68 yrs old with two kids under 12 am I doing the right things?

T

Torket

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Personal details

Age: just turned 68

Spouse’s/Partner's age: 49

Number and age of children:

2 in their 30s
1- 10 yrs
1- 8 yrs

Income and expenditure
Annual gross income: 64k salary Public Sector + approx 18k net average private practice

Various pensions (UK and Irish): 2800e per month

Annual gross income of spouse: none

Total monthly income: 3874e net

Summary of Assets and Liabilities

Family home worth approx: 290k

Mortgage: nil

Cash: €60k current accounts

PS Pension fund: Approx 52k lump and 10k per annum pension on retirement


Other borrowings – car loans/personal loans etc

None

Credit card is always cleared monthly

Buy to let properties

None

Other savings and investments:
PRSA AVC approx 57k (annual lump sums)

Whole of life with profits policy taken out in 2009 worth approx 60k

State Savings 10 year solidarity bond 30k matures in 2030

Prize Bonds 33k

Other information which might be relevant

I have private healthcare and I intend to continue working full time until 70 and keep the private practice after retiring from Public sector if possible.

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

My intention is to keep the Whole of Life policy for my wife to inherit tax free
My wife has no personal pension and is due to receive approx 60k this year from deceased family house sale. She intends to put this into State Savings towards the kids education funds. Is this the best option?
Is there a better alternatives to an ARF with the PRSA AVC?
What would be the best investment options to maximise current cash and pension income with education funds required in mind?
I want to make sure that my financial planning is appropriate for the family needs in the future. Are there other issues that stand out that I have missed?

All responses much appreciated. Thanks.
 
You have €123k to invest + your wife's €60k.

It would seem to me that the best strategy for you is to maximise your pension contributions. Definitely use up the full 40% tax rate.

Then when you need funds for education in 7 years, you can take it out of your ARF.

Put in €1,000 now.
Cost to you €600.

Take out 25% tax free: €250
- 40% tax on the €750 remaining = €450
Total €700

And if your tax rate in retirement is only 20% , this increases to €850.

Brendan
 
Brendan Burgess said:
You have €123k to invest + your wife's €60k.

It would seem to me that the best strategy for you is to maximise your pension contributions. Definitely use up the full 40% tax rate.

Then when you need funds for education in 7 years, you can take it out of your ARF.

Put in €1,000 now.
Cost to you €600.

Take out 25% tax free: €250
- 40% tax on the €750 remaining = €450
Total €700

And if your tax rate in retirement is only 20% , this increases to €850.

Brendan
Click to expand...
It doesn't work that way Brendan. He has to maximise the contributions into the public service pension first. The lump sum payment is part of his service. He may be able to get a higher amount under Revenue rules if his salary is higher than the pensionable income.

After he has maximised his contributions into the public service pension, he can contribute to a personal pension/ PRSA for his private income. He can get 25% of those contributions as a lump sum.

The taking future education expenses from the ARF works if paying tax at the lower rate. If at the higher rate it doesn't as he is paying tax on the full amount taken out. With an investment policy, he pays the tax on the gain but not the capital.

I agree 100% to maintain the whole of life. With such a big age difference between the two of you, this needs to be factored in with any financial planning.

The ARF is your best route for your AVC's...after you see if you are able to increase your lump sum payment and pay it out of your AVC's. The ARF will pass to an ARF in your wife's name on death.

Get the money out of Prize Bonds. They aren't doing anything for you and you are relying on luck to get a return from the money. Not a good strategy.

Planning ahead for future expenses is good planning. But having all of your money in State Savings is not the correct thing to do, especially when inflation is so high. You need to give your money an opportunity to grow. Get it invested and working for you.


Steven
http://www.bluewatefp.ie (www.bluewatefp.ie)
 
Thank you Brendan. So if I understand you, keep adding the maximum allowed to the AVC each year but isn't there a ceiling based on multiple of final salary?
 
Thanks Steven.

I don't really understand the public service pensions.
Are you saying that he can or he can't contribute more to the public service pension?
And if he does contribute say €30k, how does he benefit from that later? Is it a higher lump-sum on retirement and an increased pension?

How is the maximum set?

If he can contribute to a PRSA, does he not get 25% of it tax-free on retirement and then he pays 40% on the drawdown, so an effective rate of 30%?

Brendan
 
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