Need to live off £100,000 until retirement

eddietheboyp

I'm trying to help my mum out who is about 5 years away from receiving a pension. She hasn't worked since my dad passed away and is running out of money, as a result she has decided to downsize the house to free up £100,000. So she can carry on living the same she does not I believe she will need £10,000 a year. What is the best way to invest/save the lump sum so she will get the best return? Obviously needs to be safe and relatively accessible. Many thanks for any advice

opinions4u

There are a huge range of options that have different tax and benefit implications. Each individual's circumstances are different so good advice for one person could be the worst advice for another.

I'd track down an IFA at www.unbiased.co.uk and investigate the best ways of accessing income from this money while at the same time minimising tax liability.

Aegis

eddietheboyp wrote: »

I'm trying to help my mum out who is about 5 years away from receiving a pension. She hasn't worked since my dad passed away and is running out of money, as a result she has decided to downsize the house to free up £100,000. So she can carry on living the same she does not I believe she will need £10,000 a year. What is the best way to invest/save the lump sum so she will get the best return? Obviously needs to be safe and relatively accessible. Many thanks for any advice

The best way to guarantee having the money available at a rate of £10k each year is using savings. Put aside £50k into a 5-year account paying at least 5%, £20k into a 3-year account (or £10k into a 4-year account and the same into a 3-year; I can't think of any 4-year accounts at the moment), £10k for 2 years and £10k for 1 year. Keep the other £10k ready to spend. This way there will always be slightly more than £10k becoming available in the next year, which should hopefully allow for some inflation effects.

Bear in mind that this method will erode the cash extremely quickly because the growth rate on cash tends to be awful compared to inflation. It might be a better idea to invest part of the money into an income-generating investment with some potential for better growth. Although this would result in some additional risk, the potential rewards are much higher, especially since at least some of this capital is not required even on retirement age.

I would strongly suggest that she takes professional financial advice, as sticking purely in cash for the full 5 years will definitely see the value of that cash reduce significantly.

opinions4u

Aegis wrote: »

I can't think of any 4-year accounts at the moment

5.00% from Birmingham Midshires.

Aegis

opinions4u wrote: »

5.00% from Birmingham Midshires.

Ta, and a rather good cash rate at the moment too.

DiggerUK

eddietheboyp,
Is there any reason why your mum has not worked since your dad died.
I just find it odd that someone who sees themselves running out of money doesn't get a job.

McKneff

Im presuming she is 57 or so.

Does she get any benefits, bereavement allowance etc.
Have a look at the .gov website re widows

Is she capable of working

LittleVoice

McKneff wrote: »

Im presuming she is 57 or so.

Does she get any benefits, bereavement allowance etc.
Have a look at the .gov website re widows

Is she capable of working

I'm assuming that "living the same she does now" is a lifestyle which involves not being in paid work and that is what she wants.

steve6375

Downsizing will cost in fees, etc. and it is not a good time to sell. She could be in a hard place after 5 yrs with no nest egg to rely on.

Why not capitalise on her assets? Let out a bedroom. This will provide income (and company) without disposing of her capital assets - or if she wants to live alone, buy a smaller place on a mortgage (which will be cheaper to run) and let out her old house for a steady income (an agency will take on the day-to-day running is she doesn't want to do this herself - or you!).

I think it is important to make the capital that she has work for her and not just spend it away as interest rates are not that good at the moment. Any other ideas from anyone?

sabretoothtigger

In theory she could do something very simple and invest in a share index tracker and live off the dividends.

I dont think its feasible to maintain capital and live off that amount so it would require selling a bit as well when needed.