# What to do with an upcoming lump sum?



## Gthyre (8 Oct 2022)

*Personal* *details*
Age: 40
Spouse’s age: 37

*Number and age of children:*
Two, ages 2, 3 months

*Income and expenditure*
Annual gross income: €52000
Annual gross income of spouse: currently on maternity leave.

*Monthly take-home pay: *€2700 (less pension contributions)

*Type of employment: *PAYE

*In general are you:*
(a) spending more than you earn,
(b) saving

*Summary of Assets and Liabilities*
Family home worth €450k, mortgage paid off.
Cash of €40k
State saving investment due January 2023 worth €140k
Other bits and pieces worth approx €15k
Defined Contribution pension fund: €75k

*Other borrowings: *n/a

*Do you have a pension scheme? *Yes, I have a defined contribution pension in which I put in 25% of my income (including AVC contributions) and my employer adds 8%.
My wife has just started one in the last year and is also putting in the max amount of AVCs to avail of tax relief.

*Do you own any investment or other property*? No

*Other information which might be relevant:*
My wife is currently on maternity leave and will go back to work part-time in 2023. I would expect her to have a gross income of €30000

We are putting €500 a month into a Zurich fund as a form of regular saver.

We are also putting another €500 per month into a 3rd level fund for our two children.

*Life insurance*: I have life assurance and illness cover provided my employer.

*What specific question do you have or what issues are of concern to you?*
By early 2023 we will have a lump sum of approx €150k to invest with.

I guess we are looking for something medium to long term that will beat inflation at the very least... Any suggestions or recommendations for us?


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## Clamball (10 Oct 2022)

I think you are in a very good place financially, with good savings and no mortgage to pay.  I think you should get independent financial advice on what to do with your lump sum, because it depends on your life goals and your risk appetite.

Maximise your wife’s pension when she returns to work.


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## Steven Barrett (11 Oct 2022)

How did you get to your current financial position at very young age? Was it all your own doing or did you get some financial help? You are not big earners but you have no debt and have accumulated a lot of cash.


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## Gthyre (11 Oct 2022)

Yes we have received inheritance on both sides which we used to help pay off the mortgage. 

Prior to going on maternity leave, my wife was on a good salary (contracting) and we like to think we are both good savers.

We have prioritised paying off the mortgage over investing in our pensions, and it shows in the little value we have in them currently.

We are also mindful of the good financial fortune we have had and are keen not too squander anything in the future.

Thanks all for your replies,


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## Blackrock1 (11 Oct 2022)

Gthyre said:


> Yes we have received inheritance on both sides which we used to help pay off the mortgage.
> 
> Prior to going on maternity leave, my wife was on a good salary (contracting) and we like to think we are both good savers.
> 
> ...


looks like you are in a nice position, im sure a financial advisor can suggest a fund to invest the 150k in, id give consideration to one of you taking more time out of work to spend with the kids while they are young, up to 10/12 are the golden years and you dont need the extra income, trying to juggle two jobs (even if one is part time) and manage 2 kids and childcare is a big hassle, and not always worth it.


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## NoRegretsCoyote (11 Oct 2022)

Gthyre said:


> By early 2023 we will have a lump sum of approx €150k to invest with.


Is this the same as the maturing €140k state savings product?


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## Gthyre (11 Oct 2022)

NoRegretsCoyote said:


> Is this the same as the maturing €140k state savings product?


Yes, the 150k would include the matured state savings.


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## wheeler dealer (11 Oct 2022)

90% into state savings ,10% into a stockbroker a/c to gamble on shares


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## Gthyre (11 Oct 2022)

wheeler dealer said:


> 90% into state savings ,10% into a stockbroker a/c to gamble on shares


State savings return rate is not keeping up with inflation at the moment however.

I'm not interested in gambling with shares but do accept that I need to accept some form of risk.


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## NoRegretsCoyote (11 Oct 2022)

Gthyre said:


> Yes, the 150k would include the matured state savings.


You and wife should both maximise tax-relieved pension contributions and put it into all equities.



Gthyre said:


> We are putting €500 a month into a Zurich fund as a form of regular saver.


This is fine but you are exposed to tax in a way that you aren't if you put it in pensions. I would keep an all-cash emergency fund and prioritise pensions instead. Cash is good if you are saving to trade up or buy a car but otherwise spare wealth should be in a pension.



Gthyre said:


> We are also putting another €500 per month into a 3rd level fund for our two children.


Again am not sure what the objective is here. You will still have an income when your children are in third level. It makes more sense to prioritise pension now and then deprioritise it in 15-20 years time to fund your kids' third level if needed. The pension is tax free on the way in, tax free on capital gains, and (depending on the scheme) you may be able to withdraw 25% tax free as young as 50.


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## Gthyre (11 Oct 2022)

NoRegretsCoyote said:


> You and wife should both maximise tax-relieved pension contributions and put it into all equities.
> 
> 
> This is fine but you are exposed to tax in a way that you aren't if you put it in pensions. I would keep an all-cash emergency fund and prioritise pensions instead. Cash is good if you are saving to trade up or buy a car but otherwise spare wealth should be in a pension.
> ...


Thanks for your input NoRegretsCoyote,

In regard to our pensions, we are both already putting in as much as we can gain tax relief on. I don't see the point in putting anymore in on top of that if there are no tax savings on it.

Regarding the 500 euro p/m regular saver, we already have 40k in cash emergency savings and calculate that that would get us through 18 months of expenses as we are living right now. We could continue to build up that cash saving but think it's good to see if we can grow the regular saver pot through investment instead.

Regarding the college saver fund, seeing as we are maxing out our pension contributions we would also like to put money aside while we can to aid 3rd level costs. This money is going into a Zurich Child Savings plan which allows you to make a 3k contribution per child per annum tax free. The growth on this fund is not taxed (as I understand) and does not affect the inheritance threshold for our children either.

Thanks again for all replies, I greatly appreciate peoples thoughts on our situation.


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## Adelie (11 Oct 2022)

Gthyre said:


> Thanks for your input NoRegretsCoyote,
> 
> In regard to our pensions, we are both already putting in as much as we can gain tax relief on. I don't see the point in putting anymore in on top of that if there are no tax savings on it.
> 
> ...



Just as an FYI, there’s a tax exception for  supporting your kids through 3rd level if they are aged between 18 and 25 years of age and are in full time education. So when the time comes you may have the option to pay for their education and maintenance from other funds and then they could use the Zurich funds for something else, house deposit or car or whatever.






						Exemption for support, maintenance and education payments
					

Income or gains that are exempt from CAT




					www.revenue.ie
				




Edit: I’m not an expert but the growth will be taxed when you sell the fund right?


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## Peanuts (11 Oct 2022)

The thing that jumps out to me is that you seem to be living very frugally. You're saving a €1,000 pm on take home pay of €2,700 pm so living on 1,700 for a family of 4. That's great if that's what you want but be sure that you're not making unnecessary sacrifices now.


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## Gthyre (11 Oct 2022)

Peanuts said:


> The thing that jumps out to me is that you seem to be living very frugally. You're saving a €1,000 pm on take home pay of €2,700 pm so living on 1,700 for a family of 4. That's great if that's what you want but be sure that you're not making unnecessary sacrifices now.


Well to be precise, 500 for the monthly regular saver comes out of my take home pay while my wife is putting the other 500 into the 3rd level fund.

So we're not too bad . There's nothing we want for at present thankfully.

On the other hand, our kids are so young at the moment there's not actually that many places you can go with them, nor can we get out ourselves at night like we used to. It's not going to be forever either


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## Gthyre (11 Oct 2022)

Adelie said:


> Just as an FYI, there’s a tax exception for  supporting your kids through 3rd level if they are aged between 18 and 25 years of age and are in full time education. So when the time comes you may have the option to pay for their education and maintenance from other funds and then they could use the Zurich funds for something else, house deposit or car or whatever.
> 
> 
> 
> ...


That's an interesting point regarding the tax exception and something that I will look into more.

This 3rd level fund we are paying into is actually a trust in each of our children's names. So the value of it will go to them when they turn 18, and there is supposedly no tax due on any growth.


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## Gthyre (11 Oct 2022)

Also to note, our highest priority right now is to ensure we max out our pension contributions to avail of tax relief.

Following that, our next priority is to put 3k per child into the 3rd level fund per annum 

And then the lowest priority is the regular saver, this can be paused or reduced down if we have an issue with cashflow in the future


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## kavvie (11 Oct 2022)

would zurich  prisma 3 or 4 be a  good low risk idea?


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## noproblem (11 Oct 2022)

kavvie said:


> would zurich  prisma 3 or 4 be a  good low risk idea?


I'm in Prisma 4 and 3 more sort of similar ones for the past 7 years,  I'm down aprox 12.5% since the beginning of the year. However the fund is still in positive territory overall, but going down. I'd also lioke to know if I should stick in there or pull out. Thing is, it's expensive to buy in again and where else do you put money?  In your case you'd be buying in at a lowish price.


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## Adelie (11 Oct 2022)

Gthyre said:


> That's an interesting point regarding the tax exception and something that I will look into more.
> 
> This 3rd level fund we are paying into is actually a trust in each of our children's names. So the value of it will go to them when they turn 18, and there is supposedly no tax due on any growth.



My understanding is the fund will grow tax-free for the next years but when your children withdraw it they will pay tax on the gains


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## Gthyre (11 Oct 2022)

Adelie said:


> My understanding is the fund will grow tax-free for the next years but when your children withdraw it they will pay tax on the gains


I just checked back through the documentation again after reading your last post and it does appear to allow for tax free growth:

"_By legally assigning a Child Savings Plan to your child, your contributions count 
as gifts to that child. Provided you stay within the Small Gifts Exemption limit, 
the child will not incur any Gift Tax or have their threshold reduced, either when 
you make the contributions or when the plan is encashed_."

Link:


			https://www.google.com/url?sa=t&source=web&rct=j&url=https://confriel.ie/wp-content/uploads/2018/10/Child-Savings-Brochure.pdf&ved=2ahUKEwizxai4l9n6AhVSh1wKHaiJCY8QFnoECDQQAQ&usg=AOvVaw0266URvfuazH3jt6oWdWn9


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## Adelie (12 Oct 2022)

Gthyre said:


> I just checked back through the documentation again after reading your last post and it does appear to allow for tax free growth:
> 
> "_By legally assigning a Child Savings Plan to your child, your contributions count
> as gifts to that child. Provided you stay within the Small Gifts Exemption limit,
> ...



That means they won’t pay gift tax but i would have thought something like exit tax or capital gains tax would be charged (i hope someone more knowledgeable can confirm)


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## NoRegretsCoyote (12 Oct 2022)

Gthyre said:


> In regard to our pensions, we are both already putting in as much as we can gain tax relief on. I don't see the point in putting anymore in on top of that if there are no tax savings on it.


There are tax savings as the capital value is not subject to CGT and there is no deemed disposal.

I agree with @Peanuts that your consumption seems very low for a family of your size and age. Young kids are cheap if you don't have childcare but as they get older I think it's inevitable that you'll be spending more of your income than you do now.


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## kavvie (12 Oct 2022)

noproblem said:


> I'm in Prisma 4 and 3 more sort of similar ones for the past 7 years,  I'm down aprox 12.5% since the beginning of the year. However the fund is still in positive territory overall, but going down. I'd also lioke to know if I should stick in there or pull out. Thing is, it's expensive to buy in again and where else do you put money?  In your case you'd be buying in at a lowish price.


im thinking of going into 3 with a fairly big sum. for the very reason of buying in at a low unit price. but will it go lower ? im slightly concerned about global negative sentiment . but as warren buffett used say...buy when the rest are selling..maybe..


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## goingforgold (12 Oct 2022)

Gthyre said:


> Well to be precise, 500 for the monthly regular saver comes out of my take home pay while my wife is putting the other 500 into the 3rd level fund.
> 
> So we're not too bad . There's nothing we want for at present thankfully.
> 
> On the other hand, our kids are so young at the moment there's not actually that many places you can go with them, nor can we get out ourselves at night like we used to. It's not going to be forever either


I'm confused by this. So does your wife have an income that you haven't mentioned above (maternity pay maybe?)

Like others have said, I'm not sure how a family of four live on 20k per annum. Kids are young but there's food, electricity, heating costs, car fuel, broadband, mobiles, car tax and insurance, house tax and insurance, Christmas, birthdays, clothes, haircuts, car and house maintenance and the like. Some achievement if that's the case...but also are you missing the point a little bit...life is for 'living' also and you can afford to live better than most given the comfortable financial situation you find yourself in.


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## Gthyre (12 Oct 2022)

goingforgold said:


> I'm confused by this. So does your wife have an income that you haven't mentioned above (maternity pay maybe?)
> 
> Like others have said, I'm not sure how a family of four live on 20k per annum. Kids are young but there's food, electricity, heating costs, car fuel, broadband, mobiles, car tax and insurance, house tax and insurance, Christmas, birthdays, clothes, haircuts, car and house maintenance and the like. Some achievement if that's the case...but also are you missing the point a little bit...life is for 'living' also and you can afford to live better than most given the comfortable financial situation you find yourself in.


At present my wife is on maternity leave and gets no extra income apart from the government social welfare payment. This lasts for 6 months if I recall correctly and she will be going back to work part-time after that.

As I have said in post number 1, she will probably be on about 30k gross at that point bringing our annual gross income up to 82k.

I don't know why you think we are getting by on 20k per annum? My take home pay is 2700 per month and I put in about 2000 into our household expenses. Over 12 months, and including child benefit payment, that adds up to 27k.

Once my wife is back earning again, she will also contribute to the household expenses and allow me to dial back a little on what I contribute.

Otherwise, I personally don't have any expensive personal habits or pastimes (at present). As I also said in an earlier post, when you have two kids under 2 you don't have a lot of time to spend on yourself.

I also understand kids will get more expensive as they get older, I don't expect my salary to remain stationary and hope that future increases in pay (for both parents) will help negate these expenses.

Finally, and with all due respect to people who have viewed and replied so far, I created this thread to get peoples thoughts on what to do with an upcoming lump sum. I would appreciate anyone elses thoughts on this point.


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## arbitron (13 Oct 2022)

These 2 comments are not really compatible:


Gthyre said:


> I guess we are looking for something medium to long term that will beat inflation at the very least...





Gthyre said:


> I'm not interested in gambling with shares but do accept that I need to accept some form of risk.


Very difficult to beat inflation (especially current levels) without taking a risk.

Are you planning on any more children? Any big purchases coming up like replacing a car or installing solar panels?


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## goingforgold (13 Oct 2022)

Gthyre said:


> At present my wife is on maternity leave and gets no extra income apart from the government social welfare payment. This lasts for 6 months if I recall correctly and she will be going back to work part-time after that.
> 
> As I have said in post number 1, she will probably be on about 30k gross at that point bringing our annual gross income up to 82k.
> 
> ...


Hi Gthyre, my calcualtion of 20k per annum came from you stating in your first post that your total income is 2700 per month and savings are 2 x 500 euro per month, hence living expenses of 1700 x 12 = 20,400.

You hadn't mentioned child benefit or your partner's maternity pay. Still, 27k per annum for a family of four is incredibly tight. Don't hold back on holidays and the fun stuff with the kids as they start to get older, they'll only be small once.  But in meantime you and your wife can still have a life, weekends away etc. But this is a little off topic I know so enough said on that


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## Gthyre (13 Oct 2022)

arbitron said:


> These 2 comments are not really compatible:
> 
> 
> Very difficult to beat inflation (especially current levels) without taking a risk.
> ...


Thanks. I know I'll have to take on some sort of risk but honestly have no interest in dealing directly with shares. In reality, I guess I'll have to talk with a financial advisor as my next step.

There are no more kids planned. We don't have any major purchases for the next 3 years either. But would like to get a campervan at some point, that's the biggest thing I can see on the horizon.

Our house is 3 years old and our car is 2 years old so hopefully they don't cause maintenance issues over the next few years. If they do, we have 40k set aside for the likes of this


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## help999 (23 Oct 2022)

NoRegretsCoyote said:


> You and wife should both maximise tax-relieved pension contributions and put it into all equities.
> 
> 
> This is fine but you are exposed to tax in a way that you aren't if you put it in pensions. I would keep an all-cash emergency fund and prioritise pensions instead. Cash is good if you are saving to trade up or buy a car but otherwise spare wealth should be in a pension.
> ...


Hi NoRegretsCoyote. How do you choose 'all equites' when making pension contributions?? thanks


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## NoRegretsCoyote (23 Oct 2022)

help999 said:


> How do you choose 'all equites' when making pension contributions??


Not the expert but your provider should give you options.

Usually "higher risk" options are all equities.


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## help999 (23 Oct 2022)

NoRegretsCoyote said:


> Not the expert but your provider should give you options.
> 
> Usually "higher risk" options are all equities.


Im pm you as to not go off topic thanks.


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