How to invest 200k in Ireland and make the money last?

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Nomoneynohoney

Registered User
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I recently inherited 200k. I know I'm lucky to have this money even available. However, it appears the options for actually growing it and making it last are quite limited.

To take an example, an AIB "wealth advisor" pitched an Irish Life MAPS fund to me. But the annual charge appears to be quite high, and I get taxed at 41 percent anyway on any gain, meaning 200k for ten years on their band 3 fund (averaging 5.7 p.a. return for its first 5 years) would leave me with:

200,000*((1.057)^10)) = €148,160 profit before tax.

Subtract the 41 percent tax, my profit is now = €87,414.

Expected loss from fund management charges (calculated at CandidMoney) = €36,077

Total profit on 10 year investment = €51,337

Do these calculations look accurate? And is that an acceptable return? I'm not very financially savvy so just trying to work out the best way to maximize my investment. Furthermore, the returns above aren't guaranteed, and I could just as easily lose money over ten years, couldn't I?
 
Do you have a mortgage? A pension?

We really need to know something about your overall financial position to offer any meaningful advice.
 
Sorry, should have provided background. No mortgage and no pension. I have been out of work for 20 years due to invalidity, and I've pretty much been surviving on the invalidity pension (a payment provided by the department of social protection) in addition to social housing and medical card. Getting this much money while obviously a blessing is also overwhelming.
 
Thanks.

Would you consider using the money to buy your own place?

I think you need to be careful not to do anything that would disqualify you from any relevant means tested benefits.
 

Don't know what part of the country you live in but €200k would get a property in a lot of places outside of major urban areas. Not too many people I know have that stash in the bank and getting social housing and a medical card. Br careful you don't lose your benefits altogether.
 
Sarenco said:
Thanks.

Would you consider using the money to buy your own place?

I think you need to be careful not to do anything that would disqualify you from any relevant means tested benefits.
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That might be a plan.


Invalidity pensions are not means tested, so I don't lose that benefit. Furthermore, the money hasn't actually been paid to me yet. I will of course need to surrender my medical card. Not sure about social housing, they're hardly going to evict me from a house ive lived in for 20 years because I inherited some money...the rent will probably increase though.
 
Nomoneynohoney said:
sure about social housing, they're hardly going to evict me from a house ive lived in for 20 years because I inherited some money...the rent will probably increase though.
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How old are you? If you are 55 plus I wouldn't be moving from a council house especially when you have been living there for twenty odd years, you have neighbours, friends, social contacts etc in the area. Speak to an independent financial advisor don't go near the banks, they will only try to rob you with their own investment products. Enjoy the money, treat yourself like you never did before. Good luck
 
Ok, I wish you good luck with it. As for the fund AIB pitched to you? Hope they told you it's not guaranteed and you could also lose your money unless the capital is guaranteed?
 
Maybe someone better can clarify for me; doesn't the management fee come directly from the fund pre-profit each year so technically you won't be gaining as much as you calculated? (Not sure it'll be a huge difference but it will be a difference as compounded profit each year)
 
Not too sure I would be buying a property at all, you will have extra costs such as insurance/maintenance/property tax etc and still only the same income. If you are in a property you like and are happy there I 'd be inclined to stay put, depending of course on what the increase in rent is. You'd have to weigh up the long term implications.
 
Here's the pro's of using the inheritance to buy a home as I see it:-
  • Keep medical card. The value of your home is not taken into account when assessing your entitlement to a medical card, which becomes increasingly valuable as you age. I would think long and hard before giving up your medical card - it's a very valuable benefit;
  • No more rent. That should materially reduce your day-to-day expenses - although Monbretia is absolutely right that there are ongoing costs associated with home ownership; and
  • You have an asset that you can leave to family members, friends or your favourite charity as you see fit. There are also softer psychological benefits to calling a place your own.
I certainly agree with Delfio that any move has to be balanced against the possible disruption to the social network (neighbours, etc.) that you have presumably built up over 20 years in your current location.

Hope that helps.
 
How valuable is a medical card when you may have to wait two plus years for elective surgery? The OP with his invalidity pension plus his 200,000 will be well financed to pay 1000 a year towards a decent health insurance policy. I am sure he deserves that luxury along with the sense of security associated with having a private health insurance policy.
 
delfio said:
How valuable is a medical card...?
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Very!

The benefits of having a medical card are extensive - free GP services, prescriptions, dental, optical, etc.

Private health insurance is hugely overrated IMO.
 
Sarenco said:
Very!

The benefits of having a medical card are extensive - free GP services, prescriptions, dental, optical, etc.

Private health insurance is hugely overrated IMO.
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Overrated? Hope you don't need a procedure done in double quick time.
 
Thanks for your replies so far everyone. Still in a real dilemma about what to do. I don't think I want to leave the area I live in now, I'm 57 this year and not getting younger, and with my health condition, it might be a bit much to make that move. Plus as was alluded to, I know people here and enjoy living here. I wouldn't be able to afford to buy my current house from the council as it's worth roughly 400k, and I don't think I'd get a mortgage with an invalididty pension.

Tough to know how much the rent increase will be but I guess that's something I should be enquiring about myself pretty soon. I asked the wealth advisor in AIB whether I would be given the same advice if I went to an independent financial advisor and she said yes, just for different products. It seems like buying into one of those Irish Life MAPS funds is my only real option, particularly because it's hassle-free and I don't have the financial knowledge to invest 200k by myself and get a better return. Just seems like such a waste to piss all that cash away on 1.5 per cent AMCs.
 
Nomoneynohoney said:
Still in a real dilemma about what to do. I don't think I want to leave the area I live in now, I'm 57 this year and not getting younger, and with my health condition, it might be a bit much to make that move.
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Grand, no point moving if you really don't want to.

In that case, if I was in your shoes, I would inclined to divide your money as follows:-
  • Keep ~€25k on deposit;
  • Buy ~€100 worth of 5-Year State Savings Certs from your local post office;
  • Open an account with a stock broker (DeGiro are cheap) and buy ~€75k worth of shares in Foreign & Colonial Investment Trust plc.
I wouldn't touch an investment product offered by any Irish life assurance company - they're a rip-off IMO.
 
Thanks. That seems to offer a reasonable balance for my age. With regards to DeGiro, this is the only part that confuses me. Should I be buying an ETF on there? I read a recent thread on here that says I can't buy U.S. ETFs so I'm assuming a European one would be a good idea?
 
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