Retiring soon, sell investment property, cut back on insurance?

Cortino

Registered User
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My age 66, wife's age 68

I'm in fulltime employment, 40k gross income, wife is homemaker

No children, both good savers

PPR value 350k, 60k o/s, finishes 2025. Mortgage is 1200pm, tracker 1.5%, with Bank of Ireland

No other borrowings, have credit cards but rarely use.

100k savings on deposit
We both have full state pensions

Small pension, now matured 87k pot (see below)

Other properties : Former PPR in Dublin, rented out since 2004, current rental income 1500pm before tax, upkeep etc., owned outright.

Part owners of 3rd house, sale pending, 100k due to us, before CGT, selling expenses etc (estimate 70k net)

We have private health cover, mortgage insurance, serious illness cover, life insurance, premia total 500pm approx.

All told, we have monthly outgoings of 4000 Euro (have kept detailed records of spending over last 12 months)

So we would be grateful for any answers/suggestions re the following ...

1. Re pension pot:

Option one: Take 46k tax free lump sum, put 41k into low-cost annuity (would provide just 70 Euro per month net, approx)

Option two: Take 25% tax free, put fest into ARF or ARMF (but I don't fully understand what they involve!)

2. I feel that we are over-insured, so considering dropping my wife's serious illness cover (I don't have this cover), to reduce our out-goings when I retire...wise or not?

3. Should we pay off the 60k left on the mortgage? (Again, with a view to reduce monthly out-goings)

4. Is there a better way to make our savings work for us? E.g., a lump sum to a five-year NTMA a/c? If so, how much?

Re the rental property, we intend to keep it at least in the medium term, despite the increasing regulatory hassle. We've been lucky with good tenants...So far! But ideally, we'd like to be able to live reasonably well eventually without the burden of maintaining the rental property.

Thanks in advance for any input...
 
What is value of investment property, will CGT be due... It may be more beneficial to keep it as a regular source of income (outside of state pension) than cash in and earn little or no interest on proceeds from sale . You already have 100k cash savings so well covered from that perspective. Re pension pot, it's small so I'd be taking minimum lump sum out(as again you have adequate cash savings already) ... Regular income is more important I think. Also you need to clear mortgage asap unless you have plans for some big spend item. This will save you big time in interest and free up your cash flow for retirement. Still leaves you with 40k savings
 
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Thanks for your reply...yes, I meant to include the estimated value of the rental property...about 250k, using the property price register as a guide. CGT would be significant, since it has been rented out since 2004. Was originally purchased via mortgage for 31k in 1989. No plans for any major big spend item!
 
Then keep it as it's giving you a regular supplementary retirement income (pretty much tax free given low private pension pot), and you can always sell later in life if it becomes too much hassle. Clear mortgage with savings and live a happy debt free retirement.
 
If you are going to retire, pay off your debt. No point in carry debt into retirement where it will take up a large percentage of your reduced income.

Life cover is for paying off debts and replacing lost income. If you don't have either, lose the life cover too. I'd also lose the specified illness cover. If, your wife got cancer/ heart attack/stroke at this stage, you will not suffer a loss in income of have trouble paying off debts.

Keep the rental property as a source of income but consider selling it in the future and using the capital to live off without the hassle of being a landlord.

The pension, if you take the 25% lump sum, try to extract the rest over a number of years at 20% tax. If you go the annuity route, you get a higher lump sum but €70 a month isn't much. And does that include a spouse's pension? At least with the ARF, it will pass to your wife.

Steven
www.bluewaterfp.ie
 
Yes, food for thought there, alright...good to get some objective views so thank you both for taking the time and the trouble to reply...much appreciated...
 
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