Investing severance money to supplement income for next 10 years

J

Jordan Belfort

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I was made redundant lately and received a severance package after 25 years service. I would like to invest the money to hopefully match inflation so that I could draw down approx. 10% a year to supplement my income until I am ready to draw my pension. I'm debt and mortgage free. I plan to have some paid income from part time/casual work but will need to supplement that with money from severance.

What products would people recommend ?
I'm thinking something like the way an ARF works but obviously the principle comes from lumpsum rather than a pension pot.
 
What is your risk tolerance? As in could you survive something like a 30% drop in the value of your savings in a year and be okay?

That will dictate what kind of product is best for you.
 
Thanks. The money makeover format looks excellent but it a little to detailed for me on a public forum. My mistake for posting here.
 
NoRegretsCoyote said:
What is your risk tolerance? As in could you survive something like a 30% drop in the value of your savings in a year and be okay?

That will dictate what kind of product is best for you.
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Yes a 20% hit in one year would be tolerable but couldn't have a couple of those years.
 
Jordan Belfort said:
Yes a 20% hit in one year would be tolerable but couldn't have a couple of those years.
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As others have posted it's hard to give much advice without broader context.

On the one end you have state savings which are 100% secure but will likely be eroded by inflation.

On the other end you could purchase an ETF-type product and sell as you go (more risk and of course tax involved).

I would advise against an annuity as although it would give you income certainty the payments are taxable as normal income.
 
NoRegretsCoyote said:
I would advise against an annuity as although it would give you income certainty the payments are taxable as normal income.
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As this is personal money and not pension money, that would be a purchased life annuity. Only a portion of the money is taxed some of it is a return of the capital. They aren't available in Ireland.

I had a similar case to this recently where a client came into money and wanted an ARF like income from her lump sum. We looked at:

1. Leave some in cash for income for a few years and invest the rest. When cash runs out, take out another lump sum and live on this cash until it runs out.
2. Invest the full amount with a life company who have a regular withdrawal facility on the policy. They look after the tax on the withdrawal each month and she just gets a net amount paid into her account.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
Steven Barrett said:
As this is personal money and not pension money, that would be a purchased life annuity. Only a portion of the money is taxed some of it is a return of the capital. They aren't available in Ireland.

I had a similar case to this recently where a client came into money and wanted an ARF like income from her lump sum. We looked at:

1. Leave some in cash for income for a few years and invest the rest. When cash runs out, take out another lump sum and live on this cash until it runs out.
2. Invest the full amount with a life company who have a regular withdrawal facility on the policy. They look after the tax on the withdrawal each month and she just gets a net amount paid into her account.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
Click to expand...

#2 sounds like a an option and nice that tax etc taken care of by the life company. I assume principle is paid tax free and any gains are paid with 41% exit tax ?
Brokers usually take a bit cut on these. Are there any other options to reduce fees ?
Who are main companies in Ireland? Irishlife, Zurich, Aviva ?
 
Yes, the life company do all the tax, which is deducted on gains and not the capital.

Broker may charge a fee or commission to set up. A commission means higher ongoing costs as the life company has to recoup the commission paid out.

Standard Life are the other life company not mentioned.
 
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