Investing severance money to supplement income for next 10 years

J

Jordan Belfort

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I was made redundant lately and received a severance package after 25 years service. I would like to invest the money to hopefully match inflation so that I could draw down approx. 10% a year to supplement my income until I am ready to draw my pension. I'm debt and mortgage free. I plan to have some paid income from part time/casual work but will need to supplement that with money from severance.

What products would people recommend ?
I'm thinking something like the way an ARF works but obviously the principle comes from lumpsum rather than a pension pot.
 
What is your risk tolerance? As in could you survive something like a 30% drop in the value of your savings in a year and be okay?

That will dictate what kind of product is best for you.
 
Thanks. The money makeover format looks excellent but it a little to detailed for me on a public forum. My mistake for posting here.
 
NoRegretsCoyote said:
What is your risk tolerance? As in could you survive something like a 30% drop in the value of your savings in a year and be okay?

That will dictate what kind of product is best for you.
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Yes a 20% hit in one year would be tolerable but couldn't have a couple of those years.
 
Jordan Belfort said:
Yes a 20% hit in one year would be tolerable but couldn't have a couple of those years.
Click to expand...
As others have posted it's hard to give much advice without broader context.

On the one end you have state savings which are 100% secure but will likely be eroded by inflation.

On the other end you could purchase an ETF-type product and sell as you go (more risk and of course tax involved).

I would advise against an annuity as although it would give you income certainty the payments are taxable as normal income.
 
NoRegretsCoyote said:
I would advise against an annuity as although it would give you income certainty the payments are taxable as normal income.
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As this is personal money and not pension money, that would be a purchased life annuity. Only a portion of the money is taxed some of it is a return of the capital. They aren't available in Ireland.

I had a similar case to this recently where a client came into money and wanted an ARF like income from her lump sum. We looked at:

1. Leave some in cash for income for a few years and invest the rest. When cash runs out, take out another lump sum and live on this cash until it runs out.
2. Invest the full amount with a life company who have a regular withdrawal facility on the policy. They look after the tax on the withdrawal each month and she just gets a net amount paid into her account.


Steven
www.bluewaterfp.ie
 
Steven Barrett said:
As this is personal money and not pension money, that would be a purchased life annuity. Only a portion of the money is taxed some of it is a return of the capital. They aren't available in Ireland.

I had a similar case to this recently where a client came into money and wanted an ARF like income from her lump sum. We looked at:

1. Leave some in cash for income for a few years and invest the rest. When cash runs out, take out another lump sum and live on this cash until it runs out.
2. Invest the full amount with a life company who have a regular withdrawal facility on the policy. They look after the tax on the withdrawal each month and she just gets a net amount paid into her account.


Steven
www.bluewaterfp.ie
Click to expand...

#2 sounds like a an option and nice that tax etc taken care of by the life company. I assume principle is paid tax free and any gains are paid with 41% exit tax ?
Brokers usually take a bit cut on these. Are there any other options to reduce fees ?
Who are main companies in Ireland? Irishlife, Zurich, Aviva ?
 
Yes, the life company do all the tax, which is deducted on gains and not the capital.

Broker may charge a fee or commission to set up. A commission means higher ongoing costs as the life company has to recoup the commission paid out.

Standard Life are the other life company not mentioned.
 
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