Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@. Skimlinks & other affiliated links are turned on

Search
  • FIRST POST
    • badams1
    • By badams1 8th May 18, 11:26 AM
    • 2Posts
    • 0Thanks
    badams1
    Investment advice for 68 year old
    • #1
    • 8th May 18, 11:26 AM
    Investment advice for 68 year old 8th May 18 at 11:26 AM
    Hi
    After some advice as struggling finding good advice through other websites.

    My mum is 68, she has a flat worth 600k, 23k in savings and a 1500 monthly pension.

    She is emotionally and practically tied to her flat, but also wants to release some equity to give her more freedom in her lifestyle.

    Does anyone have advice on following:
    1. Apart from equity release (thoughts on this?), should she think about downsizing and by how much?
    2. What should she invest the equity in after release to generate her around 1500 extra per month?
    3. Would anyone advice renting instead of downsizing and investing the whole lot, and into what to guarantee it covers rent and extra 1500 a month?
Page 1
    • dunstonh
    • By dunstonh 8th May 18, 11:37 AM
    • 92,652 Posts
    • 59,975 Thanks
    dunstonh
    • #2
    • 8th May 18, 11:37 AM
    • #2
    • 8th May 18, 11:37 AM
    After some advice as struggling finding good advice through other websites.
    You dont get advice via websites. You get opinion and discussion (and if relying on static sites you could be getting woefully out-of-date info too).

    1. Apart from equity release (thoughts on this?), should she think about downsizing and by how much?
    Downsizing can be an option for some but it doesnt usually end up realising the amount of cash you think it will. new stamp duty, cost of moving etc. Unless its a big jump in value it may not be worthwhile. Also, some people have a problem with downsizing when they start looking at properties and realise what that actually means (i.e. moving to a less desirable area or not being sure that they can move as small as they need).

    2. What should she invest the equity in after release to generate her around 1500 extra per month?
    There are over 30,000 investment options and an infinite variation. The information is way too vague to answer that.

    3. Would anyone advice renting instead of downsizing and investing the whole lot, and into what to guarantee it covers rent and extra 1500 a month?
    Rents keep going up and sooner or later that will start hitting harder. Ownership of property is one security that most retired people look for.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • El Torro
    • By El Torro 8th May 18, 11:45 AM
    • 287 Posts
    • 267 Thanks
    El Torro
    • #3
    • 8th May 18, 11:45 AM
    • #3
    • 8th May 18, 11:45 AM
    Equity release is generally considered to be a bad deal, especially if she wants to leave inheritance.


    1,500 a month is 18,000 a year. Assuming she can draw down 4% of her investment every year that means she has to invest 450,000 to get this kind of money. That leaves her 150,000 to buy a new place (minus the costs of selling and buying). This would probably mean relocating to a much cheaper area. Would she want to do that?


    If she sold the place and rented, then, again using the 4% rule, she could get about 2,000 a month income. After spending 1,500 on whatever that only leaves 500 a month for rent.


    Based on your initial post I think it's going to be tough getting the income she desires.
    • McKneff
    • By McKneff 8th May 18, 12:49 PM
    • 36,007 Posts
    • 46,362 Thanks
    McKneff
    • #4
    • 8th May 18, 12:49 PM
    • #4
    • 8th May 18, 12:49 PM
    What does she want to change in her lifestyle. 1500 Amonth with no mortgage leaves a good mount to live on. I would be buying a funeral, spend the savings. The kids can have the house, car, etc
    make the most of it, we are only here for the weekend.
    and we will never, ever return.
    • Linton
    • By Linton 8th May 18, 2:14 PM
    • 9,387 Posts
    • 9,519 Thanks
    Linton
    • #5
    • 8th May 18, 2:14 PM
    • #5
    • 8th May 18, 2:14 PM
    1) If one is not concerned with leaving a large inheritance then taking equity release is worth considering in my view. It is expensive, but it could be a better deal for you than having no access at all to the equity. The downside is that at 68 she may not get more than around 25-30% of the flat value. 150K could safely generate about 6K/year inflation linked for the rest of her life which is some way off what she was wanting. Is the flat leasehold? How many years left on the lease? This could be a problem.

    2) Downsizing may be right for some people in some circumstances but moving from a house/flat where one has been happy for many years to one smaller and less desirable in a new area could be very upsetting. If she wants 1500/month that would imply a pot size of say 450K. So that means less than 150K after costs to spend on a new flat.
    • bostonerimus
    • By bostonerimus 8th May 18, 2:21 PM
    • 1,834 Posts
    • 1,173 Thanks
    bostonerimus
    • #6
    • 8th May 18, 2:21 PM
    • #6
    • 8th May 18, 2:21 PM
    She is emotionally and practically tied to her flat, but also wants to release some equity to give her more freedom in her lifestyle.
    Originally posted by badams1
    This statement would eliminate downsizing as an option. There are two ways to et money out of the equity in the flat.......equity release and downsizing and I think you need to decide if the emotional attachment to the flat is really enough to eliminate the downsizing option.

    Is the pension you mention index linked and does it include SP in the total?
    Misanthrope in search of similar for mutual loathing
    • badams1
    • By badams1 8th May 18, 2:42 PM
    • 2 Posts
    • 0 Thanks
    badams1
    • #7
    • 8th May 18, 2:42 PM
    • #7
    • 8th May 18, 2:42 PM
    Thanks for all the comments.

    The downsizing option with the upheaval and the costs of moving in all honesty are eliminating that option.

    Understand the implications of equity release on the final inheritance.

    What about an option of gifting the flat to the two children, and us then us paying her additional money each month? I have no idea if this is feasible, what the tax implications are etc.
    • MallyGirl
    • By MallyGirl 8th May 18, 2:50 PM
    • 2,687 Posts
    • 7,691 Thanks
    MallyGirl
    • #8
    • 8th May 18, 2:50 PM
    • #8
    • 8th May 18, 2:50 PM
    there might be 'deprivation of assets' to consider if she ever needs to go into a care home.
    • soulsaver
    • By soulsaver 8th May 18, 2:55 PM
    • 1,678 Posts
    • 667 Thanks
    soulsaver
    • #9
    • 8th May 18, 2:55 PM
    • #9
    • 8th May 18, 2:55 PM
    Thanks for all the comments.

    The downsizing option with the upheaval and the costs of moving in all honesty are eliminating that option.

    Understand the implications of equity release on the final inheritance.

    What about an option of gifting the flat to the two children, and us then us paying her additional money each month? I have no idea if this is feasible, what the tax implications are etc.
    Originally posted by badams1
    If you've got the money why not just pay her without her gifting the property as you'll get it anyway?
    • Linton
    • By Linton 8th May 18, 3:01 PM
    • 9,387 Posts
    • 9,519 Thanks
    Linton
    .....

    What about an option of gifting the flat to the two children, and us then us paying her additional money each month? I have no idea if this is feasible, what the tax implications are etc.
    Originally posted by badams1
    Seems a very risky idea for Mum. Think through the "what happens if" scenarios....
    - she wants to move
    - one or both children die and the property is inherited by someone unsympathetic
    - you die so she stops getting her income
    - the children go bankrupt and have to sell the flat
    - you have financial problems and stop paying her.

    Another option could be that you pay her a lump sum (should you have a few 100K spare) and put a charge on her flat for the repayment. However you would need to be careful that lease/insurance etc are fully covered so that you will actually be paid when the time comes..
    • pinklady21
    • By pinklady21 8th May 18, 3:30 PM
    • 562 Posts
    • 384 Thanks
    pinklady21
    Would it be feasible for her to think about taking in a lodger if the flat is big enough? Would this generate enough additional income, allowing her to also save on utility bills as the costs would be shared?
    • A_T
    • By A_T 8th May 18, 3:33 PM
    • 420 Posts
    • 273 Thanks
    A_T
    there might be 'deprivation of assets' to consider if she ever needs to go into a care home.
    Originally posted by MallyGirl
    only if the local authority deemed that actions taken were with done the purpose of depriving the person of assets in order to avoid care fees
    • kidmugsy
    • By kidmugsy 8th May 18, 4:19 PM
    • 10,574 Posts
    • 7,234 Thanks
    kidmugsy
    What about an option of gifting the flat to the two children, and us then us paying her additional money each month? I have no idea if this is feasible, what the tax implications are etc.
    Originally posted by badams1
    Noooooo. DIY stunts like this are all too likely to end in tears and bigger tax bills. If you must think along these lines, see a suitably qualified solicitor: https://www.step.org/about-us.

    Consider a combination of equity release and her taking in a lodger. If she rules out the latter then maybe consider the two children lending her money and taking a charge over the property to secure their capital. Again, see a solicitor.
    Free the dunston one next time too.
    • Katiehound
    • By Katiehound 8th May 18, 4:34 PM
    • 4,405 Posts
    • 38,794 Thanks
    Katiehound
    Whilst not huge I want to ask what the 23k of savings are doing?- just sitting in a standard savings account earning peanuts?
    Being polite and pleasant doesn't cost anything!
    If you found my posting helpful please hit the "Thanks" button!
    Many thanks

    2018 Wombling : Entrant 8 ..2280 cc+.2205mm (2.20.5) + RK 5.21= 30.25.5
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

138Posts Today

1,980Users online

Martin's Twitter
  • It's the start of mini MSE's half term. In order to be the best daddy possible, Im stopping work and going off line? https://t.co/kwjvtd75YU

  • RT @shellsince1982: @MartinSLewis thanx to your email I have just saved myself £222 by taking a SIM only deal for £7.50 a month and keeping?

  • Today's Friday twitter poll: An important question, building on yesterday's important discussions: Which is the best bit of the pizza...

  • Follow Martin