Welcome back to the #1 Investment and Retirement Planning Blog & Podcast in Ireland. Of late our focus has been very much around preparing our finances in advance of, and indeed after we leave full-time employment. Some people call it retirement, other people don't like that term (hear Fin's interview here!).
This week, as promised we will explore that big question for many, When can I retire? A few readers got in touch after Blog 118, where we looked at maximising the income you achieve from an ARF. They were asking why not just retire earlier? So here we go!
Oh, for those of you that don't like the term 'retirement' I'm delighted to share an alternative! I came work by a US guy, Don Ezra recently. All about preparing for retirement. He calls retirement phase 'Life Two'. He suggests it came about when the accronym for 'Life After Full Time Work' (LAFTWO) was converted into 'Life Two'. I like it! I also like 'Accumulation' phase and 'Spending' phase however if you are anything like many who find their calling in Life Two you may find yourself so busy that you don't have much time for spending!
See website for full Blog 119
Paddy Delaney
The concept of Financial Independence Retire Early means different things to different people. Friend of the show, Fin Goulding has no shortage of experience when it comes to the investment and insurance industry, and joins us on the show to share his own take on FIRE, and how people can achieve Financial Independence.
Be sure to stay till the end where Fin shares his take on how to manage and achieve long term investment success.
Paddy Delaney
If you have, or are soon to have, an Approved Retirement Fund (ARF) you might benefit from the following research. Wondering how to make your ARF last longer? How to generate as much income as feasible from your ARF? This week we continue where we left off 2 weeks ago, and as promised share some strategies that can
Welcome to Ireland's #1 Finance Blog, where we're on a mission to share insights that'll hopefully help you with money. If you have any questions, feedback or suggestions on the back of this piece please do get in touch with me directly here. Would love to hear from you.
Paddy
Welcome to Informed Decisions Podcast, Ireland's #1 Finance Blog & Podcast.
As we continue out focus on managing and optimising pension and retirement income in Ireland we are delighted to bring you one of the leading lights in the academic research of this topic, Abraham Okusanya.
As the creator of Finalytiq in the UK, author of 'Beyond the 4% Rule', and host of the 'Science Of Retirement' Conference there is not much that he does not know about delivering results for customers in their investing and retirement planning. Sit back and enjoy!
Paddy Delaney
P.S. apologies for the dodgy sound quality when I am speaking - my fault entirely. Will sort it for the next interview!
How long will my ARF Income last? This week we continue our analysis of how we can actually go about drawing and maximising our pension and ARF incomes when we reach the age where we start to 'spend' instead of 'accumulate' our money.
For me at least this is the fun bit for us. We don't have pensions because we want a pension, we have pensions because we want what it can potentially give us. Ultimately what it will hopefully give each and every one of us is financial independence and choice when we get to that stage of life. Unfortunately this is the bit that doesn't get very well covered in media and education. What we tend to read and hear about is 'the pension' or 'the ARF' (the products people are trying to sell us!) - we rarely hear about the finer details, and the details that will be the most significant when we get to that stage. I aim to arm you with the ideas and knowledge now so that you can achieve tangible results when you get there yourself and you are drawing an income from your ARF or other pension funds.
We will be looking at two core aspect to Retirement Income Planning; Withdrawal Rates, and Dynamic Spending Strategies. First up are Withdrawal Rates.
Paddy Delaney
Investing in Bonds, particularly in retirement (or once we stop working full time!) is the norm. If you are a member of an Occupational Pension scheme or you have a mass-market pension fund you are more than likely signed-up to LifeStyling on your scheme. We covered it in Blog 53. What LifeStyling will do is move a large chunk of your pension or investment portfolio from Equities and into Bonds as you approach your 'normal retirement age'. Can be a good thing, can be a not-so-good-thing.
This week I aim to share a short piece outlining the key aspects of Bonds, how they work, what you need to know about them if investing in them, and how they can stand to benefit/hinder investors in the mature stages of their financial planning. We will focus on Bond funds, and Bond Index Funds specifically in this weeks' edition.
Paddy Delaney
Welcome, and thanks for checking out Informed Decisions Blog. Over the past couple of weeks we have focused on managing finances in later life. Last week we explored the 2 options many of us have when we get to draw our retirement funds, Annuity or ARF.
Seeing as it currently accounts for the majority of retirement income strategies it will form a large part of coming weeks. We will be exploring how one can attempt to maximise the income one gets from an ARF. Make sure you stay till the end because we will also be exploring how you can aim to ensure that your ARF lasts at least as long as you do - and hopefully longer, potentially leaving a sizeable legacy to loved-ones.
This week we will now share insights on some really important aspects of Approved Retirement Funds (ARFs). I was being a little cheeky calling this 'what you should know about ARFs' but I do honestly believe these are the basics. I also believe that knowing these fundamentals will help, whether you already have an ARF, or will have one in the future.
We will determine how ARF-income is taxed, how it is handled on death, and explore how you can maximise the income you get from your ARF. This latter element is an entire science on it's own however I will intro the main aspects to consider.
Thanks,
Paddy Delaney
Should I buy an Annuity or Approved Retirement Fund (ARF)? Unless we are retiring from a defined benefit (DB) pension scheme we will have this decision to make in regards how to access our pension benefits. Once we take out tax free lump sum we will have this decision to make with the balance. It is a big decision with multiple complexities involved, both financial and emotional.
Do I want the predictable route or do I want the less predictable but potentially more lucrative route? Do I want the peace of mind knowing that I'll get €x every month for the rest of my days, or do I want the potential to get more every month and potentially leave a legacy? Do I want a piggy-back down Everest or do I want to navigate it on my own two feet? That last sentence might seem odd but bear with me. Before I outline the considerations I believe we should make before deciding on annuity or ARF, I want to put this decision in a little context.
I was speaking at a recent 'Point of Retirement' event in Croke Park. As part of my piece I compared managing one's income in retirement to climbing and descending Everest. I made the comparison that when we are in 'accumulation' phase of building and preparing for leaving full-time work we are on the 'ascent' of the mountain. We reach the peak at the time we depart full time employment - however as anyone who has ever climbed a mountain will confirm - the descent is far from easy. One stumble and it could be damaging or indeed fatal. This is a much lesser risk when we are ascending, a fall or stumble has a much lesser probability of significantly screwing-up our accumulation plan.
While some could argue it is slightly dramatic, I do believe that managing our income in retirement is very similar to ascending and then descending Everest. Given the potential dangers, the impact of a stumble financially, and the significant importance of staying on track draws many comparisons. One of the attendees at the session sent me a link that very night, which was breaking news of the Irish climber who had unfortunately gone missing on the descent of Everest, only for another Irish climber to be confirmed dead a week later, again on the descent. It was obviously a pure (and really awful) coincidence but it surely hammered home the point about the dangers of descending, or in this situation, of navigating our 'spending phase'.
Paddy Delaney
Welcome back to Informed Decisions with me, Paddy Delaney!
A couple of weeks ago I mentioned that the coming 'season' would be focused on how to prepare for and importantly, navigate our incomes in retirement. It's not that I am breaking a promise but this week I want to take a very slight diversion from that, for two very valid reasons a) an article I wrote was published int he Sunday Times this week, and b) I didn't allow myself sufficient time this week to complete the next piece as fully as I had hoped.....so you'll have to wait till next week for that one I'm afraid! Sorry!
It is not everyday that someone like you and I gets a full article published in one of the main weekend papers - and for someone that has been an admirer of these papers, and of the people who write articles in them, it was a big deal! So I'd love to share the article with you, in the hope that it is of value.
Before I do that I have an ask of you. I have been blogging and podcasting (or 'casting pods' as my mate Lenny calls it!) for 3 years now. I absolutely love writing and creating the Blog every week, get tons of feedback and emails from people, and indeed some of you have become hugely valued clients who I work with on an on-going basis.
During the 3 years I have had a strong desire to do more, to reach out and connect personally, to perhaps meet as part of a group or community of sorts. In my mind at least there is nothing more rewarding than spending time with people who are interested in similar things and sharing ideas, forming new relationships, and learning from each other.
With that in mind, if you are reading this in June or July of 2019, I would really love your thoughts on the following:
If I were to host a Personal Finance/Investing/Retirement conference, meeting or Webinar, would you be interested in attending? If so, have you any suggestions on the specific topics or aspects you feel would be of most value and importance to you?
I have some ideas on what I feel would be of value to people, and based on my own years as a facilitator and coach feel would be able to bring something of real value - the question in my mind however, would there be anyone else there apart from me!? So who better to ask than you, my supporters. Would love you thoughts, email me here with your thoughts.
Pause me, reflect on this, would you attend, and what topics or format would be of value to you? Let me know either way! Once you've that done have a read of the following Sunday Times article as of 2nd June 2019.
The Generation Game… click here to read full article.
Financial Planning in Ireland is on the up. Based on my experience at least, Planning is what people really really want. They may NEED a product to help them achieve their plan, maybe. But they want a plan first and foremost. They want to know that they will be OK financially, that they can afford to do xyz, that they can graduate from full-time employ at x age, and any number of other personal money-dependent goals.
Sure, the actual planning can be hard work, can require work, time, thought, challenge, compromise, debate and decision-making. These activities can and will stir up all sorts of emotions; fear, hope, pain, love, excitement, regret, joy, the list goes on. It is the emotion that it creates is what I get a real kick from. Helping people to plan, and to witness these emotions is what I love most about the work that I do with individual clients. It was in a conversation last week with a client that the topic of inflation came up. It had been mentioned in the news recently, inflation has hit a 7 year high of 1.7%. This blog topic is one I have had on 'the list' for a very long time. It is a huge topic, and some may be disappointed at how short a piece this is, given it's significance, but I feel less is more on this topic - it is a simple concept, too often over-complicated.
Paddy Delaney
Inheritance tax planning is most certainly a balancing act, is fraught with concerns and challenges, and is one that I see individuals struggling with quite often. When you die you may want your estate to pass to your children or other loved-ones but them having to potentially pay a significant % of the estate in Inheritance Tax may reduce greatly the amount that goes to those you intended, and increase the amount that goes to Revenue. I often hear people say 'sure I won't be here to worry about how much tax they have to pay', and I fully accept that logic. I do however also know that many of us would prefer not to see a significant portion of our assets go to the Revenue due to a lack of planning or perhaps a little foresight.
This week on Ireland's #1 finance blog and podcast I will share some ideas that I hope will help anyone that is struggling with this particular conundrum, or indeed may have this conundrum but doesn't yet realise it! I do hope you find it an excellent guide in the main aspects of inheritance tax planning, and I would also caution that everyone's scenario is obviously different, and what might work for one person may not be the optimum route for someone else, so please do bear that in mind as you digest this!
Paddy Delaney
ARFs, AMRFs, AVCs, Annuities all form part of retirement planning, but as usual there's far more to it than products! Welcome back to Informed Decisions Finance Blog.
As part of my own motive to share information and to help others with their financial education I am a volunteer representative of the CCPC (State body that aims to help consumers, check out their website - tons of useful resources). I was delivering a talk to a large group last week in Dundalk, at the end of which we have time for Q&A. What struck me was that most of the questions relate to retirement planning, and indeed how to ensure that the planning we do is effective and of value to us when we get to the 'spending' phase after retirement. What also struck me is that in the past I have typically varied our topics, jumping from beginning to invest, to managing existing investments, regular savings, borrowings, mindset, education etc.
Based on feedback and also based on this recent experience the Blog will take a fairly heavy retirement-planning and indeed income-planning slant over the coming weeks at least. Having said that I hope to share ideas that are as relevant to those that are in 'accumulation' phase (mid-career) as much as it does to those that are in the 'spending' phase (retired or close to it!).
Intro:
I was talking to a friend of the family a few weeks back, recently retired and full of energy. This lady loves life, has a huge network of friends and family and is looking forward to hopefully many years of good times! When she asked me 'what are you doing these days' and I proceeded to tell her, she informed me that she has only 1 major regret, that she didn't plan a little better financially for her retirement. She doesn't have as much income as she would like in order to do the stuff she would like. It got me to thinking, about my own situation, and indeed of the situations of many people that I have come across over the years who have one eye on their graduation from full-time employment to a more leisure-based lifestyle!
We all obviously have differing circumstances and different opportunities and constraints however there are at least 5 pretty common mistakes I have seen happen again and again. Here I share the culmination of those thoughts, into '5 common retirement planning mistakes', in the hope that they might be of value to you, or indeed to your loved-ones.
you can enjoy in years to come......so buckle in!
Intro:
It's been mentioned to me a handful of times that the topics of the Blog tend to be focused on the 'upper end' of things, and that for most 'ordinary people' the figures I talk about here are out of reach. To be fair the figures I sometimes talk about are aspirational, I get that. At the same time I fell that irrespective of the level you are aiming for the principles are the same, the ideas are the same. So whether the figures are 2x or 5x what you are aiming for, go with it and hopefully you'll gain some insights that'll help you get to where you want to get. Also, we gotta surely aim big....or as a friend of mine says 'keep your eyes on the stars and your feet on the ground'!
I covered 'can a couple retire with €1m' last year, and this week I will explore how to actually get to that level of a pension pot! In this relatively short piece I will explore the impact of different ages and different strategies in retirement planning, and we'll see how they each impact. The strategies differ in regards the duration of 'accumulation phase', asset allocation and fee structure.....
Paddy Delaney
Welcome back!
Many of us have heard of FIRE (Financial Independence - Retire Early) but not many of us have met many that are actually doing it! In this episode we chat with Michael to hear his story, how he is working on his own financial independence, and the vehicles he is using to maximise his own financial future.
Michael stresses that his approach works for him, and that everyone should find their own way based on what they feel will work for them, so please don't replicate what he does without determining the risks and the suitability to you first.
Michael's website is here, and we hope you enjoy the interview.
Paddy.
Hi, and welcome to Ireland's #1 Finance Blog & Podcast.
This is a first for Informed Decisions, and this week you get to hear it! We recently got to know Rob O'Donoghue of the Rob Of The Green Podcast. Rob interviews all kinds of really interesting guests, and has over 100 episodes at this stage, he is dedicated to it for sure!
Rob invited me to be a guest on his podcast, and I was happy to oblige. I share the interview with you dear listener, and hope that you get something of value from the conversation we had. We discuss:
All of Rob's podcasts are available here on iTunes and here on his Website.
I hope you enjoy!?
Paddy.
This week I share a short (but hopefully valuable) piece to raise awareness of something that impacts us all and how we make decisions, and often without us even being aware of it!
What Are Biases?
If you were shown a photo of 2 different people, based on their appearance, dress, facial expression, ethnicity, and any number of other visuals, we would have our own 'impression' of that person. In essence, though we might not like to admit it, we have made a judgement about that person based on what we see, but more significantly, based on our biases.
Biases, which we all possess by the way, can cause us to be unintentionally prejudicial, and are formed over decades of experiences, beliefs, perceptions, information and thought. Our biases can have a positive, negative or neutral impact on our experiences and decisions.
Paddy Delaney
This week I share a short (but hopefully valuable) piece to raise awareness of something that impacts us all and how we make decisions, and often without us even being aware of it!
What Are Biases?
If you were shown a photo of 2 different people, based on their appearance, dress, facial expression, ethnicity, and any number of other visuals, we would have our own 'impression' of that person. In essence, though we might not like to admit it, we have made a judgement about that person based on what we see, but more significantly, based on our biases.
Biases, which we all possess by the way, can cause us to be unintentionally prejudicial, and are formed over decades of experiences, beliefs, perceptions, information and thought. Our biases can have a positive, negative or neutral impact on our experiences and decisions.
Paddy Delaney
This week I share a short (but hopefully valuable) piece to raise awareness of something that impacts us all and how we make decisions, and often without us even being aware of it!
What Are Biases?
If you were shown a photo of 2 different people, based on their appearance, dress, facial expression, ethnicity, and any number of other visuals, we would have our own 'impression' of that person. In essence, though we might not like to admit it, we have made a judgement about that person based on what we see, but more significantly, based on our biases.
Biases, which we all possess by the way, can cause us to be unintentionally prejudicial, and are formed over decades of experiences, beliefs, perceptions, information and thought. Our biases can have a positive, negative or neutral impact on our experiences and decisions.
Paddy Delaney
This week we are going to explore two concepts, 'Diversification' and 'Asset Allocation' which can have significant impact on investment success over the long term, and which are shrouded in mystery and often misunderstood. We are going to tell it like it is, share some insights which may surprise you, and give you some food for thought if this applies to you.
What Is Asset Allocation?
This is the term most commonly used to refer to the proportional distribution of an investment portfolio between different assets. The asset allocation of a portfolio will determine how much of that investment will be allocated to two or more different asset classes; the most common being Equities, Bonds, Property, Commodities and Cash. The rationale for allocating across asset classes is founded in the alleged correlation in returns between various assets at different points in the cycles of each. The principle here is that if the portion of your portfolio in 'asset A' is in a temporary decline that your portion in 'asset B' will be on the ascent. I say alleged because there is a lot of conflicting evidence as to whether there is a negative correlation or not. Ultimately this concept aims to deliver consistently positive returns while reducing volatility of the overall portfolio.
Paddy.
If I come across another 'Best Investments For 2019' or 'Best place to invest €100,000' article I will lose the plot. Reason being that, just like the title of this blog, these articles really are just another form of click-bait. As we all will know, even if we didn't, click-bait is merely a hook with which to drag you into a website, and ultimately to sell you whatever they have in their warehouse, maybe the 'worlds most powerful torch', or the amazing 'world's quickest can-opener'......things designed to solve problems that you don't really have!
Likewise, you may not have the problem of needing to know where to invest €500,000 right now, yet you still find yourself reading this! I am not sure what that says about you, or indeed about me who is writing the blessed thing! Yet there is a proliferation of 'best way to invest such & such' and 'best investments in such & such' on the web here in Ireland. The web is great, I really do love it, but my god it's also so full of dross. I have read 5 such articles this morning in the hope of finding something which represents some sort of sense......but alas I have drawn a blank! One article suggests investing it all in a certain investment product, which on closer inspection has a really rubbish performance record and carries 2.7% fees per year, and another suggests investing the entirety in gold in the interests of 'accessing the world's greatest commodity'!
If we really were reliant on the information at hand then mistakes could be our hobby of choice for years to come! I understand that media need to create content, it is what generates traffic and subsequently advertising revenue, but as we all will accept, let's not take what we read or hear on the internet as gospel (including what you read or hear right now). Having said that some sources might be more well-intentioned than others!
Paddy Delaney
Investors are said to achieve far less in returns than the markets in which they invest. How is that possible you may ask? Typically it is down to investor behaviour. Investors get blamed for doing silly things when it comes to investing, however my take is that it is the financial professionals who must shoulder the responsibility for it.
This is not to suggest that the advisors/planners that might assist investors have total control over what an investor does, but I do believe that if an investor is engaging with an advisor/planner that that professional has a duty of care to let that investor know how investments have worked since 'time began'. Without this knowledge then it is only utterly natural that an investor will succumb to fear and do something irreversibly costly which will have a lasting negative impact on their future.
Paddy Delaney
Welcome back!
'Relief' is an interesting word. If we were to tell someone that we are going to 'relieve myself' it can strike up all sorts of suggestions! Apparently it comes from the Latin 'relevare' which meant 'to alleviate'. In this instance Retirement Relief is all about 'relevare', and to 'relevare' oneself from a burdensome Capital Gains Tax bill!
Retirement Relief is a nugget that is quite often missed as a really lucrative opportunity to reduce one's tax bill, particularly if one is a director, or owns a business or company. Can I claim retirement relief? I am on a mission to help answer that very question. Treat this article as an introduction to Retirement Relief, to wit, like everything you read on the internet, if you are going to pursue this type of route then please do (obviously) seek individual guidance on it!
I have often wondered why not many people know about it or at least why most of us don't hear much about it.....If we were being cynical we would suggest that the reason is because nobody really makes or saves much money from doing it other than the individual client.....but that would only be the response if one was being cynical! But really, I can't think of any other reason! So in this episode I am aiming to share insights on what it is, how it works and ultimately to answer that question; 'Can I claim retirement relief?'
Paddy Delaney QFA RPA APA
Hope all is well?! Last week we shared some ideas on the best way to accumulate €1m, and whether a deposit regular savings account or a pension route might be the most effective way of doing it. We analysed these two routes and factored in deposit rates, pension fund returns, fees and charges and various tax rates that apply to both and how they will impact on the end result. As always, it pays to begin with the end in mind! This week I hope to share ideas on how to select a suitable investment fund, how to avoid common mistakes, and how to deal with the consequences of funds not performing as you may have hoped.
If you have read or listened to last weeks' episode you will recall that based on realistic assumptions that the pension route would stand to be in the region of €400,000 more effective than a deposit account! A large portion of this net euro benefit was as a result of the tax reliefs (currently) available to 'Sam' on the contributions made to a pension. The remainder of the net euro benefit came from the average annual return that the pension delivered to 'Sam'. I received a lot of emails from individuals on that last episode, some expressing surprise and some seeking further information. One of the questions that was put to me was, 'Well what if the fund I am in does not deliver the 6% return, or indeed if it is negative returns for a long period of time'. In my experience at least this is a very real concern that many have, and feel quite uncertain about it, so lets explore.
Thanks for listening,
Paddy Delaney QFA RPA APA
Should I invest in a pension or save money in a bank account!?
Last week I shared some ideas about the value (or potential lack thereof) in having a pension of 'average' size. The reaction to that piece was really quite interesting; it seemed to have surprised some people! There is no question that €100,000 is a lot of money, no matter what way you slice it however having that in a pension fund at the point of retirement leaves one with, to be fair, quite limited options to access a meaningful withdrawal income. In last weeks' piece I referred to a previous blog we shared about the value of amassing a pension pot of €1m, and the considerable options that offers one at retirement. That got me thinking and so this week I take a hearty stab at comparing the merits of saving into a regular deposit savings account, or into a pension if one was aiming for a lump sum of €1m! We will explore which of these in this 2-horse race, in Net terms stands to offer you the best possible chance of success. This is not something that I have never seen done before, maybe there's a reason for that.....let's see!
Paddy Delaney
The title of this piece may seem overly alarmist, however it is my firm belief that most pensions that people here in Ireland have are really ineffective and the investors would quite possibly be better off doing something else with their funds. Are pensions useful? Absolutely they can be hugely useful (read here for 1 example!) however if they are entered into in a half-baked way they can be pretty useless, and unfortunately I have seen it far too many times.
We all see lots of articles and blogs and media mentions of not enough people having pensions etc etc, however it is also true that getting a pension just for the sake of it is not necessarily the right solution. In this article I hope to share insights which will potentially help you avoid getting into something that is of no value nor use to you, and give you a good chance of getting into something that stands a strong probability of being of real value to you.
What Is The Average Pension or Retirement Income In Ireland?
It really depends on what survey or research you are relying on but I have seen various figures quoted. Some say that the average pension pot for those retiring is €60,000 and other 'research' that puts that figure at €90,000. Either way I am not sure how those figures are arrived at, but my experience would suggest that for those that have pensions it may indeed be an average of that sort of level. Some have pension pots of €20,000 and others have pension pots of €1m or more, so it varies greatly! Depending on the size of the pot, the level of volatility you are exposed to and the number of years over which you intend to draw that income, you'll have a varied retirement income available to you.
Paddy Delaney.