To Buy or Not to Buy! Best Investment for nearly a pensioner?

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Cloudnine

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I am 60 years old -- still working but have my eye on retirement.

I earn €29,000 per year and will receive a modest state pension when I retire at 65. I worked overseas and travelled a lot when I was young, so will receive only a third of the state pension. Also, the regulations have changed.

I have savings of about €150,000 and because house prices have dropped so dramatically, have recently thought perhaps investing in property may be a good top-up for my pension. I live in County Kerry.

I have been reading some of the posts, however, and completely forgot that tax would factor into the equation.

My question is: Is buying a house/flat a better investment than simply leaving it in the bank or investing in a fund.

I would really appreciate some advice on this as I know that what I do now will have an impact on my income as a retiree.

Thank you.
 
Interesting one.

Do you already own a house? If you do, increasing your exposure to property is not a good idea.

A fund would not be a good idea anyway as it will be taxed within the fund.

As you will be well below the taxable income level, you should be looking at something which pays you gross income - Government gilts; Property or direct investment in shares.

I think that direct investment in shares is the best option. They are very liquid - you can sell part or all of them when you want. The dividend income will be taxed at your marginal rate which will be either 0% or 20% ( There is Dividend Withholding Tax on dividends, but I assume you get it back, if your income is not taxable)

You will pay 33% CGT on the Capital Gains, but you would pay that on property as well.

Gilts pay the income gross and are exempt from CGT. However, it would be too risky to put your lump-sum in the hands of the Irish government as your pension is also dependent on the continued solvency of the Irish state.
 
To Buy or not to Buy?

Thanks Brendan. That helps a lot. I do own my own home without a mortgage as it was inherited. I would never consider selling it though as it has been in my family for generations.

Thanks again.
 
Brendan - you have me a little concerned.

I have a pension fund (still working) of 110k at the minute and before Christmas got in for 170k of An Post Certs and Bonds thinking I had done well before the rates dropped.

I hope to God the worst has passed and the risk is minimal now.

On a scale of 1-10 with 1 the riskiest where do you see default by the Irish Govt right now !
 
You are correct old nick. If you hold it for 7 years or more the gain that is made in the first 7 years will not be subject to CGT. This is for property purchased in 2012 and 2013
 
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