Moneymakeover 58 No Pension - Mortgage Free - How best to invest €40,000

E

eyesgreen_1

Registered User
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Hi There,

I am 58 years old and single. I have just paid off my mortgage ,house value is around €240,000. I also paid off my car loan, so apart from Utilities, Taxes, property tax and everyday living costs I have no other debt.


Until 2024 I was generally self employed and have no pension. I am currently in new job earning €25,000 per year. (Started paying pension in this job). I have a side hustle which earns around €10,000 per year and also I currently receive around €12,000 per year from rent a room scheme.

I have some health issues, and some life goals, so I would like to simplify things towards a semi-retirement in the coming years. I don’t mind a smaller income and having a more simplified life to spend the time as I wish. (I could continue my side hustle - (around €10,000 per year).

I would also consider downsizing to free up extra cash if this would make a useful financial difference.

I plan to speak with a financial advisor in due course but I thought it would be useful to gain some pre-advice and insight from the community here.

My questions are:

1. In heading now towards slowing down and my semi-retirement years, How best do I use/invest €40,000 lump sum in my bank account?

2. What should I focus on doing financially now in terms of my income so as to best afford me a basic/reasonable retirement income?

3. In wanting to reach this goal as quickly as possible, (Even with a minimal retirement income) what would be the quickest financial route to get me there?

Kindest thanks for any advice.
 
Will you get a full state pension et 66?
eyesgreen_1 said:
I plan to speak with a financial advisor in due course
Click to expand...
I wouldnt waste my money, you'll get good advice here.

If it were me I would be piling money into an AVC, the rental money and as much additional money as you can every month.

Ask someone in HR dept about setting one up along side your current pension, you will get 40% tax relief on all contributions up to your age limit every year.

Tax relief limits on pension contributions

This page outlines the tax relief limits on pension contributions
www.revenue.ie www.revenue.ie
 
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Hi There,

Thanks for replying. RE: Financial advisor, yes I would be inclined to agree the advice on the community here is always so useful. I have done all my tax returns during my self employed years so I’m definitely on track with my PRSI contributions to receive my state pension at 66.
 
Dont think their are 40% tax payer so would at most be 20% and with tax credits may not have much income that they could get relief from. Dont know they personal credits but if single and paye income would have around €4000 tax credit which means the first 20k in year is tax free leaving 15k charged at 20% . Rent a room is currently tax free.
 
Personal details

Your age: 58
Your spouse's age: N/A
Partner's age if not married: N/A

Number and age of children: 2 Children (32, 30)


Income and expenditure
Annual gross income from employment or profession: €47,000
Annual gross income of spouse/partner: N/A

Monthly take-home pay: €3,935

Type of employment - Public Servant and Self employed.
Employer type: e.g. public servant

In general are you:
(a) spending more than you earn, or
(b) saving?

Answer: Saving

Summary of Assets and Liabilities
Family home value: €240,000
Mortgage on family home: €0
Net equity: €240,000

Cash: €40,000
Defined Contribution pension fund: 0
Company shares : 0
Buy to Let Property value: 0
Buy to let Mortgage: 0

Total net assets: €240,000


Family home mortgage information
Lender: N/A
Interest rate: N/A
Type of interest rate: tracker, variable, fixed: N/A
If fixed, what is the term remaining of the fixed rate?: N/A
If tracker, what is the margin e.g. ECB + 1%: N/A

Remaining term: (Original term is not relevant)
Monthly repayment: N/A

Other borrowings – car loans/personal loans etc

Do you pay off your full credit card balance each month? N/A
If not, what is the balance on your credit card? N/A

Pension information

Value of pension fund: 0

Buy to let properties
Value: N/A
Rental income per year: N/A
Rough annual expenses other than mortgage interest : N/A
Lender: N/A
Interest rate: N/A
If fixed, what is the term remaining of the fixed rate?: N/A

Other savings and investments: 0


Other information which might be relevant

Life insurance: 0


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

1. In heading now towards slowing down and my semi-retirement years, How best do I use/invest €40,000 lump sum in my bank account?

2. What should I focus on doing financially now in terms of my income so as to best afford me a basic/reasonable retirement income?

3. In wanting to reach this goal as quickly as possible, (Even with a minimal retirement income) what would be the quickest financial route to get me there?

Kindest thanks for any advice.
Last edited: 30 Jun 2024
 
Income Clarity:

(Before Tax)

Public servant Job: €25,000 per Annum
Self employed: €10,000 per Annum
Rent a room Scheme: €12,000 per Annum
 
Hi,

Thanks for your reply. I’ve worked out that a basic annual expenditure at present is around €12,000. That’s house bills, utilities, insurance, food, one budget friendly holiday and also includes cost of running a car for the year.

This is a pretty conserving budget, but ideally if I could have a year of budget of around €16-17,000 for more some travel ect, that would be really good, as I have generally had to live on a tight budget after losses in the 2008 crash. I’ve had to build my financial situation back up since then.

It is worth noting I will be doing my best to finish the room renting as soon as is feasible. But I most likely could continue with my part-time self employment (Around €10,000) per year.
 
What sort of pension are you in line to receive from your public service job?
Will you also qualify for any Old Age Contributory Pension?
As per @Persia's earlier post, putting money into an AVC might be a good and tax efficient way to use some of your savings and boost your eventual pension cover.

I agree with @Fortune that figuring out your current normal expenditure and trying to figure out if/how this might change in retirement is a key exercise there too.

Recommendations for tools for analysing household budgets?

Up to now, to analyse my household budget I basically do the following: Download, say, a year's worth of current account/credit card statements in CSV format (the vast majority of my expenditure is from the current account/debit card, credit card and a little with the likes of PayPal) Import...
www.askaboutmoney.com

Moneymakeover - Household Budgeting Comparisons?

Not sure if the correct place... Life has been in (financial) flux for the last 4 years (house purchased, wedding, new baby, mat leave) but 2025 has brought some stability so I have had a look at our income and expenses. I track both pretty well. We both have decent incomes, don't live...
www.askaboutmoney.com
Edit: sorry, my post crossed with your previous one about your estimated annual household budget.
 
No worries. I left out medical expenses. I think these would be around €1,000 per year. I have been on a medical card before I started the public services job so may lose the card this year. (But I’m assuming I would retain a medical card in retirement).

As for a pension in the new job, I’ve only been in it a couple of months as a permanent employee as was doing temporary contracts on the lead up to a permanent position. (The real reason for taking on this new employment was to build up some saving to invest for retirement ect.).

Ideally, if I could cut back to my part-time self employment with no room renting and invest my savings plus whatever I could build up now over the next period would be the most ideal scenario.

I have other interests I would like to have the time to focus on, which could garner new income and career if I had the time available to do so. But the time it takes to work a 9-5 job plus weekend self employment and running the room rental leaves little room for time to focus on any new adventures.

I would like to have time in these important years to focus on my bucket list.
 
eyesgreen_1 said:
As for a pension in the new job, I’ve only been in it a couple of months as a permanent employee
Click to expand...
So your pension from this job is likely to be small and you don't have any other pension cover?
eyesgreen_1 said:
Pension information

Value of pension fund: 0
Click to expand...
What is your PRSI contribution record and what sort of OACP are you likely to qualify for?

Contribution Statement

<p>Request a statement of your history and record of contributions paid</p>
services.mywelfare.ie services.mywelfare.ie
Sounds like AVCs might be a priority here to boost your pension coverage as per @Persia's earlier post.
 
Yes a pension from this new employment will be very small. And yes I have no other pension cover whatsoever.

I’ve just downloaded my Social Insurance Record. I have to be honest and say I don’t fully understand pensions, but I am trying to educate myself.

It does seem to say that you need at least a total of 520 reckonable contributions (10 years).

My statement entries begin in 1987/88 and it states:

Combined Reckonable Contribution and the Credited
Contributions for Pension - Total: 1633

So If Im understanding that correctly, it would seem I meet the criteria for a full state pension?
 
So your tax position is roughly:

€35,000 @20% = €7,000
Tax credits: €4,000
Net tax due : €3,000

If you contribute €15,000 to a pension fund, it will save you €3,000 tax.
It will grow tax-free
And when you retire, you will be probably drawing the income tax-free, or at most, at 20%

So, it seems clear that you should contribute up to €15,000 a year to your pension fund.

You are 58, so you can contribute 35% of €35k which is €12,000

You should contribute €12,000 a year until the cash is gone.
 
eyesgreen_1 said:
I would also consider downsizing to free up extra cash if this would make a useful financial difference.
Click to expand...

eyesgreen_1 said:
,house value is around €240,000.
Click to expand...

Trading down is a risky and expensive process. You will pay the legal costs of buying and selling. You will pay the estate agent's fees selling. You would have to sell first and rent while finding a place to buy. Prices could rise in the meantime and you could be priced out of buying a house.

So I don't think that trading down is an option.
 
eyesgreen_1 said:
Contributions for Pension - Total: 1633
Click to expand...
eyesgreen_1 said:
So If Im understanding that correctly, it would seem I meet the criteria for a full state pension?
Click to expand...
No, not yet.

If you retired today with 1,633 reckonable contributions then you'd be eligible for 1,633 / 2,080 = c. 80% of the full OACP payment. At the moment you're 8-9 years short of the full 2,080. You'll presumably close that gap a bit in coming years assuming that you're paying class A PRSI? Might you be eligible for any home maker/carer credits?

Homemaker's Scheme

If you care full-time for children, or for an ill or disabled person, the Homemaker’s Scheme makes it easier for you to qualify for a State Pension (Contributory).
www.citizensinformation.ie www.citizensinformation.ie

HomeCaring Periods Scheme

The HomeCaring Periods Scheme can help you get a higher rate of State Pension (Contributory) if you spent time out of work to care full-time for a child aged under 12, or a person aged 12 or over (including an adult) who needed an increased level of care.
www.citizensinformation.ie www.citizensinformation.ie
 
eyesgreen_1 said:
Combined Reckonable Contribution and the Credited
Contributions for Pension - Total: 1633
Click to expand...
Your Prsi record won't show your 2025 contributions yet.
It's likely that you now have 1685.
As stated by Clubman you need 2080 to get the full contributory pension. If you continue to get Prsi contributions up to your 66th birthday you should be at or fairly close to 2080 and gain full or almost full contributory pension.

You don't necessarily need to be in employment to get these extra Prsi contributions.

They can come from Jobseekers credits, voluntary contributions or 5k drawdowns from an ARF. Having an ARF is very beneficial for gaining extra Prsi contributions. This is another good reason to invest your 40k into a pension.

There is information on gaining extra Prsi contributions in this thread.

Key Post - PRSI and planning retirement

This Key Post is in the form of a FAQ where I don't know many of the answers. I will update the post as I get answers. 1. PRSI payable on reaching state pension age Answer: 0 (Class M) 1a. Does this relate to the start of the tax year in which you become 66? Or to after your birthday? Answer...
www.askaboutmoney.com
 
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Thanks everyone so much for your advice so far.

Just realised I do have a shot at a uk state pension as I did work there in the past, and my new job is now in Northern Ireland also. Though I will need to work out how my tax situation will apply.

I have a UK state pension forecast which states: In the year 2034 I could be eligible for state pension forecast of £85 or £4,662 per year, this assumes another 9 years of contributions. It states I have currently 4 years of contributions and I need 10 for a state pension, also it says I have 5 payable gap years (2019-2024) that I can I can pay to make up the years at a cost of £923 for years 1-4 and £907.40 for year 5. Totals cost then would be £4,599.

Again that is if I’m understanding this correctly, and also as previously mentioned I would need to get advice from my accountant on how the tax situation of working in Northern Ireland Republic will play out in this regard.
 
eyesgreen_1 said:
also it says I have 5 payable gap years (2019-2024) that I can I can pay to make up the years at a cost of £923 for years 1-4 and £907.40 for year 5. Totals cost then would be £4,599.
Click to expand...
Those sound like class 3 contributions but you might be eligible for Class 2 contributions which would cost only about ~ £180 per year for the same benefits. There's a form on there that you can fill in to see if you are eligible to fill gaps over the last 6 years and they'll send you a reply in the post within a couple of months.
 
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