You inherit £500k, you're 63 and you're renting. What do you do?

Jami74

People suggesting at 63 he should buy a retirement flat with a warden 

I dream of a £500k windfall. I would buy a forever home (always rented), it would be big enough that my children could come and visit (once they've flown the nest) and also located conveniently for future needs. I'd put a percentage of the rent saving directly into my SIPP and the rest would go towards quality of life and savings.

I also like the idea of putting into a savings account for a year first. An extra £15,000 a year income would cover some holidays and luxuries while I thought about the longer term plan. In fact the interest would be more than my current rent, maybe it would be better to let the capital pay my rent rather than spending it.

[Deleted User]

Albermarle said:

Deleted_User said:

Albermarle said:

Overall prices have fallen at least 10% since the beginning of the year.
In the meantime stick the half million into a decent one-year saving plan while he thinks about things.
I put 600k into a Barclays One-Year Fixed Rate Bond at 3.9% last month - it pays just under two grand a month.

It is not normally recommended to have more than £85K with any one bank/saving provider.

Says who ?

You think multi-millionaires ( I'm only a single one ) have dozens of bank accounts all with exactly £85K in them ?

A quick reminder - Barclays Bank did not require a government bailout during the 2008 financial crash ( thanks mainly to their chums in Qatar ) .

I think multi millionaires are a rather niche area, not normally covered much on this forum. The advice from this site ( and many other money advice sites is not to go over the £85K limit FSCS bank protection limit - Are my savings safe? - MSE (moneysavingexpert.com)
and many of the posters on this site are anxious not to do so, and/or have the majority of their money in investments rather than savings accounts.

You are right that the chance of Barclays going under is pretty slim, and you can of course do what you want with your own money. However the OP's dad who has got some serious money for the first time in his life, and I don't think putting all of it with one bank is a very good idea. 

Half a million pounds is chump change for a bank the size of Barclays.
3.9% interest for a year would give the OP's father some much needed wriggle room in his personal life.
And anyone on here who advises using it to buy a property at a time when prices are plunging need their head examined.
If he can wait this long without owning the roof over his head I'm sure the old boy could wait another year.and have a bit of fun with his windfall instead.

[Deleted User]

If a person is buying a ‘forever’ home in later life, the fact the prices are falling is not important. Maximising financial gain may not be the greatest consideration.

WabbitWabbit

I am early 60's, the thought of a retirement village living is far away from what I would want.
To me it is like sending your child to a children's club when on holiday and they don't want to go !

[Deleted User]

[Deleted User] said:

If a person is buying a ‘forever’ home in later life, the fact the prices are falling is not important. Maximising financial gain may not be the greatest consideration.

The OP's father is only 63 and would be a cash buyer.
Why not wait another year, have some fun with the interest from his savings and then be able to buy more for his money.
Half a mill to buy a house and have a few quid left over doesn't go far these days.
A 20-30% drop in property values would change the equation and probably give him a lot more choice as negative equity kicks in for thousands of homeowners.
Anyone who has lived through previous property price falls will recognise the warning signs.
There are a lot of cash buyers out there sitting on a bundle and waiting for this to happen.
From the OP's perspective his dad could rent somewhere much, much nicer with an extra £16-17,000 a year in his pocket.

Cornish_mum

Hello I thought I would chip in with my thoughts. 

My parents came into some money at a similar age to your Dad and spent it on what they thought was their forever home. They spent extra money on some things that were important to them at the time but from a property investment point of view were not very sensible (they were advised about this at the time by various family members but had their own priorities). 10 years on and their priorities had completely changed so they sold up, moved area and had to downsize a lot  (as they couldn’t recover the capital they had invested in the house) this was really hard for them. 

My ILs also came into some money at about the same time, they also spent it on property (renovations of their home and a small house overseas bought for very little money). These were also to fulfill dreams of what they wanted retirement to look like, fortunately for them in both cases there decisions maintained their intrinsic capital value. 10 years later and when their priorities changed they had a lot of choices. 

In my opinion the point of money is to use it for significant life-enhancement. This is very personal but sometimes when people come into money that they haven’t worked for they can forget it’s actual value (in terms of work hours) or become very overwhelmed with the emotional side of where it came from (if an inheritance).

For the adult children it can be a very hard situation to navigate. I think it’s great your Dad wants to talk it through with you. I wish my parents had been open to that. I would suggest not focusing on the money to start with but what a good retirement would look like for your Dad on a day to day basis. Who he wants to spend time with and what he wants to do. 

Then once he has thought about that gently discuss aspects of ageing (proximity to reliable adult children and easy to manage and a cheap to run, warm house without too many stairs rapidly became very important to my IL and parents). Then it’s much easier for your Dad to think about what he wants to spend his money on. In summary focus on his goals in life first then the money decisions are likely to be much easier. 

Best of luck 

CM

Linton

My thoughts ..........

1) dont do anything drastic quickly, it will take time to get used to the new situation
2) Put the money into a suitable secore account.  NS&I Guaranteed income bonds are safe for up to £1M and return 4% /year interest as monthly pay-outs.  So, £20K/year.  Note that the capital wont be accessible for 1 year which I see as an advantage.
3) That should be sufficient to provide a significantly better standard of living than at present with a lot left over.
4) Over the next year look at property.  Something relatively small and simple, but much better than current situation.
5) Look to the long term.  Consult an IFA with the aim of providing long term inflation linked income.

The one thing that may be a problem is isolation.  If he is used to a shared house living on his own may be difficult.  On the other hand staying with the people he knows with £500K in savings could be awkward especially if his situation becomes known.

Pat38493

People have been predicting a house price crash for many years.  Sooner or later they will be right for a while, but there's been plenty of times they weren't.

Albermarle

Pat38493 said:

People have been predicting a house price crash for many years.  Sooner or later they will be right for a while, but there's been plenty of times they weren't.

Some downward correction is already happening, but I think you are right it is unlikely to be a big crash due to the supply/demand situation for housing.
What we might see is bigger drops in weaker sectors, like retirement properties and leasehold flats. Plus in areas where the cost of living crisis is hitting the hardest. 
On the other hand the 3 bedroom family semi in middle England, near a good school, will always be in demand.

[Deleted User]

House prices fall when purchasers can no longer afford to buy.
Either the house price is unrealistically high or the cost of borrowing to buy it is rising.
Or both as the case is now which is why prices are on their way down and sales have fallen off a cliff.
If the OP's father decided not to wait a year and was to spend £500k on a property now and not invest the half mil in a 4% interest one-year savings bond and property prices fell by only 10% in the rest of 2023 he'd be 70 grand worse off than if he'd been patient and waited a year.