Investment fund to match inflation

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DrDoolittle

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I have recently sold a property and want to invest the funds. I am 55 and plan to start drawing down the funds starting in 5 years and that will supplement a move to less work hours and eventually supplement my pension. I don't have a mortgage.

I am looking at funds like Zurich or Irish Life. My goal is to match inflation, after fees and exit tax, without taking any on too much risk as I need to be drawing on fund this in just 5 years or so.

What would people recommend. Obviously things can change, particularly with Mr Trump in office but on todays data what would people suggest as a fund to meet my goals.
 
If you are going to be on a lower tax rate, then a portfolio of directly owned shares might be better. The dividends would be taxed at your lower rate.

You lack the diversity of a fund, but lower charges and more tax-efficient.
 
There is no such thing as an investment that is guaranteed to match inflation, after taxes and fees.

How is your pension invested?

One option is to maintain a high allocation to equities within your pension and invest the proceeds of the property sale in decent fixed-term deposits.
 
@Brendan Burgess I was thinking that too but worried about managing all of the different shares etc. An ETF would be a good option but the taxation is so now 41% on gains and dividends. Is there much chance of that changing to be handled more like shares ?
 
DrDoolittle said:
Pension is in 'lifestyle' type fund that targets an ARF
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Many people would suggest that higher risk/reward and equity content than a typical lifestyle approach would involve might be a better bet for someone in their mid 50s who is planning to roll their pension investments over into an ARF rather than using it to buy an annuity.

A critique of the lifestyling approach to pensions

I came across a paper which may help the PA answer some of those questions: "Beyond the Status Quo: A Critical Assessment of Lifecycle Investment Advice" https://www.netspar.nl/assets/uploads/19.-Cederburg-ACO_Manuscript.pdf "Our findings suggest that financial advice and pension regulations...
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In my opinion, you might get better feedback if you did a Money Makeover.

Key Post - Basic information required for the "Money Makeover" forum

It can be difficult, but please try to use a meaningful title in your thread For example "27 year old with mortgage arrears". You will get a much better and much more coherent answer if you give as much information as possible in your first post. For example, if you give your mortgage rate, it...
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Dividends could be taxed at the lower rate, but from what I gather it's some work to ensure that's all you pay. There's the withholding tax, which depending on the country could be more than your marginal rate - so you've to chase up on that. Then there's some sort of encashment tax of 25%, which you also need to chase up to get refunded. Possibly some brokerage and currency fees on top.

While you do hear of retired US or UK citizens living off a modest dividend stream from their share portfolio, they probably stick to domestic shares which isn't a good option for Irish investors with our smaller domestic stock market.

Trump recently has threatened to increase that withholding tax to 50% so that doesn't sound good either for anyone looking at dividends as an income source.
 
@ashambles Good point on the witholding tax but I was not aware of any enchashment taxes on US shares anyway.

Could a reasonable portfolio be made up of european traded share and that somewhat hedge against any Trump withholding taxes etc ?
 
DrDoolittle said:
I have recently sold a property and want to invest the funds. I am 55 and plan to start drawing down the funds starting in 5 years and that will supplement a move to less work hours and eventually supplement my pension
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I presume that you're already maxing out your Pension Contributions? I'd ensure that first assuming you're not oversubscribed.

While you will have an initial demand in 5 years time, there will be an element that will have a longer timeframe (6-10 years) so maybe a bucket strategy would work best for you? You could put a decent proportion (50%-75%?) of the funds in an Equity fund and the remainder in a Cash Fund. You could then move an element from the Equity fund to the Cash Fund when it had matched inflation (or better) in a staggered timeline to suit.
 
Redzer said:
You could put a decent proportion (50%-75%?) of the funds in an Equity fund and the remainder in a Cash Fund. You could then move an element from the Equity fund to the Cash Fund when it had matched inflation (or better) in a staggered timeline to suit.
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Just to reiterate...

A critique of the lifestyling approach to pensions

I came across a paper which may help the PA answer some of those questions: "Beyond the Status Quo: A Critical Assessment of Lifecycle Investment Advice" https://www.netspar.nl/assets/uploads/19.-Cederburg-ACO_Manuscript.pdf "Our findings suggest that financial advice and pension regulations...
www.askaboutmoney.com
 
Flybytheseat said:
Gold, Silver and Gold/Silver mining stocks are your best bet.
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Gold regularly underperforms inflation, sometimes for quite long periods. If you bought gold in 1933, you were buying into a long slump; you had to wait until 1974 before it caught up with (US dollar) inflation. If you bought gold at its 1980 peak, you're still waiting for it to catch up with US dollar inflation. Over the timescale the OP is talking about, gold is certainly not a reliable hedge against inflation.

And mining stocks are considered signficantly more volatile than stocks generally. Again, over the OP's time horizon, they look even less like a prudent hedge against inflation.
 
Dr Strangelove said:
It’s hard to advise without doing the money makerover which I would suggest
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I agree. :)

Investment fund to match inflation

I have recently sold a property and want to invest the funds. I am 55 and plan to start drawing down the funds starting in 5 years and that will supplement a move to less work hours and eventually supplement my pension. I don't have a mortgage. I am looking at funds like Zurich or Irish Life...
www.askaboutmoney.com
 
"One option is to maintain a high allocation to equities within your pension and invest the proceeds of the property sale in decent fixed-term deposits."

@Sarenco This is definitely worth considering and any gains in pension will be taxed as income eventually.
 
DrDoolittle said:
Good point on the witholding tax but I was not aware of any enchashment taxes on US shares anyway.
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I've only US shares with Goodbody, last year they charged me withholding and encashment. Not sure if brokers like DeGiro and InteractiveBrokers also charge encashment - perhaps not yet?

This thread https://www.askaboutmoney.com/threa...holding-taxes-paid-on-eurozone-shares.232425/ makes interesting reading for anyone planning to try to make dividend income a significant part of their plans.

From that it looks like picking German shares would be even worse than US ones, as German DWT is 26.38% which Revenue only allows you to offset 15% leaving you to fight German bureaucracy for the rest.

I'd hope I'm wrong but It looks to me like if you want dividend income from your own selection of shares and simple tax treatment you buy dividend stocks in the country you're tax resident - which wouldn't be a safe way to invest as an Irish resident.
 
TomEdison said:
Gold regularly underperforms inflation, sometimes for quite long periods. If you bought gold in 1933, you were buying into a long slump; you had to wait until 1974 before it caught up with (US dollar) inflation. If you bought gold at its 1980 peak, you're still waiting for it to catch up with US dollar inflation. Over the timescale the OP is talking about, gold is certainly not a reliable hedge against inflation.

And mining stocks are considered signficantly more volatile than stocks generally. Again, over the OP's time horizon, they look even less like a prudent hedge against inflation.
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Well it has outperformed equities by a factor of 3 to 4 over the past 2 years and this will likely continue as we head back into US quantative easing so thanks for the commentary but I believe you havent researched the topic and are potentially misinformed. Thanks for the debate as that should be how it is on a public forum. US equities on the otherhand will likely stagnate and potentially drop by 50% in the coming year so I know where I'm putting my meagre savings. The fact that I don't subscribe to the lemming like group think on this forum is more likely an indication that I'm right rather than wrong.
 
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