Category Archives: Blog

When I’m not at work, I’m Cycling!

Last year, in the height of another dreaded ‘lockdown’ I did what a lot of guys my age seem to do. I became a MAMIL (Middle Aged Man In Lycra)! As a kid I loved my BMX but for most of my life, cycling was always a means to an end. I enjoyed cycling to college or work but I never really saw the attraction in cycling for the sake of it.

However, after some encouragement from some long standing MAMIL friends, I took the plunge and got myself a road bike.

One of the first things I learned is that it’s not just about the bike. There is an infinite list of accessories, clothing and safety gear. And then there’s the sophisticated technology devices and apps to be got.

Fast forward 12 months and I am a fully-fledged MAMIL. I even find myself watching late night repeats of the Tour of Flanders on Eurosport to study cadence and climbing.

While I’ve probably missed the boat with the Tour de France, I have learnt that cycling can be for everyone. You’re never too late to start (a bit like a pension!) and it allows for all standards and levels of fitness.

Cycling is something you can do alone or in a group. I have had some of the best conversations with my friends while on the bike (as opposed to on a bar stool). Unlike meeting your friends in the pub, you always remember the conversation!

Mental health has become omnipresent in todays world but I genuinely feel that the greatest benefit cycling has given me is with my mental health.

Exercising in the fresh air has really helped get a good night’s sleep and sets me up for the following day.

If you are considering getting in to cycling, I would recommend the following tips:

  1. Do your research before you commit to buying a bike. Get advice from a few bike shops to understand what bike you are best suited to and use YouTube to verify.
  2. Don’t scrimp on the gear. Cycling gear can be expensive but the cheap stuff doesn’t last as long and will not protect you as much as the more established brands. Make a wish list of items you need/want and spread out when you buy them. Make sure to let people know what you want when coming up to Christmas and birthdays!
  3. Download the Strava App. It’s free and it is a great devise to record your trips. You’ll spend hours after your cycle analysing your data!
  4. If Road cycling is not for you, consider investing in an e-bike. You’ll still be exercising and can cover a lot of ground in a relatively short amount of time.

If you are fortunate enough to live in Dublin you have one of the best cycling facilities on your doorstep, free of charge! The Dublin mountains are a great challenge to conquer. The rewards you get the higher up you go are well worth the effort. Not only that, once you go over the other side you are immediately in the stunning natural countryside of beautiful county Wicklow.

If you want to take a break from the hills, then a spin out to Howth or around the Phoenix Park are just as impressive.

Pensions & Tax Relief….How does it work?

How does the area of pensions and tax relief work? Bottom line is that the State will incentivize you to save for your retirement by allowing you save some of your gross salary (i.e. income before tax is applied) in to a pension plan.

For example:

How much tax relief can I avail of?

Each individual is allowed tax relief based on their age and percentage of their salary.

Know your limits!

  • Don’t be greedy! The maximum salary you can claim relief on is €115,000 p.a. Therefore if your income is €500k p.a., you can still only claim relief up to the first €115,000 p.a.
  • If you are a member of a Company Pension scheme and your employer is making a contribution to your pension, this is NOT included in your salary limit (so you probably have plenty of scope to contribute up to your limit).
  • If you are a member of a Company PRSA Scheme and your employer is making a contribution to your pension, this IS included in your salary limit (so be careful not to exceed your limit).

Sounds good? There are even more tax benefits...

  • When you contribute to your pension, the money is invested in a fund where it is allowed grow TAX FREE! Unlike a deposit account where the growth is taxed annually, a pension fund can grow without the burden of the growth being taxed. This cumulative tax free growth is the key ingredient in your pension fund, providing you with a long and happy retirement.

What about the tax when you want to retire?

  • The tax relief doesn’t stop just because you want to retire! There are a few options but in general, the day you retire you can get at least 25% of your total pot transferred in to your bank account TAX FREE!
  • The balance of your fund can remain invested and grow TAX FREE!
  • Whenever you do drawdown on the balance of the fund you are liable to income tax. However, there are various structures and ways to minimise the tax liability at that point.

What if I die and I haven’t spent all of my pension fund?

  • Even on death your pension can be tax efficient!
  • If you die and still have a pension fund (pre or post Retirement) it doesn’t die with you. Instead, your family can inherit your pension in a much more tax efficient way than if you had left them a property or money in a bank account.

So in summary you can get…

  • Tax relief on your pension contributions
  • Tax free growth on your pension fund
  • Tax free growth on your retirement fund until you draw it down
  • Tax efficient access to your pension fund throughout your retirement
  • Tax efficient transfer of your funds to your estate on death
  • Tax free lump sum at retirement age

With all aspects of Personal Financial Planning, it is important to get professional impartial advice that is specific to your own needs and circumstances.

For an initial chat to see if we are suited to working with you, simply get in touch.

Time, not timing, is important

This time last year, investment analysts were predicting a positive, albeit modest growth in the global stock market for 2021.

Looking back now we can see that most experts were too conservative in their assessments. The Global Stock Market finished off the year 32% up on the previous year. 

There are a number of factors that led to that investment growth, not least the rise in energy stocks, a low interest rate environment as well as the continuing boom in technology related companies.

For our pension and long term savings clients who have their investments in well diversified funds, you have benefited from being invested in the great companies of the world.

The outlook for 2022 is for growth to continue but at a slower pace than what we have become used to.

Rising inflation has already meant that the great companies of the world have had to adjust their spending and all the signs are pointing toward the start of rising interest rates in the US. This will affect the ability for those companies to borrow and/or service their existing debt.

So while the market is expected to cool that doesn’t mean growth stops.

As investors with money in Pension funds or long term savings, the number 1 rule when markets are turbulent is to remain focused on your original objective and stick to the plan.

The following video is a great illustration of how to avoid falling into the emotional investment trap.

As always, if you have questions about your investments, savings or retirement planning, seek qualified impartial advice from a trusted adviser. You can contact us here for an initial chat.

 

 

 

What happened to the pension in my old job?

Clients ask me this question regularly when we meet. So what does happen with your old pension?

We are often solely focused on a fresh start and looking forward when we move job. We neglect to address what we’re leaving behind – our own pension funds!

What you are allowed to do with your existing plan can vary. This depends on the structure of the pension scheme. You may be entitled to leave the funds in the scheme until you reach retirement age (normally 65) however there are other options that will allow you take control of your pension fund, control how you invest it and control when and how you draw it down.

For example you can transfer it into a:

  1. Pension plan with your new employer.
  2. Personal Retirement Savings Account (PRSA) and continue saving in to it.
  3. Personal Retirement Bond (PRB) and access it from the age of 50.

Like all important financial planning decisions, your individual goals and objectives will determine what option is best for you.

As a starting point you should seek out independent advice from a trusted advisor.

So if you’re wondering what you do about your old pension, get in touch with us today at Coleman Financial Planning to discover what option suits you best.

Make a start on giving yourself the retirement options you deserve!

 

 

Why saving for education is so important

Saving for education, it’s something that we often put on the long finger. There are so many other priorities, especially when children are small. But there’s lots of reasons why saving for education is important. And it’s never too early to start.

Recent research showed that over a third of Irish parents had no savings in place for their children’s education. It was estimated that the annual cost of sending a child to college could be between €5,000 and €10,000 a year and even more if they are living away from home. That’s a substantial sum over a number of years of third-level education, especially if you have a couple of children.

We all want to give our children the very best in life. A good education is part of that. It may seem early to start but time does fly. As part of your overall financial plan, you can look at how to start putting a little aside regularly to cover future education costs.

There are lots of investment savings plans available for anyone looking to start saving for education. These range from low-risk investments to more adventurous options.

The first step to selecting the right one is to talk with a professional adviser who can tailor the right solution for your needs.

If you need some help in getting started, we’d love to hear from you, just get in touch.

Do you need life insurance?

It’s not something we like to think about. And definitely not something we like to talk about. What would happen if suddenly your life doesn’t go as planned? Something unexpected happens. This is why you need life insurance.

What is life insurance?

Life insurance is designed to pay out an amount of money to your dependents providing some financial security to them in the event of your death. It’s difficult to think about your untimely death but the financial impact on your loved ones could be huge. Therefore it’s important to plan to protect them.

How much life cover do I need?

How much life insurance cover you need depends on your circumstances. Generally, if you have a young family, you will need to provide a larger lump sum than if your children are older. That is because the benefit has to last longer.

You will need to consider having enough insurance to:

  • cover your family’s income needs, for as long as they need the income
  • pay off your mortgage and any other loans
  • cover costs that might arise when your children are older, for example school or college fees

There are several ways you can protect a family and it can be daunting trying to work out how much cover is required and for how long.

At Coleman Financial Planning we use a simple but robust formula to calculate what level and type of cover is specific to your family.

Get in touch with us and we can tailor a solution that is flexible and unique to your family’s needs.

 

 

 

NOW is the time to start your Smart Financial Habits

A recent study by EY suggested that the Covid restrictions in 2020 led to a reduction in Irish household spending in the following areas;

  1. Eating Out (-€14bn)
  2. Holidays (-€3bn)
  3. Petrol/Diesel (-€700m).

While some families have had to face a reduction in take home pay, our spending has also reduced significantly and for many people they are getting to the end of the month with cash still in their bank accounts!

Once in a Lifetime Opportunity!

At some point in the (hopefully near!) future, the restrictions will lift. Restaurants will be open, weekends away will be back and trips to the cinema or a match will be a regular event. This means your spending will go back up and the ‘squeeze’ will come back on your monthly cashflow.

My advice to you is to seize this ‘once in a lifetime’ opportunity by starting some new habits now while there has been a reduction in household spending and the temptations to spend are curtailed.

If you start now, you are less likely to break the habit when we go back to the ‘old world’.

Smart Financial Habits

If you are serious about your financial wellbeing, these are the good habits you need to have:

  • Protect your family

Have a monthly outgoing that will provide financial security to you and your loved ones in the event of your death or illness.

  • Build an emergency fund

Lodge money into a deposit account (by standing order/direct debit) each month. This way you will have at least 6 months net income available for financial emergencies.

  • Start a “Big Stuff” savings account

Put money away each month into an investment account for 5 years to cover the future cost of your kids 2nd or 3rd level education, the Big Family Holiday or the Roundy Birthday Treat.

  • Start or increase your savings in your pension

If you have a pension talk to your employer about increasing your contribution. If you don’t have a pension talk to a specialist about how to get started.

  • Increase your monthly repayments on your personal loans or mortgage

This is a simple yet effective way to reduce debt in a structured way ensuring savings in the longer term.

  • Start a monthly standing order to your favourite charity

Charities have felt the impact of social distancing with less opportunities to engage donators. This is an easy way to give something back. And it can be done in a very tax efficient way too.

The order of priority of these good habits will be different for everyone. Talk to an independent, qualified Financial Adviser like Colman Financial Planning, about what habits are most important to you and your circumstances.

 

 

 

Tuning out the noise

In February this year, we saw a significant, sharp fall in the value of global stocks and shares.

For some of our clients, that meant a 30% drop in the size of their investment or pension fund. For other, more conservative clients the fall was less so. But it was still an uncomfortable experience.

Thankfully by August most clients’ funds had recovered those losses. However, similar falls in the past have taken a lot longer to recover.

For over 200 years, markets have consistently provided positive growth to long term investors. The journey is almost always peppered with volatility which means fund values will fall and rise along the way.

The one key trait that all successful investors share is discipline.

Sticking to the plan and riding out the storm can be hard to do when the waves are 30 feet high and crashing in around you but the storm always passes.

Having a strong relationship with an adviser will help you be better prepared to live your life through the ups and downs of the market. That’s the value of discipline, perspective, and calm.

That’s the difference the right financial adviser makes.

The following clip demonstrates the value of discipline. It was produced in 2019 but was just as relevant in 2020 and will be for as long as investors look for growth.

For help in tuning out the noise, just contact us at Coleman Financial Planning.

Money On Deposit? Make It Work For You Now!

Do you have money on deposit? Are you just leaving it there? Have you considered starting a regular savings plan or putting a lump sum you have accumulated in an investment? If not, then you really need to understand why now is such a great time to start saving and making your money work for you.

Don’t get me wrong, everyone should have some money on deposit (ideally 3 months net salary). Deposit accounts are accessible and won’t decrease in value (in the short term!).

Current Dilemma

The problem is that for almost 12 years deposit rates have been in free fall. This means banks, building societies and credit unions cannot give you a real return on your savings.

In addition to this, Central Banks (who control monetary policy) need to keep interest rates as low as possible for at least another 5 years. This is to help keep the cost of borrowing low so that businesses and households can function and grow.

Solution

So the only solution to growing your savings is to invest.

I’m not suggesting people start emptying their deposit accounts and start trading stocks and shares every morning (this is not Paddy Power stuff!!).

An investment should be spread into a range of diverse assets (i.e. stocks, bonds, commodities and property) and the proportion in each asset class should be determined by what level of risk you are comfortable with and how long you would like to invest for.

There are a wide variety of very attractive regular savings plans and investment bond options available. The fund or funds you invest in is very specific to your needs and objectives so it is important you meet with a qualified advisor who will help you establish the best fit for you.

So, what kind of returns should you expect?

Historically those investors that have had more of their fund invested in equities (i.e. global stocks and shares) have performed the best.

But even the more conservative savers have outperformed deposit rates by taking on a cautious level of risk.

Performance table

The key to this is to choose a fund that you are comfortable investing in. And one which is designed to help you reach your financial goals.

Next steps

The next step to take is to talk to a financial adviser – you can contact us here at Coleman Financial Planning.

After you complete a short investment questionnaire we will help you decide what your saving/investment goal is, how much money you can put away and for how long.

Most importantly we will outline the product options and choices that are best placed to deliver on your goals.

 

MAKE YOUR MONEY WORK FOR YOU – CONTACT US TODAY