Moneymakeover Investment options/savings for retirement: medium risk.

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Mousehelp

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Personal details

Your age: 55
Your spouse's age: N/A
Partner's age if not married: divorced

Number and age of children: 2 x early 20s. one just finished college, one finished in 4 years. Live with me.

Income: 85,000 and potential 10,000 bonus

Type of employment - e.g. Employee or self-employed. Employee. Private sector

In general are you:
(a) spending more than you earn, or
(b) saving? Saving. Approx 2,500 pm - including withheld Compay shares


Summary of Assets and Liabilities
Family home value: 900,000. 4 bed, S Dublin
Mortgage on family home: 0
Net equity: 900,000

Cash:
Defined Benefit pension fund:
Company shares : 30,000
Buy to Let Property value: 0
Buy to let Mortgage: 0

Total net assets:



Other borrowings – car loans/personal loans etc none

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

Pension information

Value of pension fund: no idea. Defined benefit. I am due to get 40,000 pa including AVCs if i retire at 60 years. This will be sufficient. option to do private work when I retire, if i want.

Maxing AVC contribution (pay from cashed in company shares each year)

Buy to let properties
0

Other savings and investments:
Savings Bonds 55,000
Bond repayment of 85000 currently on deposit


Other information which might be relevant

Life insurance: 4 x salary
Have health insurance etc
have upgraded the house - solar panels, battery, insulation etc


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

Am planning on retiring in approx 5 years time. Have approx 1500 cash left over every month. go on plenty of holidays, have a year old car. kids almost reared etc and have everything I need/want. So looking at investing money for 8/10 years time for iw/when i need it or to leave to the children.

l would like to invest the 85,000 currently on deposit. medium risk. Know there are better returns than state savings so looking for some advise. Am I better off waiting for the government SIA? Have never invested before so all new. all advice welcome and thank you in advance.
 
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I would recommend you have a consultation with an independent financial advisor who will give you good advice based on all your personal information. You can afford it and it will allow you to be very open with your details that you may not able to be in a forum like this.

The only odd thing I noticed was your poor understanding of your pension. The DB element gives you €40K pa, will you have the contributory state pension? And you should easily know the value of your AVC by logging into the providers portal. And do you and your ex have any pension adjustment order due to the divorce?

overall you seem to be in a very strong financial position. Why not use the €85K to max out your AVC’s until you retire? The money will technically come from your income but you can use the €85K to make up any shortfall in your take home salary.

In terms of your children you talk about investing to give them money in the future but why not avail of the tax exempt €3K pa to each child while they are in their 20’s and building their own careers. They are probably saving for a house, car, travel and €3K per annum would go a long way towards building this savings up.
 
Try to calculate a reasonable projection of your annual costs post retirement, but in today’s euro cost. That will give folks here a starting point as you haven’t shared income details therefore we can’t estimate this based on info provided.

You have a Defined Benefit pension, which is a de facto bond/fixed income investment. You will presumably have a state pension, also a de facto bond/fixed income investment. I would suggest you need to transition your 55k + 85k (am I understanding that total correctly?) into equities. Also worth getting clarity on AVC value as @Clamball suggested. I’d add to also check your pension contribution record on welfare.ie to understand what level of state pension you’re due to qualify for. Is it safe to assume that the 40k DB pension is inflation-adjusting?
 
I wonder is the state pension included within the estimated annual value of the defined benefit pension? That is the case with most public sector DB schemes.

Maybe the terms are different in this OP private sector DB scheme... I didn't think any even existed anymore.
 
CharlieMac said:
I wonder is the state pension included within the estimated annual value of the defined benefit pension? That is the case with most public sector DB schemes.
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Well, they definitely won't be getting the OACP from age 60
Mousehelp said:
Value of pension fund: no idea. Defined benefit. I am due to get 40,000 pa including AVCs if i retire at 60 years. This will be sufficient. option to do private work when I retire, if i want.
Click to expand...
 
many thanks all for taking the time to reply. Yes, have a DB pension (were stopped shortly after i joined the company over 20 years ago). yes, inflation adjusting. Will also have contributions for the state pension from aged 66 as have worked/paid PRSI for the past 23 years.

Have 16,000 AVC and am maxing these for last year and going forward until I retire.

re: children. I am already giving them the 3K tax exempt a year, as are grandparents.

So am thinking yes, of equities. This is where I need to see a financial advisor to advise.

Projected monthly expenditure on retirement (excluding holidays) approx 1500 with biggest bill being health insurance (highest plan). obviously no carers or nursing home factored in here if it was needed.

Am i better off waiting for the government SIA or should i be looking at products already on the market? thanks again
 
Worth checking the rules of your DB scheme.. Will you be entitled to the state pension in addition to the 40k, or whatever it is, from your DB scheme? Also how much of the state pension you will be entitled to. It is currently unavailable until age 66.
 
Mousehelp said:
So am thinking yes, of equities. This is where I need to see a financial advisor to advise.
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The simplest way to invest in equities IMHO is either through an ETF or a managed fund from one of the big life assurance companies. The general consensus if investing in either of these options would be to choose something that is well diversified. E.g. the MSCI World Index tracks stocks from 23 developed countries.

An example ETF would be the iShares MSCI World. Advantage of ETFs is that the charges are very low. The main disadvantage is that you have to do the taxes yourself. They can be complex with "deemed disposal" due every 8 years. But if your investment timeline is 8 years or less, then deemed disposal might not be an issue. You can easily purchase them through any of the online brokers like Trade Republic, De Giro, Interactive Brokers etc.

An example equivalent fund would be Zurich's Indexed Global Equity fund, which essentially also tracks the MSCI World index. The charges depend on who you purchase this from. It will be more expensive than an ETF. The main advantage is that you don't have to worry about taxes. The Life Assurance company (e.g. Zurich) takes care of that for you. Other companies have similar funds

On a risk scale, the fund is marked as 5 out of 7. So a bit higher than the "medium risk" that you stated you were looking for. So you could consider putting, say, half your cash in the ETF or fund and keeping the other half in the best interest bearing deposit account you can find. That would reduce the overall risk.
 
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