what do with house sale money if entering retirement

eastmidsaver

hi i am writing on behalf of a couple i know who have recently entered into retirement. 
they have a property which they rent out,  but now want to sell it.
once it is sold they will obviously pay off the remainder of the mortgage.
so my question is, considering the savings interest rates are very low,  what could they do with the remainder of the money (ie investments) ??
clearly they won't be putting it all in equity as they don't want that level of risk at that stage of their lives.
so, what kind of funds should they maybe consider?
thank you.

Thrugelmir

I'd suggest that they post on here themselves. As it's pointless speculating on what's best for them without a fuller picture of their finances and an understanding of their objectives. Saving and investing are very different. Risk is far too often underestimated after a period of booming stock markets. 

eastmidsaver

i don't think they will post on here and i am sure they will investigate themselves.
i am only asking just to give them some ideas / options that they can consider.
thanks.

Eco_Miser

One possibility is to spend it, possibly in preference to drawing their pension (which certainly in the case of the State Pension will become more valuable if left undrawn).

Other possibilities are to keep a large lump (up to £50k each in Premium Bonds, which are totally safe, and have an average payout higher than bank interest, with a remote possibility of a big win; to invest in a multi-asset fund with a high proportion of bonds or in an Investment Trust which has the objective of preserving wealth. 

eastmidsaver

thanks.  i shall pass the suggestion on.

enthusiasticsaver

It really depends on their financial circumstances and whether they will need that money in the foreseeable future to live off.  Many people if they want to keep it relatively accessible they put it in premium bonds.  Personally we only keep 5% in cash (instant access) and the rest is invested via an IFA although if they are reasonably astute and the amount is not huge they may want to look at multi asset funds as Eco Miser suggests and they can DIY which avoids the costs of an IFA. As I say though it depends on whether the money is needed to supplement pensions and their attitude to risk and investments. 

OldMusicGuy

Another vote for spend it. It's tax efficient, they can defer taking pensions and state pension if needed. Unless they need this for the long term, much better to put some away for an emergency fund and spend the rest. If they need it for the long term because pensions aren't enough, then they should consider putting in a low cost multi-asset fund like Vanguard, HSBC Global Strategy, BlackRock or similar.

They should also consider gifting some to kids if they are both in good health. We downsized recently (at the start of retirement), we gave a chunk of the equity realised to our son and are spending the rest.

xylophone

hi i am writing on behalf of a couple i know who have recently entered into retirement. 

How old is each party?

OldMusicGuy

JamesRobinson48 said:

Hmm.  Last I heard many items of discretionary spending (such as new car, home improvements or dining out) bear 20% VAT, swelling the government's coffers at one's own expense. I am by no means averse to spending money as such. However stating that spending money is "tax efficient", implicitly as an argument in favour of doing so, surely warrants some explanation or qualification?

Tax efficient as in I don't pay income tax. If I drawdown more than my personal allowance + 25% tax free (UFPLS) then I pay income tax on the excess. Whereas if I use savings/house equity, I don't pay income tax. Also, as I am retired I have no income so cannot contribute more than £2,880 to my pension so it seems to be sensible to let the money in the pension grow and use up cash, especially as inflation will erode it over time. It's also helping avoid sequence of returns risk.

I don't see how I can survive in retirement by not spending money, therefore I have to pay taxes like VAT on what I spend. And I also believe in enjoying the early years of retirement when we are more active. 

csgohan4

OP suggestions are fine, but will they understand what a wealth preservation or multi asset, index tracker e.t.c

They also need to invest in their own money and spend some time researching themselves, only they will know where their risk appetite is.  It's all good saying put it all in an index tracker or income IT, when they want to blow it all on crypto or TSLA. 

Eco_Miser

csgohan4 said:

OP suggestions are fine, but will they understand what a wealth preservation or multi asset, index tracker e.t.c

Probably not, but it gives them some terms to look up, while they are investigating for themselves, as per the third post.