Advice for couple in their 50s with disposable income

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Talkinghead

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We are a married couple (54 and 53) with 3 kids (1 in second year college, 1 doing the LC this year and one in Primary). Wife works part time in HSE. We are all in good health. We are just about to clear our mortgage and we have no other debt. I landed a good job in my late 40s and we’ve used our salaries to pay down the mortgage and we’ve also put €300k in doing house renovations. So nothing big left to spend our money on.

We are not into cars or a flash lifestyle. We’ve cleared our debts but that has come on the back of having no savings. My wife and I are now in a position now where after we pay all of our living expenses, we can save €11500 per month. Assuming things will crop up like college and replacing our cars and the odd holiday, we are assuming that we could easily afford to put away circa €110k per year.

Again, assuming I work to 65, health permitting (I like my job), we could have circa €1m in savings. Our pensions would be approx €7k (if we were drawing down now) per month at retirement. The house is currently worth about €800k. We don’t have any inheritance coming our way. We are risk averse, but would chance 25% in riskier assets. We’ve toyed with the idea of buying an apartment in Dublin as an investment as we don’t like the idea of inflation eating up our savings. Our financial goals are not to screw up financially and to leave a nice sum for our kids when the time comes. Taking all that into consideration, we would appreciate any suggestions as to what we should consider.
 
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If you draw down your private pension now it gives an income of 7k per month? When eligible for the state pension your annual income from pensions would be ~100k?

It seems like you could retire much before 65. Assume with the high earnings there must be some form of pressure etc. Employers aren't giving out 500k salaries for easy jobs!
 
Talkinghead said:
We are a married couple (54 and 53) with 3 kids (1 in second year college, 1 doing the LC this year and one in Primary). Wife works part time in HSE. We are all in good health. We are just about to clear our mortgage and we have no other debt. I landed a good job in my late 40s and we’ve used our salaries to pay down the mortgage and we’ve also put €300k in doing house renovations. So nothing big left to spend our money on.

We are not into cars or a flash lifestyle. We’ve cleared our debts but that has come on the back of having no savings. My wife and I are now in a position now where after we pay all of our living expenses, we can save €11500 per month. Assuming things will crop up like college and replacing our cars and the odd holiday, we are assuming that we could easily afford to put away circa €110k per year.

Again, assuming I work to 65, health permitting (I like my job), we could have circa €1m in savings. Our pensions would be approx €7k (if we were drawing down now) per month at retirement. The house is currently worth about €800k. We don’t have any inheritance coming our way. We are risk averse, but would chance 25% in riskier assets. We’ve toyed with the idea of buying an apartment in Dublin as an investment as we don’t like the idea of inflation eating up our savings. Our financial goals are not to screw up financially and to leave a nice sum for our kids when the time comes. Taking all that into consideration, we would appreciate any suggestions as to what we should consider.
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i presume you are maxing your pension contributions? is there an option to buy back service for your wife aswell with the HSE?

as other posters noted you can set aside 18k a year for the kids with not tax implications so do that.

An apartment for the kids to use in university and then have an asset afterwards could be useful?
 
My pension estimate is primarily based on what my current employer will pay me per month when I retire. They use a pension modeller. This amount will increase as pay rises get factored in over time. There is no lump sum when I retire, just a generous monthly pension. While I can draw down the pension at any stage after 55 if I retire, the actuarial hit is sizeable the earlier I do so. I’ve also got a very generous health insurance plan from my employer which will see my right in my retirement regardless of when I retire. Needless to say, I’m not worried about my income when I retire. What I am trying to achieve is twofold; where to put my money and at the same time, limiting to the greatest extent possible CAT for my kids.
 
Is your pension a defined benefit scheme or something as some of what you posted above doesn't seem to make sense if it's a defined contribution scheme...
 
Yes, defined benefit. I’ve worked for 4 different employers in my life and I was lucky enough to have a DB scheme in each.
 
Talkinghead said:
Our pensions would be approx €7k (if we were drawing down now) per month at retirement. The house is currently worth about €800k.
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At those levels, I suspect you will exceed the standard fund threshold (which Sinn Fein want to further reduce) if you don't retire before 65 so you might want to keep an eye on that.
Talkinghead said:
What I am trying to achieve is twofold; where to put my money and at the same time, limiting to the greatest extent possible CAT for my kids.
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Given the potentially large estate, you might consider taking out a Section 72 policy, the proceeds of which are tax-free if used to pay an inheritance tax bill.

It might also be worth considering investing the annual small gift allowance for each of your kids that are under 18 in bare trusts.
 
With that kind of money you should go to a financial advisor for proper advice including specialist tax advice. Someone like Steven on here @Steven Barrett always gives good advice and I've never seen him be anything but clear and with correct advice. (no connection).

You want someone who will charge you a fee to look at your entire situation and offer you options to pick from.
 
Talkinghead said:
We are a married couple (54 and 53) with 3 kids (1 in second year college, 1 doing the LC this year and one in Primary). Wife works part time in HSE. We are all in good health. We are just about to clear our mortgage and we have no other debt. I landed a good job in my late 40s and we’ve used our salaries to pay down the mortgage and we’ve also put €300k in doing house renovations. So nothing big left to spend our money on.

We are not into cars or a flash lifestyle. We’ve cleared our debts but that has come on the back of having no savings. My wife and I are now in a position now where after we pay all of our living expenses, we can save €11500 per month. Assuming things will crop up like college and replacing our cars and the odd holiday, we are assuming that we could easily afford to put away circa €110k per year.

Again, assuming I work to 65, health permitting (I like my job), we could have circa €1m in savings. Our pensions would be approx €7k (if we were drawing down now) per month at retirement. The house is currently worth about €800k. We don’t have any inheritance coming our way. We are risk averse, but would chance 25% in riskier assets. We’ve toyed with the idea of buying an apartment in Dublin as an investment as we don’t like the idea of inflation eating up our savings. Our financial goals are not to screw up financially and to leave a nice sum for our kids when the time comes. Taking all that into consideration, we would appreciate any suggestions as to what we should consider.
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- you need to be certain those pensions are certain
- you have to think about care in old age
- you should not assume you will continue to work
- nor should you assume you will not have health issues
- you need to make sure your wife also has a pension or circumstances that mean she will have the lifestyle to which you are both accustomed.

And after you have that certainty you can look at what to do to minimise inheritance tax for your children.

If you've never been a landlord are you up for it? Really up for it. It is not merely a matter of just buying an investment apartment.

I'd be thinking along the lines of getting each child set up in a property in Dublin that they own, and rent is paid to them under tax free rent a room, to their student buddies, that's what I saw wealthy parents do when I was younger. A yearly 6k tax free helps with paying for their mortgages.

Only downside is if the child is not financially prudent.
 
Talkinghead said:
We’ve toyed with the idea of buying an apartment in Dublin as an investment as we don’t like the idea of inflation eating up our savings.
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Think long and hard about this because if you look around and possibly read some threads here you will notice that lots and lots of landlords are leaving the rental game for many reasons. Its not for the faint hearted and to me sounds like too much hard work. Some of the posts on this thread refer.
 
Start with some basics and make sure you have an up to date will in place, your tax affairs are in order etc.

I note you said that you have very good employee health insurance which will see you right when you retire or words to that effect but surely when you retire, they will stop paying it for you, or am I missing something?

You should and could start giving some consideration to the family holidays and the holiday of a lifetime. You may also have weddings to fund at some stage.
 
As I mentioned, I don’ get a lump sum in retirement but I get a percentage of my salary depending on length of service. I also retain full medical insurance as long as I am in receipt of a pension from my current employer. The plan’s benefits mean that I will never have to worry about medical expenses or nursing home costs in retirement.
 
Sue Ellen said:
o_O That's some perk. Nursing home costs can be extremely costly now never mind in the future.
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I’m just curious, how can an employer stay in business long term if they provide medical coverage including the cost of nursing home charges (1 - 2k per week) - the potential liabilities must be enormous!
Is your wife covered by the scheme as well?
 
Thanks to all who offered suggestions. I plan to start in this calendar year the small gift exemption payment from myself and my wife to my kids. I will look into the section 73 investment plans and I have arranged to meet with a financial advisor. I will also talk to my bank about low risk investments. I take on board the comments regarding buying an investment property and I don’t think I want the hassle.
 
Talkinghead said:
We are a married couple (54 and 53) with 3 kids (1 in second year college, 1 doing the LC this year and one in Primary). Wife works part time in HSE. We are all in good health. We are just about to clear our mortgage and we have no other debt. I landed a good job in my late 40s and we’ve used our salaries to pay down the mortgage and we’ve also put €300k in doing house renovations. So nothing big left to spend our money on.

We are not into cars or a flash lifestyle. We’ve cleared our debts but that has come on the back of having no savings. My wife and I are now in a position now where after we pay all of our living expenses, we can save €11500 per month. Assuming things will crop up like college and replacing our cars and the odd holiday, we are assuming that we could easily afford to put away circa €110k per year.

Again, assuming I work to 65, health permitting (I like my job), we could have circa €1m in savings. Our pensions would be approx €7k (if we were drawing down now) per month at retirement. The house is currently worth about €800k. We don’t have any inheritance coming our way. We are risk averse, but would chance 25% in riskier assets. We’ve toyed with the idea of buying an apartment in Dublin as an investment as we don’t like the idea of inflation eating up our savings. Our financial goals are not to screw up financially and to leave a nice sum for our kids when the time comes. Taking all that into consideration, we would appreciate any suggestions as to what we should consider.
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A few things jump out at me:

  1. If you are able to save €11,500 a month, you are obviously in a well paying job. Well paying jobs don't come without their pressures and demands. Working until age 65 may take its toll on you and you may want to get out earlier.
  2. Even if you don't want to get out earlier, your employer may decide that for you, especially if you are in a multinational. If that does happen, you will get a good package but the older you are when it happens, the harder it may be to get full time employment.
  3. You should now grow your wealth.
  4. You talk about being risk averse but are willing to take on debt to put into an apartment in a small capital city on the edge of Europe? Is that not a lot riskier than not taking on any debt and investing in the biggest and best companies from around the world (many of whom generate more income than the whole of Ireland!).
  5. As we have seen with double digit inflation recently, leaving your money on deposit is a risk too.
  6. Why wait until you are dead until you help your children out financially? That could be another 50 years. What pleasure and enjoyment will you get from seeing your children having their retirement plan topped up when you are gone? You will be in a financial position to help your children out financially in getting on the property ladder (never buy your children a property, it is not good for their independence). Which will give you more enjoyment.
  7. Absolutely use the €6,000 a year exemption to fund this for your children. It is simply funding a bit each year to help your children out in the future.
You need to invest and grow your wealth to achieve financial independence. When you have that, you have choices. Like if you want to retire before 65 but your employer(s) won't pay out the defined benefit pensions until age 65, you can fund the income yourself.


Steven
www.bluewaterfp.ie
 
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