# Crossroads in life and need to assess options



## roundrobin (16 Jul 2018)

Hitting that 50 yrs milestone and re-assessing our priorities so would welcome an opinion or two.

Age: *49*
Spouse’s/Partner's age: *50*

Annual gross income from employment or profession: *€100,000*
Annual gross income spouse: €0 (never worked - disabled, no pension possibilities, no state income since marriage as means tested)

Type of employment: *Public* sector employee

Expenditure pattern: Generally strong '*savers*'

Family home: *€300,000*, mortgage free

Investment Property: Value:* €240K+*, Mortgage *€60K*, Tracker: ECB+0.6%, 7yrs remaining. Rented out since building with ~€3,500 net income (€10.5K gross) after mortgage/expenses/tax. Original cost ~€235K.

Other borrowings – car loans/personal loans etc: *None, *one car.

Do you pay off your full credit card balance each month? *Yes*

Savings and investments:
*€200,000* savings. Could need €50K in coming year or two for renovations and car change.

Do you have a pension scheme?
*Yes*, public sector (pre 1995) so could retire at 62 with max benefits though likely prefer to go at 60. No need to 'top-up' pension.

Ages of children:
*20, 19*. (in or starting 3rd level, no debt & should covered one through 3rd level from day-to-day income)

Life insurance:
Yes, though <€200K (opinion?). Also income protection and work life assurance. Usual mortgage protection policy.

What *specific question* do you have or what issues are of concern to you?

Being a landlord is difficult and are very much inclined to sell investment property to remove the hassle. Even providing for rainy day, outstanding education costs, €50K for PPR renovations and some CGT on sale, this would leave a total savings after sale of ~€270K available to invest.
We could likely rent for a little more (maybe €11.5K pa) but tax will consume most of the gain. Though fortunate with tenants, it would be a concern should we have a problematic tenancy in the future. The market is the strongest it's been for selling this property and I am optimistic of a ready sale. So *should I sell*? Had considered diverting rental income to OH so she could be viewed as double earner and treated better tax-wise with possibility to invest in pension also but, it seems (as I understand) that this would not work. Being single income couple means we don't get wider tax band and are hit with marginal rate early. Perhaps place investment property solely in OH name and she derive an 'unearned' income from it? Still unsure on this issue.

And if we sell, what would the forum *recommend for the €270K* by way of investment? A better quality of life would be our priority as work is demanding and carrying some family health difficulties. I would hope to retire at 60 and in addition to a good pension (>€40K) would receive a lump sum of >€135K. So the €270K could be viewed as long-term investment. Partner has never worked so no option available to invest in a pension for her.

Would welcome any ideas and thanks.


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## Brendan Burgess (16 Jul 2018)

roundrobin said:


> Being a landlord is difficult and are very much inclined to sell investment property to remove the hassle. Even providing for rainy day, outstanding education costs, €50K for PPR renovations and some CGT on sale, this would leave a total savings after sale of ~€270K available to invest.



I think you have answered your own question here. 

You have plenty of money. You do not need the hassle and aggravation of being a landlord.  With €300k invested in property via your home, you would be diversifying by selling the investment and putting the proceeds into equities. 

Brendan


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## cremeegg (16 Jul 2018)

roundrobin said:


> Perhaps place investment property solely in OH name and she derive an 'unearned' income from it? Still unsure on this issue.



If you do this your OH will pay Class S PRSI and qualify for a contributory old age pension, i.e. one that is not means tested.


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## Sarenco (16 Jul 2018)

The gross rental income looks kind of low relative to the estimated property value.  Is this an RPZ-related issue?  If so, that issue _should_ fall away within a relatively short time frame so I wouldn't rule out hanging onto the rental.

In any event, to answer your direct question, if I had €270k to invest in your circumstances I would probably do something along the following lines:-

I would invest €100k in 5-Year State Savings Certificates; and 
I would invest the balance in a broadly diversified, global equity investment trust like Foreign & Colonial Investment Trust Plc (FRCL).
I personally don't think you need any additional life assurance or income protection insurance.

As Brendan says you appear to be in a very strong position financially so don't unnecessarily put off making any home improvements, taking holidays, etc., that you think would add to your quality of life.

Hope that helps.


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## roundrobin (16 Jul 2018)

Thanks Sarenco, Cremeegg & Brendan, for your help. Yes, the rental income is perhaps on the low side but good tenants were worth it. The investment property is high-end but not (given location) likely to command >€11K pa rent. It's not in RPZ area. As Cremegg suggested, I'd be keen to see if my OH could derive an old-age pension somehow as my pension would be halved were I to pre-decease her - this is why an investment income might be important and the reason I'm considering the disposal. With Class S PRSI, would my OH not need to be paying this for quite some time? From Revenue site, it would seem (cursory look) that she would need min. 10 contribution years to get <€100/wk contrib pension.
I'm also wondering if her having this (modest) rental income might prompt treatment by taxman as double-income couple with the corresponding wider tax band - currently I enter marginal rate at mid-€40Ks.
Thanks again to all.


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## noproblem (16 Jul 2018)

Would your other half not be entitled to the widows pension should you "pass" before her?


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## Bronte (17 Jul 2018)

cremeegg said:


> If you do this your OH will pay Class S PRSI and qualify for a contributory old age pension, i.e. one that is not means tested.



Are you sure about this creme egg?  If it's true then that would be fantastic.  How much of a pension would the spouse get based on 15 years of PRSI payments.  And I believe if you are paying PRSI you can increase the pension by paying a lump sum prior to reaching retirement age.


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## Bronte (17 Jul 2018)

Sarenco what return would the OP get on those two investments.  The state one guarantees the capital but the other one, what is the risk in that.


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## Bronte (17 Jul 2018)

Roundrobin don't forget when you retire your tax on rental income may be lower. Because your total income is lower. I presume you're paying at the higher rate now.  Also as far as I remember when you're a certain age the margins are larger. 

Legally there is nothing to stop you transferring the property into your wife's name.  Whether revenue will accept that the rental income solely belongs to your wife is another matter.  But there is nothing wrong with structuring your tax affairs in an efficient manner. And nothing wrong with a husband gifting a house or anything to a spouse. (Sean Dunne springs to mind here)


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## Sarenco (17 Jul 2018)

Bronte said:


> Sarenco what return would the OP get on those two investments.  The state one guarantees the capital but the other one, what is the risk in that.


Well, I obviously don't have a crystal ball but the total return on a FRCL share over the twenty years ended 31 December 2017 was 453.4%, which equates to 8.9% per annum. 

The trust invests in equities so it's obviously a volatile/risky investment, which is why I think it makes sense to go with a blended approach in investing to try and achieve an acceptable balance between risk and (expected) return.


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## Bronte (17 Jul 2018)

Sarenco said:


> Well, I obviously don't have a crystal ball but the total return on a FRCL share over the twenty years ended 31 December 2017 was 453.4%, which equates to 8.9% per annum.
> 
> The trust invests in equities so it's obviously a volatile/risky investment, which is why I think it makes sense to go with a blended approach in investing to try and achieve an acceptable balance between risk and (expected) return.



That's an amazing return for something so risky.  Otherwise I'd be onto an estate agent myself right now to sell and invest.  OP might be _*risk adverse*_ as I have been so analysed by my bank.


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## roundrobin (17 Jul 2018)

Thanks all. To answer a few points. I recognise the need to have some investment in equities (e.g. FRCL) and with the horizon available to me, this should end well. The state savings will provide for safe harbour for another portion. @Bronte @cremeegg - I did toy with transferring the investment property (currently joint as with everything) into my OH name but couldn't get a straight answer from Revenue as to whether they would then treat the rental income (which goes to her sole bank account) as her 'income'. Reading about Class S contributions it would appear she needs a lot of 'contributions' to reach entitlement to her own contributory pension? I rang Social Welfare previously on this but couldn't fully comprehend the answer though they seemed to hold out little hope of a pension. It seems frustrating that for a disabled person (ever) unable to work that there is no mechanism to build a pension in her own right.
@noproblem - The widow's pension holds out more hope should I die before her as it is based on my contributions it would seem. This is great news as my work pension halves on my death. If this were the case, then this would be offset by the addition of the widow's pension.


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## Bronte (17 Jul 2018)

Don't accept any advice by telephone.  Contact revenue by email. Talk to a tax expert for proper advice. Money well spent on that.  Contact Pensions office, in Sligo I think it is, for better advice than from social welfare. 

How many contributions is a lot.  A contributary pension is gold in one's hand.  Enquire about making additional contributions.  Citizen's advice center might also have an idea about that.


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## Sarenco (17 Jul 2018)

@roundrobin

As a pre-1995 public servant, will you be entitled to a State Pension (Contributory)?  If not, I don't see how an entitlement to a Widow's (Contributory) Pension could arise.


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## Firefly (18 Jul 2018)

OP,

At 49 you have 100k Public Sector job with the pension that goes with it. You are mortgage free and have 200k in the bank.
You should be the one giving advice!
Well done.

If it were me I'd be getting out the ball of the world from my small fella's bedroom & making plans!


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## gipimann (18 Jul 2018)

Sarenco said:


> @roundrobin
> 
> As a pre-1995 public servant, will you be entitled to a State Pension (Contributory)?  If not, I don't see how an entitlement to a Widow's (Contributory) Pension could arise.



Pre-1995 public servants are not entitled to State Pension Contributory as they pay Modified PRSI.  However, their surviving spouse is entitled to Widows/Widowers Contributory Pension (one of the few benefits that modified PRSI does allow).

http://www.welfare.ie/en/Pages/PRSI...surance---Contributions-and-Clas.aspx#classes


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## Sarenco (18 Jul 2018)

Thanks @gipimann - the complexities of public sector pension entitlements have always amazed me.

So, would the OP be entitled to 50% of the relevant public sector pension plus the full amount of a Widow's pension?  Or is one pension adjusted to take account of the other?


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## cremeegg (18 Jul 2018)

roundrobin said:


> I did toy with transferring the investment property (currently joint as with everything) into my OH name but couldn't get a straight answer from Revenue as to whether they would then treat the rental income (which goes to her sole bank account) as her 'income'.



The rental income would not need to be all hers. If the house is in both names then I think that saying 50% of the income is hers would not be controversial.

The amount of rental income is irrelevant, if she has any rental income this creates a liability to pay Class S PRSI. Which entitles her to a contributory pension. Calculating the number of years and the amount of pension entitlement earned is a nightmare. However that fact that she is under 56 is important.

See here for details. https://www.welfare.ie/en/Pages/Qualifying-for-State-Pension-Contributory.aspx#q3


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## roundrobin (18 Jul 2018)

@Firefly Thanks - but it's been a rocky road getting to this point! Let's just say value your health and yes, making plans for enjoying life is important.
@gipimann Thanks for the clarification and I've had a few hours on the phone to numerous welfare/pension offices to confirm things. Yes, my superannuation funded pension would half on my death - which is what gave me concern given her situation. My class D PRSI (modified) contributions as a pre-1995 public servant do entitle her to that pension - though has very few other benefits. From welfare.ie I have (re Widow's pension):

"The pension is not means tested, so your rate of payment is not affected by other income you may have such as an occupational pension, earnings from employment, etc."​There are other conditions she would have to follow such as not cohabiting but I take from this that she would therefore benefit from both and so restore her income nearer that of when I was alive.

For information, I also investigated whether she could take sole title of the investment property and rent it out in her name in the hopes of giving her an income in Revenue's eyes. She can (but would need Revenue to confirm if joint-title would be okay) and could pay PRSI at class S (self-employed) which _could_ ultimately lead to a contributory pension at 66 (as is currently). However, there are conditions attached. Primarily she would have to have it rented (receiving min. €5K per annum rent at current rates) for min. 10 years (520 contributions) over the remaining 15 (or so) years through 66 (which could be a moving target!). This would only secure a min. pension of ~€97 per week but she would then at that point be eligible to buy voluntary contributions to boost this. In any case, she would not be able to claim this pension as well as a (possible) widow's pension. Factoring in the hassle of renting and the long-term commitment of this, we're content to have the safety net of the widow's pension and enjoy retiring from being landlords.

@cremeegg Just noticed your post as I wrote the above and we concur on this Class S point. I worked through the labyrinthine regulations around this and think the above is pretty accurate.

@Firefly Worth noting that I'll still barely breakeven if I sell this property given the costs over the years, my original investment and poor rental yields through the recession. Sometimes, it's better to do nothing and just enjoy what you have when you have it!


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