mums retirement. 60k to invest

blackste

hi all, little advice on my mums retirement funds please.
she has 60k to invest to boost her income, and im not sure of the best way to get her the maximum income. she can tie it up for one year, but will need income from it after that point.
my advice was to max her isa for this year, and put the rest into a saga 1year bond paying 6.06%. then she will need a monthly income. i am struggling to work out what level of income she would get, as i dont know how to calculate tax on savings.
can anyone help?

dunstonh

6.06% is too low. Its only 4.8% after tax. Which is only 0.7% above inflation.

If she needs monthly income in the future then she can start the investment strategy now. She doesnt have to wait for a year. The income can just be reinvested for the first year.

The issues here that need to be considered for income in retirement are (not in any order):
1 - age
2 - attitude to investment risk
3 - tax (including age allowances)
4 - pension credits, if applicable
5 - inflation (if you draw all the income from 60k, then in 10 years, that 60k will be worth £42k in real terms)

One of the biggest mistakes people can make going into retirement is think that they should only be using deposit backed investments. If you do use deposit based accounts then you are destined to lose money in real terms. You could live for 30 years after retirment and 60k would become £20k in that time in real terms. You have to factor in inflation and this usually means using investments for some of the money.

The minute you mention risk, you often get people jump from one extreme to the other by thinking investments are high risk. However, there are whole load of options on a sliding scale of risk. You dont have to go to extremes.

tax, age allowances and pension credits need to be considered as if you stick the money in the wrong place you could wipe out your age allowance and pay extra tax or lose pension credits.

I dont see the saga 1 year bond (a fixed term deposit) ibeing the right move for all the money.

EdInvestor

blackste wrote: »

hi all, little advice on my mums retirement funds please.
she has 60k to invest to boost her income, and im not sure of the best way to get her the maximum income. she can tie it up for one year, but will need income from it after that point.
my advice was to max her isa for this year, and put the rest into a saga 1year bond paying 6.06%. then she will need a monthly income. i am struggling to work out what level of income she would get, as i dont know how to calculate tax on savings.
can anyone help?

Could you tell us a bit more?Is she over 65 and thus getting the tax age allowance ( around 7200 at present)?How much other income does she have? Is it all from pensions (ie taxable)?


BTW, don't get too hung up by the need for a monthly income.Some people exclude all accounts that don't pay out monthly and end up with lower rates as a result. But it's quite easy to organise this yourself. Let's say Mum needs 5% as an income, say 3k p.a, 250 pounds a month.

Just open a high interest instant access account with the 3k, and then let Mum draw the monthly income out of that account.Invest the other money at the best rates you can get, tied up if appropriate.Then at the end of the year, top up the high interest account with next year's income, and reinvest the rest in the best deals available....

BTW have a look at National Savings index linked certs for some of the money ( 15k?) They are tax free so won't affect her income and are quite a good deal at present, as inflation is quite high.

She could consider using her 7k maxi ISA for something with some prospect of growth - perhaps some commercial property funds?) .She would only be exposing 12% of her money to a comparatively low risk investment if she did that, it's not much.The other 88% would be in cash.

blackste

hi guys,
sorry for the delayed reply.
my mum will be 60 in august, and has been given a pension statement quoting £100 per week from 60.
she is planing to cut her hours in work to 15 hrs per week, which will give her around £75 per week after tax. she has very little ion the way of savings, as she took the route of paying the mortgage off early, but has a small company pension, about 15 years worth of contributions, which she may keep paying into as long as she is part time.where would i look for a higher paying short term bond or hideyhole for the money. the reason for short term is that she has a problem with her eyes and may not be able to work for that much longer. then she will need income. but for now some growth would be great. that is why i looked at the 1yr bond.

thanks for the help.
steve

dunstonh

modern investments can flick between income and growth in no time. There is no need for her to treat it as two different stages.

Given her position, she is almost certainly cautious in nature and income reinvested (whilst not needed) is very common on cautious investments.