Moneymakeover Age 58 with savings but no investments.

M

Marner

Registered User
Messages
11
Age: 58

Partner's age: none

Children/Dependants: None

Annual gross income from Job: €75 K

Annual nett Take Home Pay: €46 K

Type of employment: Public Sector

Expenditure pattern:
Saver

Rough estimate of value of home: €375K

Mortgage on home
None

Other borrowings – car loans/personal loans etc
None

Do you pay off your full credit card balance each month?
Yes

Savings: €600K
In various Irish banks and credit unions.

investments: None

Do you have a pension scheme?

1) Public sector defined benefit pension “Final Salary” scheme, Class A PRSI. I will have 38 years’ service if I continue to work to age 65.

2) 36K in PRB from a previous employment, Consensus fund.

Do you own any investment or other property? No

Life insurance:
No

Likely short/medium expenditure:

The house is approx. 60 years old, a full energy upgrade would cost €100k. It’s not a pressing issue currently but would be if I were retired and at home all day. My car is approaching the end and given my milage to work an electric would be justified. Estimated cost of €35K.


Background Information.
I grew up in somewhat tough circumstances, no money or security in the household. Started a trade after school and worked various jobs, mostly without pensions, until I got into the public sector. I’ve always been a good saver, had one mortgage and paid it off. I’m risk adverse but I probably don’t really understand finance risk and investments.

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

I don’t have a clear plan. I could retire from work in two years (without the old age pension), or I can work right up to age 70, but that’s unlikely. Ideally, I’d like to aim for retirement somewhere between ages 62 and 66. Too many of my friends and family have passed away recently at relatively young ages.

The 600K in savings is bothering me. I read in the media that I’m losing money due to inflation, but I don’t know who to trust for the best advice with how to get better value from this money. Are AVCs a good option for me or will I just end up paying the tax when I draw on them? Should I invest hundreds of thousands in some form of investments? With whom?

I have no interest in purchasing another property or being a landlord.
 
Marner said:
36K in PRB from a previous employment, Consensus fund.
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Paying extra to essentially track an index. Look into switching funds.

Marner said:
a full energy upgrade would cost €100k.
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This could be a good idea. Have you looked at your current energy costs to be able to see if it works for you?


Marner said:
Are AVCs a good option for me
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They quite likely are. They could solve a few issues you have. They would reduce the amount of tax you pay. They will be invested, which reduces your inflation worries. It will also reduce your monthly bank savings as you'll have less take home pay.
 
Given your income and level of savings, I suspect you are living quite a frugal lifestyle. Remember to live a little - you can’t take it with you.

An energy retrofit will probably give the best return on your capital and will increase your comfort levels. So, I would go ahead and get that work done now.

AVCs and/or purchasing notional service would definitely seem to make sense in your circumstances.

Early retirement should definitely be an option in your case. I would suggest pulling out your bank statements for the last three years and figure out how much, on average, you are spending per annum. Once you have that figure, you can start to work out the level of pension/assets you would need to fund your lifestyle.
 
With 600k in savings earning little, it would make sense to do upgrades to house asap plus you get benefits (mostly warmer house I’m assuming for longer).

You really should invest the money in something that earns a better return.

As above you should max your pension contribution to reduce the amount of tax you pay
 
A big Thank You! to Fortune, Sarenco and Cameo for your responses.
I will try to answer your queries here, and maybe quiz you a little more.
Sarenco said:
I would suggest pulling out your bank statements for the last three years and figure out how much, on average, you are spending per annum.
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I will do this.

Sarenco said:
I suspect you are living quite a frugal lifestyle. Remember to live a little - you can’t take it with you.
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Not desperately frugal! but I do tend to enjoy some of the simpler things in life. I'm concerned though that in retirement, if healthy, I could spend much more than I do while working. I would like to travel more, maybe live abroad for a few months each year.

Fortune said:
Have you looked at your current energy costs to be able to see if it works for you?
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Electricity = €650 pa, Oil= €800 (800 litres), Gas bottles + solid fuel = €250. Total = €1700 pa.

Sarenco said:
AVCs and/or purchasing notional service would definitely seem to make sense in your circumstances.
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Where should I go for trustworthy advice? I don't think I know enough to make the best choices/decisions myself.

Cameo said:
it would make sense to do upgrades to house asap plus you get benefits (mostly warmer house I’m assuming for longer).
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I have upgraded the attic insulation and installed new triple glazed windows. I'm going to start thinking about Solar. I'm reticent about the full upgrade as I believe that I would have to move out to allow the floors to be torn up for a heat pump system.
Cameo said:
You really should invest the money in something that earns a better return.
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Where would you go for the best advice in this matter?

Many Thanks!
Marner.
 
Marner said:
I have upgraded the attic insulation and installed new triple glazed windows. I'm going to start thinking about Solar. I'm reticent about the full upgrade as I believe that I would have to move out to allow the floors to be torn up for a heat pump system.
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That sounds horrendous. How much would that cost and do heat pumps make financial sense. Would you not be better off selling and purchasing something that is modern, well insulated, cheap to run, age ready.

For financial advice there's posters on here like Steven Barrett, Ferguson, Padraic Kissane and a couple of others. Sometimes it's worth paying a grand or so to get good advice. Personally I wouldn't trust a bank, and if you do get advice from a bank come back on here and tell us what it is so you get a more rounded view.

You're living rather frugally, if that suits you fine, but you can't take it with you. So enjoy it while you have your health.
 
Marner said:
Electricity = €650 pa, Oil= €800 (800 litres), Gas bottles + solid fuel = €250. Total = €1700 pa.
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I’m a bit of an energy efficiency enthusiast (ask my wife and kids!) but to spend 100k to offset a proportion of a €1700 p.a. bill is absurd, the SEAI have a lot to answer for imo. The vast majority of the benefit is in the three things you’ve mentioned, two of which are already done. Add solar and a big enough battery and you could conceivably switch to fully electric resistive/IR heating at low overnight/EV electricity rates rather than a heat pump. Not as efficient as a heat pump, but also not as disruptive. (Although I don’t know why floors need to be ripped up, if that’s what you’ve told?).
 
Incidentally, solar+battery is one of the best bang-for-buck investments you can make in early years of retirement in my opinion. With an expected lifespan of 20-30 years, you're effectively buying an inflation-adjusting benefit for the rest of your life. A €10k investment nets you around €1500 in benefits (in today's €) per year. An annuity for similar would cost around €40k.
 
Marner said:
Where would you go for the best advice in this matter?
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See some of the names mentioned by bronte. Ive only ever used execution only services of financiall advisor. If it was me, I'd buy shares paying a decent dividend but this is not for everyone
 
Just to be clear I’ve no connection to those gentlemen advisors, but they do post sound advice on here in their own names. Which is why I’d recommend them. And I recommended one of them to a sibling who made a very unwise financial decision that the advisor is trying to get money back on. Because said sibling didn’t go to an advisor or ask on somewhere like here, or even didn’t ask non expert me, who would have said no way!
 
Marner said:
Age: 58
Rough estimate of value of home: €375K
Mortgage on home None
Other borrowings – car loans/personal loans etc None
Savings: €600K In various Irish banks and credit unions.
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I'm just amazed you managed to save that much money whilst availing of zero tax efficient savings strategies and none of it came from the power of compounded growth offered by investing in the stock market. If you had saved all that money in to an ETF/Index fund over the last 3 decades, even with the high taxation that comes, I can only imagine what you would be worth now.
 
@CharlieMac , Thank you for your replies! I'm 40 years working on it and with just a few to go I need to make the best of my savings as I will have no other income other than my pension.
I've never understood financial maths. Ironically I remember spending hours and hours having calculus "pressed" into us, the teacher never explained compounding or financial literacy or the business of making money outside hard labour. Then again, he was a catholic priest.
 
It's a credit to you being careful with your money.

The way I see it you don't have to worry about money at all. You are on track to retire with a circa €40k p/a defined benefit pension added to your substantial savings that can also earn you an income if invested wisely. You are well set up to have a comfortable retirement.

Even though you will have nearly 40 yrs service at 65 you will still have scope to increase your occupational pension benefits by 100-200k, tax free lump sum etc.. so I think it's worth starting to make AVCs and avail of that tax relief. If I was you I would invest a large portion of your savings in to an All World index fund via ETFs and just leave it there. Alternatively the Prisma funds from Zurich who will take care of all the taxation requirements.... for a fee.

It might be worth spending a certain amount to get good structured financial advice but you can also get great ideas reading other money makeover threads on this site.
 
@Bronte , @Cameo , Thank you for your suggestions regarding a financial advisor. I've been thinking that the likes of Eoin McGee etc. was only for someone perhaps self employed and with two or three times my income and savings.
 
Marner said:
I'm concerned though that in retirement, if healthy, I could spend much more than I do while working. I would like to travel more, maybe live abroad for a few months each year.
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You go from having 20-30 days annual leave to 365 days annual leave. You are free to do a lot more things and you should enjoy it. Remember, you are more likely to spend more at the beginning than at the end, so enjoy yourself.

With that amount of money, you need to get some of it working for you. This is the money that you won't need in the next few years but will need in 7+ years.

I recently had clients who went to Japan on a holiday. It cost them €20,000. Of that, €10,000 was their capital and the other €10,000 was the return on the investment that they had made. This is the purpose of investing. Being able to have trips like this and not all of it comes from your capital, some of it is the gains on your investment.
 
Marner said:
I'm reticent about the full upgrade as I believe that I would have to move out to allow the floors to be torn up for a heat pump system.
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Whoever told you that was incorrect. You can get a heat pump system which works with your current radiators (I'm assuming you have traditional radiators, not underfloor heating) so there should be no need to go tearing up any floors.
 
@Ceist Beag , Thank you for your reply.

My house is an old cottage/bungalow. While the oil fired heating system is working fine now, the pipes under the concrete floors are approx 60 years old. I have changed all of the radiators over the years. Any of the Deep retrofit people I have met have recommended underfloor heating with a heatpump (Ecodan). Also to heavily insulate the floors.

What model heatpump would you recommend to work with my existing high temp radiators? Is this what you use to heat your house?
 
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