Retirement/ Income advice
Discussion
Hi All,
After some advice and potential new ideas really...a little bit of background (hopefully not too long winded!):
I am in the process of helping my mother retire - her situation is as follows, she has worked for most of her life, has a tiny state pension, has pretty much zero savings but lives in a London house worth around £1.15m. My mother is not at all materialistic and can't really understand the value of what she has as she sees it as her home (she bought the place 24 years ago for £135k, so knows she is very fortunate), however she wants to stop working next year and retire, while protecting her capital but creating an income. She wants to stay in the area she currently lives in due to familiarity, friends etc. My suggestion is she sells the home, downsizes to something worth half and with the remainder, buys two one bedroom flats, to let, in order to generate her monthly income.
We have also spoken with a fund manager who has proposed a low risk investment portfolio that would generate a similar income but she cannot get her head around this and feels she would be completely out of control with this option.
I also suggested a BnB option, so she could keep the house but she is not keen on this either.
She's a great person but is highly resistant to change, has low ambitions, doesn't want for much but her home means a lot to her. She doesn't want to go down the equity release route either. Numbers confuse her and her business acumen is limited - however, she's run a charity shop very successfully for most of her working life and I want to make sure she is set up for the future.
Any pearls of wisdom are welcome or if anyone has similar experience any ideas would be appreciated.
Thanks for reading.
After some advice and potential new ideas really...a little bit of background (hopefully not too long winded!):
I am in the process of helping my mother retire - her situation is as follows, she has worked for most of her life, has a tiny state pension, has pretty much zero savings but lives in a London house worth around £1.15m. My mother is not at all materialistic and can't really understand the value of what she has as she sees it as her home (she bought the place 24 years ago for £135k, so knows she is very fortunate), however she wants to stop working next year and retire, while protecting her capital but creating an income. She wants to stay in the area she currently lives in due to familiarity, friends etc. My suggestion is she sells the home, downsizes to something worth half and with the remainder, buys two one bedroom flats, to let, in order to generate her monthly income.
We have also spoken with a fund manager who has proposed a low risk investment portfolio that would generate a similar income but she cannot get her head around this and feels she would be completely out of control with this option.
I also suggested a BnB option, so she could keep the house but she is not keen on this either.
She's a great person but is highly resistant to change, has low ambitions, doesn't want for much but her home means a lot to her. She doesn't want to go down the equity release route either. Numbers confuse her and her business acumen is limited - however, she's run a charity shop very successfully for most of her working life and I want to make sure she is set up for the future.
Any pearls of wisdom are welcome or if anyone has similar experience any ideas would be appreciated.
Thanks for reading.
Well, if you want to turn capital into income, and are ruling out an investment portfolio, then BTL seems to be the only option. I'd suggest you use a letting agent so that she's not hassled with tennants calling her about failed washing machines or leaky roofs. You also have to accept that the rent can take while to get going, because there are usually some teething problems to pay for over the first few months.
You could also try asking this on the investments board at moneysavingexpert, you might well get some variations suggested there
You could also try asking this on the investments board at moneysavingexpert, you might well get some variations suggested there
My 2p.
Sell house and then rent, dont bother buying again. DWP will help with rent if things go askew.
Then if preference is for property sink cash into a REIT or range of REIT's
Personally thats a bad idea though, look at a range of income trusts and REIT's you should get 4% PA as dividend which is not taxed until you hit higher rate tax levels.
Interest, rent and any other income is taxed once you leave the tax free allowance.
4% on £1M is obviously £40k, thats pretty much tax free. Even if the return is only 3% you are still on for £30k tax free. (Well this is due to dividend tax credit, but you get the picture)
You can even sink the dosh into bonds, only problem there is they are generally not inflation indexed. Equities are to a certain extent.
I really do think time and effort researching will be sensible. Suggestions of BTL are way wide of the mark IMO. Who wants to manage renters and properties!? Better to just take the yield and let the investment trusts take 1% or so. Better than the 15% the rip off rental agencies take!
Sell house and then rent, dont bother buying again. DWP will help with rent if things go askew.
Then if preference is for property sink cash into a REIT or range of REIT's
Personally thats a bad idea though, look at a range of income trusts and REIT's you should get 4% PA as dividend which is not taxed until you hit higher rate tax levels.
Interest, rent and any other income is taxed once you leave the tax free allowance.
4% on £1M is obviously £40k, thats pretty much tax free. Even if the return is only 3% you are still on for £30k tax free. (Well this is due to dividend tax credit, but you get the picture)
You can even sink the dosh into bonds, only problem there is they are generally not inflation indexed. Equities are to a certain extent.
I really do think time and effort researching will be sensible. Suggestions of BTL are way wide of the mark IMO. Who wants to manage renters and properties!? Better to just take the yield and let the investment trusts take 1% or so. Better than the 15% the rip off rental agencies take!
Simpo Two said:
If she doesn't want to sell her house and has little/no savings where is any 'income' going to come from?
Her only way out is to downsize, converting bricks into pounds.
I would agree.Her only way out is to downsize, converting bricks into pounds.
If she doesn't want to sell and doesn't want to use an equity realease scheme, the house may as well be worth £1.5k as £1.5m. It's not going to generate an income.
Lodgers 
A lodger can -
a) allow you to stay in your own home
b) generate tax free income, if below the Rent a Room threshold (£4,250 per annum)
c) provide a level of security for someone who is living on their own
Now, I do know that many people would be adverse to having a lodger in their house and there can be some risks involved, especially for single ladies.
However, I certainly think that this option should be at least given some thought.
A lodger can -
a) allow you to stay in your own home
b) generate tax free income, if below the Rent a Room threshold (£4,250 per annum)
c) provide a level of security for someone who is living on their own
Now, I do know that many people would be adverse to having a lodger in their house and there can be some risks involved, especially for single ladies.
However, I certainly think that this option should be at least given some thought.
ringram said:
My 2p.
Sell house and then rent, dont bother buying again. DWP will help with rent if things go askew.
Then if preference is for property sink cash into a REIT or range of REIT's
Personally thats a bad idea though, look at a range of income trusts and REIT's you should get 4% PA as dividend which is not taxed until you hit higher rate tax levels.
Interest, rent and any other income is taxed once you leave the tax free allowance.
4% on £1M is obviously £40k, thats pretty much tax free. Even if the return is only 3% you are still on for £30k tax free. (Well this is due to dividend tax credit, but you get the picture)
You can even sink the dosh into bonds, only problem there is they are generally not inflation indexed. Equities are to a certain extent.
Thanks for the input and I will look into the above.
I really do think time and effort researching will be sensible. Suggestions of BTL are way wide of the mark IMO. Who wants to manage renters and properties!? Better to just take the yield and let the investment trusts take 1% or so. Better than the 15% the rip off rental agencies take!
Sell house and then rent, dont bother buying again. DWP will help with rent if things go askew.
Then if preference is for property sink cash into a REIT or range of REIT's
Personally thats a bad idea though, look at a range of income trusts and REIT's you should get 4% PA as dividend which is not taxed until you hit higher rate tax levels.
Interest, rent and any other income is taxed once you leave the tax free allowance.
4% on £1M is obviously £40k, thats pretty much tax free. Even if the return is only 3% you are still on for £30k tax free. (Well this is due to dividend tax credit, but you get the picture)
You can even sink the dosh into bonds, only problem there is they are generally not inflation indexed. Equities are to a certain extent.
Thanks for the input and I will look into the above.
I really do think time and effort researching will be sensible. Suggestions of BTL are way wide of the mark IMO. Who wants to manage renters and properties!? Better to just take the yield and let the investment trusts take 1% or so. Better than the 15% the rip off rental agencies take!
PorkInsider said:
Simpo Two said:
If she doesn't want to sell her house and has little/no savings where is any 'income' going to come from?
Her only way out is to downsize, converting bricks into pounds.
I would agree.Her only way out is to downsize, converting bricks into pounds.
If she doesn't want to sell and doesn't want to use an equity realease scheme, the house may as well be worth £1.5k as £1.5m. It's not going to generate an income.
Eric Mc said:
Lodgers
A lodger can -
a) allow you to stay in your own home
b) generate tax free income, if below the Rent a Room threshold (£4,250 per annum)
c) provide a level of security for someone who is living on their own
Now, I do know that many people would be adverse to having a lodger in their house and there can be some risks involved, especially for single ladies.
However, I certainly think that this option should be at least given some thought.
I agree with all of the above and personally I think she should start a BnB but she is against the idea. She's a tough nut to crack. A lodger can -
a) allow you to stay in your own home
b) generate tax free income, if below the Rent a Room threshold (£4,250 per annum)
c) provide a level of security for someone who is living on their own
Now, I do know that many people would be adverse to having a lodger in their house and there can be some risks involved, especially for single ladies.
However, I certainly think that this option should be at least given some thought.
otherman said:
Well, if you want to turn capital into income, and are ruling out an investment portfolio, then BTL seems to be the only option. I'd suggest you use a letting agent so that she's not hassled with tennants calling her about failed washing machines or leaky roofs. You also have to accept that the rent can take while to get going, because there are usually some teething problems to pay for over the first few months.
You could also try asking this on the investments board at moneysavingexpert, you might well get some variations suggested there
Thanks for the input, well noted.You could also try asking this on the investments board at moneysavingexpert, you might well get some variations suggested there
HCMH said:
She is going to sell the house, ideally she would love to stay where she is but she knows she can't.
OK, well to be fair you said she was resistant to change, that her house means a lot to her, and that you had only *suggested* that she sell up - which overall adds up to 'not selling' If she IS going to sell, bingo, £0.5M to invest. Like you I'd avoid BTL, too much aggro IMHO.HCMH said:
Hi All,
After some advice and potential new ideas really...a little bit of background
Equity release isn't always the potential nightmare scenario it was 20 years or so ago. One to consider maybe?After some advice and potential new ideas really...a little bit of background
http://www.ageuk.org.uk/money-matters/income-and-t...
Don`t know if the link will work but please read my last post. Happy to have a chat. :-)
http://www.pistonheads.com/gassing/processpost.asp...
http://www.pistonheads.com/gassing/processpost.asp...
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