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Your 60’s – cruising to the end of your working life

This month it’s time for the latest in our series of age related articles – welcome to the world of the sixty-somethings! As you (potentially) approach the end of your working life, you are at a really important stage in your financial life. We hope to give you some food for thought to ensure you make the wisest financial decisions to see you through the next phase of your life.


Plan carefully for the end of your working life

It is really important that you are getting the best financial advice at this stage – there are so many significant decisions that need to be taken. You want to work with somebody who can confidently confirm to you the lifestyle that you can afford into the future, who can help you plan your financial life for the rest of your life.

Your adviser needs to have their finger on the pulse too in relation to all of the pension related opportunities that are available for you – maximising tax-free cash opportunities, carefully planning your post-retirement strategy and deeply understanding the various tax reliefs that are available to you. The days of saving until you’re 65 and then buying a fixed income for the rest of your life are long gone. Now is the time to start thinking about managing your pot of money wisely until the day that you die.

Of course if you are a business owner, you need to have clear line of sight of your exit strategy and how you will generate the maximum personal value from your exit from the business.


Keep saving while you’re earning

Now is not the time to ease off on your savings, instead you need to put your foot to the floor! Your expenses have probably reduced – your mortgage hopefully is in the past, the kids are educated and have moved out and you have more spare cash.

Remember your time horizon for saving is no longer age 65, it’s until you die. So the more you save now, the better your lifestyle will be later in life.


Review your investment strategy carefully

In the past when your time horizon was age 65, it used to be all about having everything in cash or other low risk assets at this stage. Now that people are financially planning into their 80’s and 90’s (and beyond), your time horizon is longer and your investment strategy needs to reflect that. We will always carefully consider your total investment timeframe before carefully constructing your investment portfolio for you.

An example of such a strategy that some people consider is an investment “glide path”. Instead of putting all of your money into low risk assets as before, some use a rule of thumb of keeping “age 100 minus your current age” in equities. So, a 65 year old would have 35% of their investments in equities. While such rules of thumb are useful, we will always look at your individual circumstances, your own specific attitude to risk and all of your available assets in deciding what’s right for you.


Know your current (& likely future) expenses

As the days of earning income draws towards a close, a significant factor that will impact your future wealth is your expenditure. Now is the time to get crystal clear on what you spend. So actively track your spending, know how much you’re going to need in the future to live the life that you want. Then we can demonstrate to you everything that is financially achievable for you for the rest of your life.


Keep your emergency fund full and protection in place

There can sometimes be a temptation to think that you’ve cleared all the hurdles and can now just start spending your hard-won savings. Unfortunately things can go wrong at any stage in life. That emergency fund that you had built up is still really important to see you through any significant bumps in the road.

Your life cover and specified illness cover are also still very important. You may not need as much cover as before, but you still need to protect your loved ones and yourself against future disasters. And it’s a fact of life that you’re also more likely to claim at this stage in your life too…


Think about future work (seriously!)

We suggest that you look at future work opportunities too. However you will be doing this as much for the mental wellbeing benefits as for the actual financial benefits. And you will only look at work on terms that suit you – doing work that you like, in a location that is easy for you and where the work hours really fit around the rest of your life. Work at this stage should be a source of enjoyment, not a chore!


As the world of work draws towards an end, you still hopefully have a very long life in front of you. So it is really important that you retain a long-term view of your finances and get really good advice in doing so. And that’s why we’re here. We want to guide you to allow you live the very best life that you can lead, for the rest of your days.

Your 50’s – time to build and retain your wealth

This is the latest in our series of articles that consider the financial challenges for clients at a specific stage in life. This time we’re looking at people who are in their 50’s. This is a really important stage in your financial life as it is often the time in life of maximum income and the greatest opportunity to really build your wealth.


Here are some thoughts on how you might approach your finances differently in the second half-century of your life.


Accept advice and help

We very definitely put this one at the top of the list, as there are some crucial strategies to implement correctly at this stage in your life. If you should make major mistakes in relation to your retirement finding during your 50’s, you probably won’t have enough time on your side to fully recover from them. There are also significant tax saving opportunities available to you in retirement funding, investment schemes and exiting your business. Each of these needs to be considered carefully. This is also a critical time to plan how to transfer your wealth to the next generation in a tax efficient way.

Each of these (and more) are important strategies to get right and each of them require careful advanced planning. We modestly suggest that you accept our help in helping you to maximise the financial opportunities open to you. At the end of the day, research has shown us time and time again that clients who accept advice and help from experts achieve better outcomes.


Have crystal clear goals

Now is not the time to muddle along and hope for the best. We encourage you to take a step back from your bank and investment statements and really look into the future. What does your desired life look like for the next 20/30/40 years? When you have this picture clear in your head, then it’s our job to show you what you need to do to achieve it. We’ll create the plan and then work with you every year to ensure you achieve your dreams. Without the clarity of your dreams and objectives, are you just drifting along to see where life takes you?


Don’t touch bonuses

Now we start getting very practical! Hopefully at this stage of life your monthly income exceeds your expenditure. You probably have the back broken of your mortgage or even your mortgage may be behind you. Bonuses that you get in work or from inheritances etc. are very welcome, but in truth probably not necessary to fund your life today. So don’t use them for today, give yourself more options in the future. If invested wisely, they might help you to retire earlier, buy a place in the sun or (not quite as exciting!) pay for long-term care later in life. Do you really need that 3rd holiday this year or the very top of the range car?


Maximise your pension contributions

Once you hit your 50’s, you can get tax relief on your own pension contributions at your marginal rate on 30% of your net relevant earnings. Once you hit 55, this rate increases to 35%. While there is a maximum annual amount of earnings of €115,000 for which tax relief will be given, if you have spare cash there are great tax saving opportunities here. Of course if you have your own business, there are opportunities for even greater tax savings through making pension contributions. As you generally cannot claim relief for years gone by and as the radio ad says, “Once they’re gone, they’re gone”, don’t let these opportunities slip through your fingers.


Pay attention to your investments

As mentioned earlier in this piece, your 50’s are a time for continued wealth accumulation, but without taking significant bets at this stage. It’s really important that you work very closely with your adviser to ensure that your investments reflect your timeframes and your appetite for risk. You should be watching that money grow in a way that doesn’t cause you sleepless nights.


Keep the kids moving!

Yes we all want to help our kids and we’re not advocating that you throw your kids out on to the streets once they are through college! But at the same time, be careful about the level of support that you give to them in buying a house or in their careers. Support them fully within your means, but don’t let their financial needs derail your own goals. Otherwise financial problems will just stack up for you in the future, and these may also come back to haunt your kids!


Your 50’s are a time of great financial opportunity. Please give us a call and we will help you to make the most of these opportunities for you and your future.

8 Great Financial Goals to improve your Lifestyle

We’re now well into 2018 and we often find that the finances of our clients settle down a bit at this time of year. The madness of Christmas is behind us,and a lot of annual financial commitments have often come and gone at the start of the year. Spring is a good time to take a step back and consider how you can maximise the impact of your financial resources in achieving your desired lifestyle.

We’ve done some thinking on this and have set out 8 ways in which careful management of your finances can positively impact your lifestyle goals.


1. Don’t live on the financial edge

We have come across a number of situations with new clients over the last few years in which they have relatively significant investment portfolios, but without any real liquidity. Their money is tied up in properties and other long-term investments.

One of the impacts of this is the discomfort it causes, as the conversation includes statements such as, “We’re fine once there are no short-term shocks and we need money”.

Why put yourself though this? We suggest that you keep a portion of your investments accessible at all times. You might want to (or have to) take a few months off work, do some significant work to your house, or financially help a family member. Allow yourself the luxury of being able to do these things.


2. Pay yourself first

Saving money for the future and planning your retirement are among your most important financial activities. Treat them like this. We’ve seen many examples of people who save whatever is left over at the end of the month. This approach unfortunately rarely works as there is no lid put on spending.

Instead we advocate that you identify in advance how much you want to save each month and take this money out of your current account immediately after payday. You are now more likely to curtail unnecessary spending as you see your account balance reduce over the month. Yes, from time to time you will need to dip into your savings – but at least now they are there to allow you to do so!


3. Clear your debts

Debt is the drag on all your finances and once these are cleared, everything you earn is pretty much for you. Actively look to pay off your debts. There are many different ways of doing this; negotiating better interest rates, paying off high interest rate debts first or paying off your smallest debts first (known as the snowball effect). Talk to us and we’ll give you a steer on how best to do this.


4. Create multiple income streams

We have a client who took the plunge a few years ago and left corporate life, establishing himself as a self-employed professional service provider. He then started writing a (paid for) newspaper column and soon after starting lecturing too, which was another nice income stream. He’s gone on to collaborate on two books which have both delivered income. He hugely enjoys each of these activities. And all the while his own consulting business blossomed.

We all have multiple skills. The trick is identifying our skills and passions and then leveraging them so that work is not really work!


5. Plan to retire early

We’re not saying necessarily that you should retire early, instead we’re advocating that you plan to do so. Pay a lot of attention to your retirement planning, if possible don’t plan that you’ll be ok if you work until you’re 68. Instead plan so that you can retire at 55 or 60 or whatever age makes sense for you. Of course, it doesn’t mean you have to retire early; you can work into your 70’s if you want! But now you’ll be working on your terms, without financial pressure.


6. Live within your budget

First of all, do you have a household budget? Because if you don’t, you should… Identifying what you currently spend every month and what you should be spending each month are an important step in getting your finances under control. The next step is to live within your means, and this means that your income should comfortably exceed your spending. If it doesn’t it’s time to either rein in your spending or cut some items from the budget.


7. Don’t skimp or overspend on insurance

Insurance is a tricky business, and let’s be honest it’s a cost that none of us enjoy paying for. In the best-case scenario, we get nothing back for our money because we’ve had no need to claim! By the time you insure your house, cars, health, income and life, the costs really start to stack up!

It’s important as a result to get the right levels of cover in place. Don’t skimp on insurances, some of them are legal requirements such as car insurance and indeed the requirement for life insurance usually forms part of your mortgage contract. You need to have enough in case anything goes wrong. However we also see situations where people have too much cover, where they are over-insured. At a claim stage, your pay-out will be limited to your insurable interest, the amount required to make good your loss. We can help you to identify the right level of life assurance and income protection that you need to ensure that your financial goals can be achieved, no matter what happens in the future.


8. Leave a great legacy

We place a lot of store on helping our clients to plan for when they are gone. You don’t want to leave a financial mess behind you, potentially a tax bill and huge worries stacked on top of grief for your family. Instead you want to leave a large bank of great memories and a capability for your family to achieve their full potential and dreams. This can be done, but it requires careful planning and we will help you to do this.


We hope that there are goals in here that you can implement immediately. We would love to help you develop your thinking and your plans around them, so please feel free to give us a call to discuss them further.

Don’t blow your financial future in your 40’s – our 10 tips

We recently wrote about why people should be thinking about their retirement in their 30’s, and why this is the time when you should start seriously saving to achieve your desired lifestyle in retirement. We got a great reaction to this article, and were asked by a number of people in their 40’s for some tips in relation to managing money at their stage of life.


So here goes with our Top 10 Tips for managing your money in your 40’s.


1. Keep control of your lifestyle

For a lot of people as they enter their forties, the financial pressure starts to ease a bit. As a result of career progression and increased earnings, the bills (in particular the mortgage repayments) don’t look quite so daunting any more. And this is when people’s lifestyles can run out of control. Rather than putting their increased wealth to good use, they simply grow their lifestyle until this becomes the new “norm”. And as a result, that hard earned extra income ends up delivering zero impact to your long-term financial health. Put that extra wealth to good use.


2. Be careful with debt

Higher incomes and higher available financial resources generally result in people becoming less cautious with their money, as they have the financial firepower to suffer some losses. That’s fine, once you can afford these losses. When you borrow for investment purposes, any gains are quickly multiplied. However should you suffer losses with leveraged investments, these losses are multiplied too. Many Irish investors suffered catastrophic losses when the economy crashed in 2008, most of them because they had used debt to fund their investments. Be very careful with debt.


3. Be careful what you spend on your house

We’re all for living in comfort, but be careful that your house doesn’t become an unwanted millstone around your neck. We’ve seen a number of examples of people with the back broken on their mortgage, and then deciding that it’s time to almost re-build the house or indeed move to a bigger house. The rationale is usually around higher income levels making this possible, and also because the kids need more space – don’t they? This may well make sense, just be clear that the it’s hard to recoup money spent on your house, it usually isn’t fully reflected in future valuations. Also think past the next 5-10 years – will you want a bigger house when the kids decide it’s time to move on?


4. Don’t forget about your health and yourself!

It’s very easy (and rewarding) to get sucked into and really involved in the lives of your children. However don’t let this happen to the detriment of your own health and your other relationships. Not taking care of your own health will probably result in very nasty medical bills down the road. So make sure you keep eating well and exercising regularly to keep yourself in good shape. And make sure you’ve quality time with your partner away from the kids. Letting yourselves drift apart runs the risk of a nasty (and very costly) separation down the road. Keep the date nights going!


5. Don’t let your career drift

With us all living longer and needing to be more self-sufficient in retirement, we’re going to be working until later in life. So your 40’s are only the mid-point of your career, if even that! This is not the time to take the foot of the pedal and start coasting towards retirement. Acquire new skills, get new qualifications, maybe develop additional income sources. You still have a huge amount to offer the world of work, so put these years to good use.


6. Review your emergency fund

Maybe you were very forward-thinking years ago, listened to the advice and built a nice “rainy day” fund. Now’s the time to take a good, hard look at it. A fund built up a few years ago may be quite inadequate today. Do you need to add to this to cover your current level of expenses?


7. These are big years for retirement savings

These are often the critical years for retirement savings. You now have the financial firepower to really turbocharge your retirement fund, and you also still have the time on your side to benefit from the magic of future compound interest. So make these years the high impact years in your retirement savings.


8. Don’t lose sight of your protection needs

If you get sick or should die, would your current protection cover fully cover the lifestyle requirements of your family, or did you set up your life assurance and income protection policies back in the days of lower income levels and lower household expenses? These may need to be reviewed, and we would be delighted to assist you in this task.


9. Who are you (or will you be) caring for?

One big challenge facing families today is the multi-generational impact on financial plans. It’s not enough to plan solely for your own future. All too often, we see parents playing an important role in helping their children with significant deposits to enable them to get on the home ownership ladder. After all, maybe it’s the only way to get them to finally move out! And as we see older people living longer and having more complex care needs later in life, the burden of financing this support may fall on the family. Does your financial plan take account of these costs?


Have you thought about wealth transfer?

Depending on your specific financial situation, now might well be the time to really start looking at the future transfer of your wealth. If you have significant assets to pass on eventually, these can be seriously eroded by our penal inheritance tax environment. Planning for this a long time in advance will allow us to develop financial strategies that will enable you to significantly reduce this tax burden, ensuring your assets go mainly to your loved ones and not to the taxman.


Follow these 10 tips and you’ll enter your 50’s in great financial shape!

Talk like an investments ninja!

With markets having powered ahead in recent years, in general people are happier talking about the performance of their investment portfolio. After all, it’s easier to talk about gains than losses! But we’ve noticed some conversations shifting towards consolidation of gains as the prospect of a turn in markets probably moves closer all the time. We’re not in the business of trying to time markets, but help investors to take a long-term perspective with their investments and to build a portfolio that matches your own attitude to risk.

But back to those conversations… We know there is a huge amount of terminology and jargon surrounding investments, so we thought we’ll help you sound like an expert the next time those conversations start up again.


Here are some terms that you might hear (or use!) and what they mean.


Active/passive investment: These are different approaches to portfolio management. Active management is where an individual manager will attempt to outperform through wise asset / stock selection. A passive investment approach is where a manager simply mirrors an index, such as a stock exchange index.


Annual dividend/yield: The dividend is the amount paid out to shareholders during a year, usually based on a share of the profits. The dividend yield is calculated by dividing the dividend amount paid on each share by the share price itself.


Asset class: This is a group of similar types of assets that make up an investment portfolio. The most common asset classes are equities (shares), bonds, property, cash and commodities.


Bear market: This usually refers to a fall of at least 20% from a market peak over a period of time.


Bonds: These are loans made by investors to companies or governments, in return for a fixed rate of interest and a return of the original capital at the maturity date of the bond.


Buyback: When a company believes its shares are under-priced and also has excess cash available, they will often look to buy back their shares and then enjoy the profits themselves when the shares rise in value. This is a way of returning value to other shareholders, as after the buyback, there are now less shares in circulation, increasing existing shareholders’ share of the business.


Correlation: The degree to which two securities tend to move in the same direction. A well-diversified portfolio will have lots of non-correlated assets.


Correction: Smaller than a bear market, this term is usually used in relation to a 10% drop in share prices.


Cyclical stock: The stock of a company whose performance rises and falls depending on the economic environment. For example, luxury car manufacturers saw big profits during the boom of the early 2000s… with much leaner times after 2008.


Defensive stock: Different to the above, defensive stocks aren’t impacted to the same extent by the economic environment as their demand doesn’t fall away. Companies that produce basic foods, energy suppliers and healthcare stocks are often considered to be defensive as there is a demand for these products in all economic conditions.


Equities: Shares, stocks – different names but the same thing. They represent a partial ownership of a business.


Economic moat: This is a relatively recent term, introduced by the investment guru Warren Buffett. He used it to describe a sustainable competitive advantage enjoyed by a company over its competitors.


Hedge:  This is a strategy used to offset some of the risks in an investment. Companies use hedging to protect themselves against risks such as currency movements or possible future price rises of a key raw material.


Leverage: The use of borrowings to increase an investment impact. Great when a market rises, a disaster when a market falls. Remember property debts in Ireland in the early 2000s…


Market capitalisation: Market cap for short, this is the total value of the shares of a company. This is calculated by multiplying the number of shares outstanding by the share price.


Premium/discount: These terms are used to describe an exchange traded fund (ETF) that is trading above (premium) or below (discount) its net asset value, or bonds trading above or below their face value.


Real return: The actual return when the impact of inflation is included. An investment that grows by 3% in a period of inflation of 3% delivered no real return.


Sectors: These are used to describe different areas of an economy, such as financial services, construction, healthcare, technology and industrials. A well-diversified share portfolio will usually contain stocks from a wide range of sectors and geographical regions. The reason being to avoid having “all your eggs in one basket”.


Stock Exchange: There are locations, not always physical ones, where shares are traded.


Volatility: A measure of the degree to which a fund’s performance fluctuates. The basic rule is the higher the volatility, the greater the risk an investor is taking in search for higher returns from their investment.


Yield curve: This portrays the rate at which interest rates change when evaluating bonds with shorter maturities to those with longer maturities.


Of course this is not an exhaustive list, there certainly is no shortage of investment terminology. But we hope that these often used and sometimes misunderstood terms will help you shine in those investment conversations!

What are the risks to your investments?

When we’re designing an investment portfolio for our clients, we take into account quite a number of considerations. We start by understanding your investment goals and time horizons, and then we build a full understanding of your liquidity requirements, any asset class preferences that you might have and also the returns that you expect.

This final element brings the whole area of risk into the discussion – what your appetite is for risk and also your capacity to withstand any shocks within your portfolio. We look to build a portfolio for you that, in an overall sense, reflects this appetite and capacity for risk. We want you to achieve your investment objectives, while at the same time ensuring you can get a good night’s sleep and not lie awake worrying about your investments.

We’re asked a lot about risk in an overall sense and also more specifically about the different types of risk and how they might impact your portfolio. So we thought it would be useful to set out some of the main risks that can have an impact on an investment portfolio.

However we want to start with a note of caution. This is not an exhaustive list; it is simply a list of the main risks. Please note that the magnitude and impact of risks change all of the time too, as investment conditions change. Of course we’re always happy to answer any specific questions that you have in relation to any of these risks.


Economic Risk

This is certainly one of the most recognised risks. When there is a major economic shift, this can have quite a significant impact on investment portfolios. The last time we saw one of these was in 2008 / 2009 when the near-collapse of the banking industry plunged the world into recession, having a significant impact on investment portfolios around the world.


Geopolitical Risk

These are politically led events that happen across the world that create risks, which don’t always play out as expected. For example when President Trump was elected, many commentators thought that this would herald a swift decline in investment portfolios. However the opposite turned out to be the case – the S&P 500 index is up 21% since he was elected! But on the other hand, what impact would an escalation of the situation in North Korea have?


Market Risk

This is where individual shares can be dragged down as a result of a significant market downturn in their sector, as opposed to issues that may be affecting the individual company itself. Probably better known as collateral damage!


Currency Risk

This risk is impacted by changes within a single country or region. The value of a currency will be impacted by economic events that are specific to that country (along with other factors). So while the investment performance of (let’s say) British stocks that you hold may perform in line with expectations, the value of Sterling will have an impact on your investment too, either increasing or reducing the value when transferring the money back into Euros.


Interest Rate Risks

We’ve all become very accustomed to an extremely low interest rate environment. However nothing lasts forever, and we are seeing signs around the world of interest rates beginning to increase, albeit quite slowly. These will impact different asset classes. For example, as interest rates rise, the yield on existing bonds falls, as investors will get a higher return from new bonds issued. Fixed interest (bond) fund managers in particular watch interest rates like a hawk! In the same vein, inflation has an impact on some bonds (where a fixed rate of interest is paid), so inflation risk is another that is carefully monitored by fixed interest fund managers in particular.


Credit Risk

Bonds are effectively loans made by investors to issuers (governments or companies usually) in return for a coupon each year and repayment of the loan (investment) at the end of the term. There is always a risk, sometimes very small and at other times bigger that the issuer will default on the repayment of the loan. Higher risk issuers have to pay a higher coupon (rate of return) to attract money to make this risk attractive to an investor.


As stated earlier, this is not an exhaustive list of risks! We all face risks every day in relation to every aspect of our lives, managing investments is no different. However the critical lesson is to be clear about your appetite and capacity for risk, and to ensure that your portfolio reflects this. Then you can leave the fund management experts to worry about all of these individual risks, as they seek to achieve the returns you expect in order to meet your investment goals and objectives.

In your 30s and thinking of retirement – are you mad?

Well the short answer is no, you’re not mad to be thinking about retirement in your 30’s. Of course it is not going to be foremost in your mind as there are lots of competing priorities – a house to be bought, maybe a wedding to be celebrated or a family to be started. And these also don’t take into account the holidays, cars and social life that are there to be enjoyed!

So planning for retirement is probably well down the list…

But it’s a problem that won’t go away, instead the challenge gets significantly greater as time marches on for a couple of reasons. First of all any savings made in your 30’s have more years to benefit from the magic of compound interest and will have a much bigger impact on your retirement outcomes than money saved in later years. Secondly, the state old age pension scheme is under enormous pressure due to Ireland’s ageing population. By the time people who are in their 30’s today actually get to retirement, state benefits will look very different; will they be paid later, paid at a lower level or means tested? Maybe people will face a combination of all of these…

So what can you do to positively impact your own retirement outcomes?


Adopt a savings mind-set

This is an important starting point – to recognise the importance of saving for different timeframes, including retirement. We’re not suggesting that you stop spending, as life is definitely for living! But we are suggesting that you take a balanced approach to your finances; spend money on things that matter to you, avoid frittering money away and take a strategic approach to your financial future rather than simply hoping everything will turn out ok! Saving money is a key pillar of a strategic approach to your finances.


Pay yourself first

We sometimes find with clients who are in or around their 30’s that while the intention to save for retirement is there, the reality is that it just doesn’t happen. Saving for retirement falls to the bottom of a long list of priorities and usually doesn’t make the cut. So our advice is to reverse the priorities. Pay yourself (by saving) first, immediately after you get paid each month. As a result, something else will suffer – this will usually be a discretionary spend (such as that 2nd coffee bought every day, the extra takeaway dinner every week) that actually adds little value to your life.


Understand the impact of debt

Debt plays an important role in all of our lives, whether it is a mortgage for your house or a loan for a car etc. We all know the folly of running up credit card debts and also borrowing to fund your lifestyle. However simply the availability of debt can really hurt your retirement planning too. Take the example of someone who gets a salary increase. This increases spending / saving power. Some people unfortunately see this as an opportunity to immediately change the car and borrow more money as additional repayments can now be afforded. Yes you’re driving a nicer car, but your salary increase now has no impact on improving your financial future. We’re not killjoys who think you should save every extra euro, but salary increases should reward you both today and tomorrow.


Don’t waste windfalls

Similar to the last point, windfalls that quite often are in the shape of pay bonuses are an opportunity to dial up your enjoyment of life today (after all you’ve earned it), while also improving your future. Set yourself a personal commitment to save x% of any windfalls you get for your long-term future, while enjoying the balance of that bonus today.

And really achieving balance is the key point that we are attempting to make. Yes enjoy the financial opportunities that present themselves to you today. But don’t do it at the total expense of your financial future later in life.


Avail of any “free” retirement support

This final point applies to anyone who is fortunate enough to have a benevolent employer who agrees to pay into a pension scheme for you. This will often be done on the basis of “matching” your own commitment, up to a certain limit. Don’t let this opportunity pass you by!  This is effectively free money for you and a reward for sound financial behaviour carried out by you. Always avail of this opportunity to the maximum that you are able, as it is usually offered on a “use it or lose it” basis – if you don’t avail of your employer’s matching contribution in a given year, you can’t come back looking for it later.


As we said at the outset, we understand that planning your retirement is not going to be at the top of anyone’s wish list while in their 30’s. However by embedding some good financial habits, you can hugely improve the quality of your life, both today and in the future.

5 ways to pay less tax

Tax is a necessary evil. If we want to live in a country with access to public services, taxation is the system used to pay for these services. We can (and do!) argue and moan about the different levels of tax payable and whether they are levied fairly. But at the end of the day, the money to be used for public services has to be collected somewhere.

While most people accept that tax must be collected, most people certainly do not want to pay more than their fair share. So as we approach the 31st October tax payment deadline for individuals, we’ve set out 5 ways that can help you to reduce your tax burden either now or in the future. All of these are perfectly legitimate and are not considered aggressive tax practices – they are simply good tax housekeeping that is sometimes ignored.


Claim relief for your medical expenses

It still amazes us how many people let this one slip by… You can claim standard rate relief (20%) for all the medical expenses that you pay for – typically your own, your family’s and in some cases where you pay other people’s expenses. Most medical costs qualify and when you add up all those doctor visits, prescriptions, physio sessions, hospital consultations, x-rays etc., they can amount to a tidy sum. On top of this, some dental procedures such as crowns and gum treatments also qualify. Your claim is reduced by amounts claimed back from health insurers.

The process is so simple. You claim as part of your tax return and you can even go back and claim for the last four years. There might be the cost of a holiday coming back to you, to help the recovery from all your ails…


Make a pension / AVC contribution

With this one, you need to make a pension contribution payment in order to gain the benefit, but there is a growing awareness of the need to provide for our own retirement needs. The state pension scheme is creaking at the seams and the state retirement age has already slipped out to age 68 – who knows how much further out it will go? We all need to save our futures, and pensions are usually the most effective way to do so.

Pension contributions attract a number of tax benefits,

  1. Your contributions qualify for marginal (higher) rate tax relief within certain limits
  2. Your pension fund grows free of all taxes
  3. You can take a portion of your fund tax-free at retirement, with other tax mitigating strategies being deployed in relation to the balance.


Annual gift exemption

Another one to save tax in the future. When you die and leave wealth behind you, this often results in tax liabilities for your estate beneficiaries. One of the ways to reduce this tax liability is to gift money to your future beneficiaries while you’re still alive. Any person can gift another person up to €3,000 p.a. without a tax liability. So for example, a couple in their later years could each gift €3,000 to their children, sons & daughters-in-law and their grandchildren etc. every year. They don’t have to be directly related. This could significantly reduce the amount eventually to be inherited and could significantly reduce or remove any tax liability.


Be clever with financial protection

Some people unfortunately still think that all life assurance policies and illness benefits are all the same. They are not. Some can be used for specific purposes while attracting tax benefits – for example Section 60 policies that are used to pay an inheritance tax bill are exempt from inheritance tax themselves. Others such as certain life assurance policies and Permanent Health Insurance policies qualify for income tax relief on the premiums.

This area can be quite complex. Give us a call and we’ll simplify it all for you and find the most tax efficient route for you.


And then there’s the rest…

And still there are many more reliefs and exemptions available, some of which may apply to you. So make yourself aware of all of the reliefs available. Whether you’ve kids in college, have spent money renovating your home, are taking a training course or are commuting on public transport or cycling to work, there are potential tax saving opportunities out there for you. A little bit of research or a conversation with us just might help you to reduce that unwelcome tax burden that you are shouldering.

Financial planning is not about products

In financial planning businesses such as our own, a relatively small proportion of our time is spent dealing with the implementation and servicing of financial products on behalf of our clients. Because financial planning is so much deeper than simply putting products in place.

Instead our clients today come to us with relatively simple questions (that are in fact quite complex) such as “Will we always be ok?” or “Have we enough money?” There’s no easy answers to these ones! Because to answer them, we need to know what sort of a life you want to lead, and then we need to put a cost on that life. It’s only then that we can start to develop a financial plan to help you achieve that life, help you build a risk appropriate investment portfolio, plan for your retirement and protect yourself if that’s what your plan requires.

But sometimes our clients approach us about other financial challenges they might have, or indeed simply want to bounce ideas off us! We’re delighted to help and give you an opinion if we can. And if we can’t help you directly ourselves, we often know someone who can actually help you.

Here are some of the areas we’ve been asked about.


Tax Advice for Individuals

Business owners and professionals will usually have an accountant. Many PAYE workers don’t. That doesn’t mean that you can’t benefit from tax advice; some of you may want information about annual gift exemptions, others may want general tax advice. We’ve been asked many tax questions over the years. With some of these, we can give you the answer. However if we can’t help you ourselves, we have relationships with some accountancy and tax firms that will provide you with the services you need.


Advice about Bank Accounts

We came across a situation some time back with a client where neither their bank manager nor their accountant had spoken to them about the importance of having multiple signatories on their bank accounts, both personal and business accounts. We believe that this is simple, practical advice in most situations, but of course each situation should be looked at on it’s own merits. Unfortunately in this particular case the client died and his wife ended up in an awful situation of being unable to access his / their money without jumping through all types of legal hoops… This is an area you should consider – would a death or incapacity of one of you be made worse by being unable to access cash in bank accounts?


Enduring Power of Attorney

This is a legal document that can be set up by a person during their life when in good mental health. It allows another specially appointed person to take actions on their behalf should they become incapacitated through illness in the future. This prevents assets being frozen and going under the control of the courts and allows the person acting on your behalf to make a range of personal care decisions on your behalf.

Anyone who has been through this situation, needing to access the assets of a relative who has lost their mental capacity (e.g. to pay for their care) will know the value of having an enduring power of attorney in place. It can be incredibly frustrating being unable to carry out simple actions on the person’s behalf without it.

At the same time, many people also draw up a “Living Will” which captures their preferences in relation to areas such as end of life care, their preferences in terms of resuscitation etc. when very ill or close to death.

We suggest that you give this some thought and if it is something you want to progress; the best place to start is with your solicitor. They will talk you through the process and then draw up the papers that are needed to put the enduring power of attorney in place.


A Will

Yes we still come across clients from time to time who don’t have a will in place. We always strongly suggest that you get this in place. It is a relatively simple process, usually carried out with the help of a solicitor. However the benefits are significant. It enables you to ensure your assets are distributed as you intend on your death and that this process is carried out as painlessly as possible.

These are just some of the areas that we’ve been asked about. While our primary role is to help you build a robust financial plan and then put in place financial solutions to achieve your financial objectives, we’ve a pretty broad perspective of a range of related areas. So don’t be afraid to ask! As we said earlier, if we can’t help you, we probably know someone who can.

Are you a cohabiting couple? Get protection advice!

According to the Census carried out in 2011, 12% of families in Ireland are now made up of cohabiting couples.  This cohort of our population still faces some unique challenges when it comes to personal finance and inheritance. In this article, we’re going to identify some of the significant issues to be managed, and set out why it is so important for cohabiting couples to get expert financial advice. Not doing so could result in some very expensive tax liabilities down the road!


The Background

In 2010 the Civil Partnership and Certain Rights and Obligations of Cohabitants Act was enacted. This Act conferred rights similar to those of a married couple on registered civil partners and qualified cohabitants. The rights extended though are different for both.

Registered civil partners now have automatic rights to each other’s estates on death. This entitlement was not extended to cohabiting couples, who can apply for a provision out of the deceased’s estate but have to pay inheritance tax on it.

As a result, it is critically important that cohabiting couples get expert financial advice in order to avoid inheritance tax bills in the future.


The family home

As cohabiting couples are not treated for tax purposes in the same way as married or civil partnership couples, the death of one partner could result in a sizeable tax bill for the surviving partner. First of all, cohabiting couples should make themselves aware of the qualification conditions for Family Home Relief, which allows a complete exemption from Inheritance Tax and Capital Gains Tax if those conditions are met. This relief is available to any two individuals, which of course includes cohabiting couples. Meeting these conditions could result in a significant tax saving on the death of a partner.


Mortgage Protection

Mortgage Protection will be put in place as a condition of gaining mortgage approval. This policy repays the loan to the bank in the event of death of a borrower. Should the conditions of Family Home Relief not be met, there is a potential tax liability for the survivor on the death of their cohabiting partner as their Inheritance Tax Threshold (the amount on which you don’t pay tax) is only €16,250.

In the worst case scenario, if one partner alone bought the house and subsequently died, their surviving partner’s tax liability could be based on the full value of the house (less the threshold amount) – a very sizeable bill.

Arranging mortgage protection on a joint life basis might give rise to a potential tax liability, as could the inheritance of the property itself.  Solutions we would consider could include,

  • Increasing the amount of life cover to cover the inheritance tax liability
  • Taking out a “life of another” policy
  • Taking out a section 72 policy to specifically pay the tax

We suggest strongly that you seek our advice to find the very best solution for you.


Personal & Family Protection

As cohabitants have no automatic rights to their deceased’s partners assets, unless they have a will in place the proceeds of a life assurance contract could even end up in the hands of the deceased’s next of kin. This can be avoided by the policy being structured correctly. Again we will examine your specific circumstances and advise you on the optimal route to ensure that on your death, your assets end up with your intended beneficiary and in the most tax efficient way possible.  There are very important considerations around the type of policy to be used and who pays the premium, in order to ensure the most tax efficient solution.


Small gift exemption

In Ireland there is a small-gift exemption, which allows anyone to gift up to €3,000 in any tax year to anyone else with no attaching tax liability. This can be done every year and is an effective way for cohabiting couples to transfer some wealth to each other and for parents to transfer wealth to their children – €6,000 is allowed each year from 2 parents to each child. This can really add up over time!

Cohabiting couples can use this exemption very effectively where one partner is financially dependant on the other. In order to avoid a liability for inheritance tax, it is crucially important that the person who will benefit from the policy actually pays the premium from his or her own means. If they don’t have means and their partner pays the policy, they are liable for inheritance tax on the death of their partner. The small gift exemption can be used to transfer wealth to the partner without means, who can then use this to pay the premium. This will enable the policy owner to pay the premium where he/she doesn’t earn an income.


The goal of this article is to give cohabiting couples a flavour of some of the important issues they need to consider in relation to their personal finances. We will be delighted to talk you through your specific situation, and help you ensure you avoid any nasty surprises at a later stage.