mortgage. About 30% of our funds are invested in the stock market direct. We get dividends from these of between 2% and 5%. We have suffered up to a 50% fall in the value of these over the years and up until last week these were all performing well above purchase price.

We keep about 60% of our funds invested in various An Post Certs, Prize Bonds. The remaining 10% is kept in cash.
The An Post certs are maturing at different times. We always cash these in and add to our cash pile, then review the situation.

At the moment our State pensions and a small private pension are enough to keep us going. Our lifestyle is simple enough but we enjoy our holidays. We take lots of these, mainly to Europe on low cost flights but maybe splurge a bit on hotels or apartment rental.

We have considered purchasing a place in Spain but because of our age we may purchase in one of our children's names, then all the family can use it. We would be aware of the poor returns from An Post Certificates and Prize Bonds. The sum in the latter will definitely be reduced this year.

We find that the cash pile kept for one off purchases is seldom touched, although this year we had a couple of family weddings that included a trip abroad. There is enough in dividend income, interest from maturing certs, private and state pensions to pay for our day to day needs and our holidays.

What we do works for us. After a few years doing this we find that our retirement is about spending money rather than saving it. Sometimes that can actually be hard when the doom & gloom news is dragging at you. It is important to keep an eye on the rear view mirror but focus mainly on the enjoyment of the freedom that you both have now and enjoy it.


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## Silversurfers (14 Oct 2018)

Thank you Tintagel for your very informative post. Like you, we intend having a few holidays each year, but we don't want to have constant worries about our spending.

I wouldn't be confident about my stock picking ability, though the prospect of dividend income is appealing. My other reservation is the current high level of stock markets. Then again, who knows when there'll be a correction?

Perhaps a multi asset fund would be more suited to us. I am aware that the value of funds can fall as well as rise, but long term would it be reasonable to expect an annual return in the region of 3 or 4% from a medium risk fund?

Also, is it worthwhile turning the AVC 45 grand into an ARF?


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## Marc (14 Oct 2018)

Our advice to anyone reading this is to start thinking about these questions 3-5 years before retirement.

There are many trade-offs that need to be considered and starting this process ahead of time simply gives you more time to consider options fully.

Would you be willing to complete an annual self-assessment tax return?

The reason being that your gross taxable income (before investment income) is €39,208pa

A married couple aged 66 have an annual income tax exemption of €36,000pa so the amount of income tax you pay is currently likely to be relatively modest.

Your average rate of tax deductions is likely to be only about 4%pa.

Under these circumstances, I'd certainly avoid life assurance company contracts entirely  where all income and gains are subject to a flat rate of exit tax of 41% currently.

You would be considerably better off with an income in the form of dividends (marginal rate of 20% plus USC) or capital gains tax 33% (less annual exemptions of 2 x€1270pa)

The example portfolio (below) has an expected real return (over inflation) of CPI plus 2.20% net of costs.

Assuming the ECB inflation target of 2%pa that implies an expected nominal return of around 4%pa.

The probability of making a 20% loss in real terms in any 1 year for this portfolio is less than 1%.

We can be 50% confident that the worst one year loss is less than 5% and 95% confident that the worst one year loss is less than 15%.

I'd also suggest deferring the AVC until age 75 as you will also obtain tax free growth on this.

Marc Westlake CFP, APFS, EFP, TEP, QFA
Chartered, Certified and European Financial Planner and Registered Trust and Estate Practitioner


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## Silversurfers (14 Oct 2018)

Thank you Marc for your suggestions. Completing an annual self assessment tax return would not be a problem.

I see the tax related benefits of your approach. Setting up the portfolio could be a challenge, but definitely food for thought.


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## Marc (14 Oct 2018)

I can refer you to several firms who work with us Nationally who could set up such a portfolio for you.


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## Silversurfers (14 Oct 2018)

I would appreciate that, thanks again. We live in Dublin.


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## Gordon Gekko (15 Oct 2018)

Very sensible advice from Marc re taking advantage of the 20% rate band.


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## kernel (15 Oct 2018)

Marc, I am in a similar position to Silversurfers and would very muc appreciate any advice or recommendations from any companies u might recommend. Again south dublin based


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