Moneymakeover Recently retired and in need of investment advice for some extra income.

A

acequion

Registered User
Messages
102
AGE: 66
STATUS: Single, no children

OCCUPATION
Retired professional. [Only retired in late 2025]

INCOME [from occupational pension and OAP]
€40.000 gross per year
WEEKLY TAKE HOME PAY: Approx €650 after deduction of VHI

EXTRA YEARLY INCOME
Approx €1.500 - €2.000 net from contract work [this is open to me for the next few years]
Zurich AVC/ARF Approx €40.000 in the fund, currently in the process of being matured. Planning to take about €4.000 per year, less tax, for extra income as long as the fund will last in the ARF

LOANS/MORTGAGE
None. I own my home, value approx €400.000
I also own an apartment in Spain, value approx €150.000

SAVINGS
Approx €220.000
I am the sole heir of my very elderly mother, so will inherit approx €100.000 after inheritance tax, perhaps more.

SPENDING
I like to travel and have €25.000 put aside [from the 200K above] for some big trips over the next 2-3 years.
I have another €20.000 [again from the total savings] put aside for home renovations/improvements here and in Spain.
Otherwise my outgoings are quite modest. No expensive hobbies, running a modest car, occasional outings with friends for dinner/cinema and very occasional weekends away. Regular trips over to Spain on cheap Ryanair flights and living costs there are lower than here.

LONG TERM PLANS
Perhaps sell my home here and move to live in Spain, but that is far from certain and not in the immediate future.

However, even with fairly modest spending, I still spend all or almost all of my €650 income per week [Ireland’s high living costs] and would like to increase my overall income.The ARF will give me a little more.

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

Apart from about €20.000 which is invested in a Bank of Ireland fund, the rest of my savings are just sitting in various savings accounts. While I want to keep at least €50.000 on hand for big plans and emergencies as cited above, I would like to invest about €100.000. I have done the Zurich risk assessment and came out as cautious which does not surprise me. Given my age and the fact that I am quite alone, my money is my big security going forward and hence I would be quite risk averse. But I am open to some risk. I have been advised to consider Zurich’s Prisma 3 or 4, perhaps €50.000 in each but I would like a second opinion on this please? Is there much risk to the capital with these funds? Slow or poor growth would not be a major concern but losing a lot of my capital would be a huge concern. What about buying shares? Given that I know nothing about shares or where I’d even start, is it better to avoid this type of investment?

While I am an intelligent person I have zero expertise in the area of finance and would be completely ignorant of the markets, another reason why I prefer to play safe.

Thanks so much in advance for advice.
 
I think you should try and limit your income from all sources (including ARF drawdowns) to €44k to avoid having to pay income tax at the marginal rate.

If that isn’t enough to fund your lifestyle, feel free to dip into your after-tax savings. After all, you can’t take it with you.

I would be inclined to keep a reasonable allocation to equities (perhaps 50%) in your ARF and keep your after-tax savings on deposit. Leave a reasonable amount (maybe €50k) in an instant access savings account and move the rest to fixed-term deposits earning reasonable interest.

There’s nothing wrong with the Zurich products that you mentioned but they’re expensive and any returns are taxed heavily.
 
Would you be able to give a breakdown on a normal week as to what your €650 is spent on? If you've no mortgage what are your other outgoings.
 
acequion said:
I am the sole heir of my very elderly mother, so will inherit approx €100.000 after inheritance tax, perhaps more.
Click to expand...
Is this correct? Has some/most of your Group A Inheritance Tax exemption threshold been used up previously e.g. via previous inheritance from your father or gifts from your parents?
 
Thanks so much for the quick replies so far, really appreciate them.

@ClubMan, thanks so much for your input but I'd prefer not to get into the whole area of what I'll inherit and what inheritance tax I'll be liable for right now as I find it complicated. It's a bit off yet [hopefully] but I'd be reasonably confident of a conservative estimate of €100.000 at some point. My pressing question right now is what to do with the money I already have.

@Sarenco, thank you and agree re the 44K. However though I have heard the taxes are high on the Zurich products, would it not be a good idea to invest something there? Maybe 50K? Agree you can't take it with you, but savings are not a bottomless pit and you never know what change of circumsatnces might lie ahead, eg health changes, that money might be needed. Hence wanting to grow some of the savings so that the current funds might make a little extra.

@tripkaedama, Well I'm a lady so hair and beauty would take a bit. I've an elderly dog with health issues and as I didn't insure him, his [specialised] food and overall care cost a good few bob. I still transfer €300 monthly into one of the savings accounts. After that, like I said it's living costs ie food, phone, electricity, petrol etc. Plus some outings. Gardening costs for about half the year, plus general home maintenance as I have to get somebody in for all DIY jobs. And likewise in Spain, that property has to be maintained too. I wouldn't spend 650 every week and it doesn't go over that thankfully, it seems to cover costs reasonably comfortably, but it is that or close enough most weeks. And the cost of living continues to rise.
 
acequion said:
However, even with fairly modest spending, I still spend all or almost all of my €650 income per week [Ireland’s high living costs] and would like to increase my overall income.The ARF will give me a little more.
Click to expand...

I think you are a bit muddled in your thinking as a lot of people are.

You do not need to live within your income. In retirement, it is ok to run down your savings.

I would leave the ARF where it is. It is growing tax-free. Run down your other investments first.

You have €220k of savings + €100k inheritance at some stage. That is €320k which will keep you going for a long time.

In the very unlikely event that you run that down, you have a house in Ireland a house in Spain. You can either sell one or take out a life loan secured on it.
 
I wouldn't be bothering with Zurich funds due to the very high costs and high taxation. Their only advantage is simplicity.

Buy a portfolio of directly owned shares with at least €100k and ideally €200k.

You will get dividend income from these.
And if you need cash for repairs, you can sell the shares.
 
acequion said:
I would be quite risk averse. But I am open to some risk.
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Well you are exposing yourself to quite a significant risk. It is very possible that inflation will severely reduce the risks of money left on deposit.

There is no such thing as a risk-free investment. If you invest in shares, they may fall in value but should rise in the long-term. If you leave money on deposit, it is very likely to fall in real terms.
 
@Brendan Burgess, thank you so much. But is there not a legal obligation to drawdown an AVC. My default strategy is ARF so do I not have to withdraw so much of that per year?
 
@ Brendan Burgess, Where would I go about buying shares? Bear in mind that I am completely clueless regarding such ventures.
 
It is definitely a good idea to maximise your 20% tax band using ARF drawdowns.

Leaving funds in your ARF for future growth will likely result in a future 40% tax liability.

Don't follow the advice to buy shares directly. This requires a lot of time and effort to choose suitable low risk high dividend shares. You could in the future be required to register for income tax and submit a form 11 every year.

Or you would need to choose growth and higher risk shares.

You will need to handle capital gains and losses on the shares and report these to Revenue.

The charges for Zurich funds can be lower if you deal with a broker. The broker in the link below also does lump sum Zurich investments. Prisma 3 or 4 are probably suitable for you.

If you decide to contact the execution only broker you will need to have chosen your funds beforehand.

 
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acequion said:
@tripkaedama, Well I'm a lady so hair and beauty would take a bit. I've an elderly dog with health issues and as I didn't insure him, his [specialised] food and overall care cost a good few bob. I still transfer €300 monthly into one of the savings accounts. After that, like I said it's living costs ie food, phone, electricity, petrol etc. Plus some outings. Gardening costs for about half the year, plus general home maintenance as I have to get somebody in for all DIY jobs. And likewise in Spain, that property has to be maintained too. I wouldn't spend 650 every week and it doesn't go over that thankfully, it seems to cover costs reasonably comfortably, but it is that or close enough most weeks. And the cost of living continues to rise.
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It's worth having a look at your bills to see can you shave a few euro off those. If you're on a monthly contract with a mobile provider you might be able to swap to a pay as you go one for a savings there. Tesco do €15 per month (28 days) and there's others out there.

With the money that you do have it may be worth looking at something like adding solar to your house. €7k - €10k of a spend there will pay for itself over a 7-10 year period. With a battery you can also benefit from cheaper rates off smart tariffs overnight is my understanding. Pair this with changing to an electric car which might save you money on petrol. Although there's definitely an upfront cost to buying a new electric car. Just something worth considering.

It's also beneficial to shop around where possible for your broadband and other bills if that's a possibility. Losing money by sticking with any provider beyond the initial 12 month period is a huge additional cost.

If you don't want to take a big risk with your current savings but want them to be doing something you've the option of some of the online savers with AIB or BOI. You can open 4 and 2 accounts respectively with the banks and put in €1k per account per month with AIB and €2.5k per month per account with BOI. These return 3% minus DIRT for 12 months. Just as an example if you did that with those you'd be putting €9k a month into savings across them and that's €108k for the year at 3% for €3,240 interest before DIRT. And that's guaranteed.
 
Can you increase the contract work? It will increase your income, keep you occupied, and stop you travelling.

Spain, can you winter there, costs are way lower and reduce your expensive heating bills. And rent your house out for the winter.

House, how many bedrooms, location, city town? How about the rent a room tax free income, especially as your off gallivanting often…

Mother, could you sell your house and live with your mother?

Health, Spain is good for older people, but often too hot in summer, are your renting it out in July and August.

You’ve become used to spending your income, time to rethink some aspects of it, I doubt your dog’s expensive tastes are the issue. At some stage operations and procedures will not elongate life.
 
Brendan Burgess said:
You do not need to live within your income. In retirement, it is ok to run down your savings
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A point often missed. Your savings are for one to supplement one’s retirement by letting one live the way you want to. At age 66 you’d hope to get to a good 80, after that you have not much interest in travelling and the like, so divide savings by the 15 years and use that amount. With some held back.
 
acequion said:
Zurich AVC/ARF Approx €40.000 in the fund, currently in the process of being matured. Planning to take about €4.000 per year, less tax, for extra income as long as the fund will last in the ARF
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So you have an AVC. I would advise against maturing it. If you mature it, you will have to take 25% tax-free and 4% a year as pointed out by the others.
 
S class said:
It is definitely a good idea to maximise your 40% tax band using ARF drawdowns.
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In theory yes. But in practice, it is only another €4k income to bring her up to €44k. So it's an extra 20% tax or €800 a year. I don't think that this is material.
 
S class said:
Don't follow the advice to buy shares directly. This requires a lot of time and effort to choose suitable low risk high dividend shares. You could in the future be required to register for income tax and submit a form 11 every year.
Click to expand...

There is a bit of admin. But not "a lot of time and effort". And the charges are much lower and the tax is much lower.
 
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