Financial Insights From Our TeamRead below for the latest featured articles from Infinity Financial Planning.
The 8th Wonder of The World A Simple Idea. Charlie Munger, the vice chairman of Berkshire Hathaway says, “Take a simple idea and take it seriously”. The simple idea that should be taken seriously by every investor is the ability to earn compound interest on your savings over the coming decades. Compound Interest and College Fees Let’s look at a simple example. We all want to give our kids, or even our grandkids, the best possible start in life and a good education is half the battle. However, education, particularly third level education does not come cheap. College fees may be free, but other costs certainly add up. Conservative estimates suggest annual costs vary, but begin from €10,000 to €12,000. Currently, the monthly child benefit amounts to almost €300 per month for two kids. Take the following scenario: Save €300 per month. Investment strategy is market related. Timeframe is for 10 years. Assume annual interest rate, net of costs, is 5% per annum. No indexation of...read more
There’s no greater feeling than being on the right side of a winning stock. The joy of being ‘right’ and making money in the process is insatiable. Jason Zweig, in his excellent book, “Your Money and Your Brain” describes how the brain activity of a person that’s making money on their investments is similar to a person who is high on cocaine. It’s that powerful! Picking Winners The problem with picking stocks is that it tells us nothing about the future. Companies and industries change on a continual basis, as technology and human creativity move forward. Similarly, the stock market, which is essentially a collection of businesses, is always changing. An investor in 1910 would have been excited about the choice of car companies they could invest in. By the 1990s, investors’ attention switched to the new economy as characterised by technology companies such as Cisco, Microsoft, and Netscape. Even over the last decade, the list of the world’s biggest companies has evolved significantly...read more
The value proposition of financial advice is changing greatly over time. We find the nature of what our clients expect from us as Certified Financial Advisers is changing. The most common question we answer for the people we deal with is ‘Will I have enough?’read more
Pension Planning for Business Owners and Directors It’s most likely you are familiar with creating and developing business plans. Most successful business plans have many different dimensions for that business to develop successfully. The strategy for building the desired income in retirement is no different. Pension planning is something that all business personnel should carefully consider. Part of the strategy should include taking advantage of the many tax benefits of company pension planning. These benefits include: No Benefit in Kind on employer contributions Corporation tax relief in the year the contribution is made No PRSI payable on pension contributions Tax effective retirement lump sums No USC payable on pension contributions Tax-free investment growth throughout (No Pension Levy in 2016) Earnings cap for tax relief is not applicable to company contributions Death benefits of up to 4 times salary plus annuity Post-retirement flexibility and tax planning of the ARF option...read more
Financial planning is all about allocating resources. Using a Section 73 savings plan to avail of gift tax relief is clever use of existing savings. This simply involves making the best use of the money you have. I expect everyone is interesting in minimizing taxes and maximizing cash-flow, for themselves personally, and their dependents, both now in the future. Simply put there are only four things you can do with your money; Owe it, grow it, spend it or gift it. Let’s dig a little further into the last option, gifting it. The dwelling house exemption loophole was tightly knotted in the 2016 budget. The dwelling house exemption now only applies where the following conditions are satisfied: 1. The house was the only or main home of the person who died; 2. The recipient of the house lived in it as their main home for the last three years before the person’s death; 3. The recipient does not own or have an interest or a share in any other house (including one acquired as part of the same...read more
Russia 2018 was hailed as a huge success. Moody’s, the ratings agency, said the World Cup's boost to the country's gross domestic product (GDP) would be between $26 billion and $30.8 billion over the 10 years from 2013 through to 2023. One of the more notable statistics from Russia 2018 was the fact that there were 22 penalties scored, considerably more than in any previous World Cup. As I watched some of the action, I was reminded that investors are also prone to making short-term decisions. So, is there a link between how investors and goalkeepers behave when making decisions under pressure? Many goalkeepers, not unlike investors, have an ‘action bias’. The urge to catch the latest investment trend, such as bitcoin or blockchain, runs deep. According to a 2007 study of 286 penalty kicks, almost 29pc are shot down the middle – a similar number to the amount placed to the left or right. The study found that the goalkeeper has a 33pc chance of saving the penalty if choosing to remain...read more
Smart Investment Decisions The process of making smart investment decisions is complex. While humility is a virtue in all parts of life, when it comes to making smart decisions with money, it serves as a vital layer of protection. When it comes to your money, there are no silly questions. Remember that fellow student in university who raised his hand and asked the question that everyone knew the answer to? Remember how the class laughed and thought that person was dumb? It turns out that person wasn’t dumb. That person was humble. Being humble, when it comes to money, is incredibly smart. That Individual may very well have been Warren E. Buffett who, at the age of 86, still spends the majority of his day reading and learning. Why does he do this? To learn things he doesn’t already know. The importance of Informed Investing You would think that Mr. Buffett — one of the most successful investors in the history of investing — would know everything he needs to know by now....read more
Financial Decisions The financial decisions we make earlier in life can have a significant impact on our lifestyle in later years. With life expectancy increasing all the time, It also increases our responsibility to be organised financially to fund ourselves for 20 plus years into retirement. Six Financial Decisions you May Regret Later in Life Your Starting Salary: Employees who negotiate their starting salaries averaged a €5,000 increase compared to those who didn’t negotiate. Career guidance advice to increase your chances of salary increases recommends you, volunteer enthusiastically, highlight your team player skills and provide solutions to work related problems. The Company You Work For: A 30 year old should carefully research the pension and sick pay benefits offered by their employer. Many employers simply provide the facility to make pension contributions without any encouragement or incentive from the employer. A 30 year old with no pension contributions will fall far...read more
Paying inheritance tax is something that many people experience when inheriting an asset from family or friends, are there ways we can minimize the tax bill? Planning is required. Let’s see some examples: Will I Face a Tax Bill if I Inherit my Sister’s House? I am 63 and living with my sister aged 73. She owns the house and I have been paying rent each week for the last 10 years. She has told me she has made a will and that on her passing, I will get the house. What are the tax implications for me if I inherit the property? The tax arising on inheritances is Capital Acquisitions Tax (CAT). Amongst the rules with this tax is an exemption on the inheritance of a dwelling house. The exemption applies where the following conditions are satisfied: first, that the house was the only or main home of the person who died; second, that the recipient of the house lived in it as their main home for the last three years before the person’s death; third, that the recipient does not own or have an...read more
Our esteemed friends working in the Revenue want you to pay them as much taxes as possible. Typically, we save our IT and Engineering Contract clients at least €100,000 in taxes over 20 years. Infinity Financial Planning try to help contractors, directors and employees to get better organised financially. Our aim is to help you minimise your taxes and increase your bank balance. Most people are busy working long hours. Successful people use financial planners like ourselves to help identify ways to legitimately make the most of what you earn. From our 35+ years in Financial Planning we have picked a few tricks along the way which we would like to share with you: Small Gift Exemption and Other Perks Let’s start with possibly the best perk. A €500 single voucher may be provided, to any employee or employer, without applying PAYE, PRSI and USC to that benefit. This is called the small gift exemption. It is allowed annually. The small gift exemption is available to employees, contractors...read more
INVESTMENT PLANNING 7 Things To Do If Investment Markets Are In Freefall Pat Leahy, Certified Financial Planner August 23, 2018 First things first, the investment markets are not in freefall as we type. In fact, investment markets have been calm for the last number of years. So much so that some investors may have forgotten how frightening economic crises can be. Looking at past economic crises, we can see that the markets have never told us precisely when, where or how steep their short-term movements were going to be. But, they have reliably recovered and soared – usually without warning. Those who did not panic-sell at the bottom and then try to guess when it might be “safe” to return were ultimately rewarded with healthy returns. So let’s pretend we are in a state of emergency, with the following fire drill. Here are 7 timely actions you can take when financial markets are tanking, and, hopefully, even when they’re not. 1. Don’t panic (or pretend not to). It’s easy to believe...read more
Baroness Ros Altmann, a former UK Pensions Minister is of the opinion that ‘the cash equivalent transfer values are so attractive and the freedoms for personal pensions now make Defined Contribution (DC) pensions far more user-friendly than ever before’. This quote was taken in direct response to the question ‘Why are Defined Benefit Schemes (DB) winding up?’ Transfer value Taking a transfer value reduces the employers DB Scheme liabilities, so therefore they may provide ‘enhanced’ transfer values to encourage leavers. If you are close to retirement age you are first in the queue to get paid, however if you are perhaps 20+ years from retirement age, will there be funds left to meet your employers covenant of a fixed pension amount for life? Just ask employees in Waterford Crystal, Irish Independent, AIB, British Home Stores and many more, about what happens when the sponsoring company gets into financial difficulties. Defined Benefit schemes are struggling. They are underfunded,...read more
Our job is to help people make good financial decisions. We help you:
1. Calculate your cash-flow.
2. Reduce Your Tax.
3. Help you Accumulate Wealth in Your Business.
4. Protect Your Income in All Circumstance
Get advice when it comes your investment Ideas Investment typically involves a trade-off between risk and reward. Benjamin Franklin once said “The investor’s chief problem – even his worst enemy – is likely to be himself”. In practice, people make judgments and decisions that are based on past events, personal beliefs, and preferences. Sometimes these beliefs can lead people away from rational, long term thinking. Financial planners and investors alike should learn that successful investing comes from reigning in emotions and overcoming their biases. When it comes to investment what affects your risk tolerance? Your time horizon and liquidity needs is one such factor, such as how long will it be before you will need to withdraw 20% of your investment? Your net worth – this boils down to what you own minus what you owe. Are you including your retirement savings? The higher your net worth the more capacity you have to stand a market decline Investment knowledge and experience are...read more
Any time of the year is a good time to improve your bank balance. The beginning of the year is when many people make resolutions to live a healthy lifestyle. While these resolutions are great in themselves, you should also consider your financial health. How about concentrating on your personal finance’s and making financial resolutions now? Making, and sticking, to these resolutions will help you feel better! Here are eight possible resolutions to help you get started…… 1. Begin Saving We all have heard this phrase “mighty oaks from little acorns grow”. When it comes to your financial life, small savings can help you create a great portfolio in the future. Do something that makes you save a little, for example, consider starting a monthly savings plan and set up a direct debit from one of your bank accounts. 2. Have an Emergency Fund Apart from saving every month, have an emergency fund that you can use in case of an unexpected financial crisis. Having an emergency fund will give you...read more
If you made resolutions, chances are you have broken some of them by now. The usual suspects like lose weight, get in shape and stop smoking will fall by the wayside for many of us. Your financial goals for 2018 should be measurable. How can you quantify them? It should help if you apply time limits to your aims also. This will increase the likelihood of you achieving your ambitions. Measurable and time-bound goals can provide you with a gradual stairs to reach your goal, rather than focusing on the daunting challenge of reaching a seemingly massive aim high in the distance. It should help to identify how you would feel if: You achieve your target and You did not hit your target. Does hitting the target fill you with a warm glow of satisfaction, or is it just, whatever? If you fail to hit the target, will it knock you for six, or is it just a minor inconvenience? I know from experience with clients that money is a powerfully emotive subject. One of the reasons...read more
Supplementary Pension, Do you Qualify? Payment of a supplementary pension can arise where you retire, before turning 65 years old, from a public service position. Where applicable, you must claim for your supplementary pension from the Department of Social Protection. This stressful process should come with a health warning. Supplementary pension may form part of the pension paid to retirees who paid full rate, Class A, PRSI contributions in respect of all or part of their pensionable service, and is also a possibility if you are buying back years or purchasing additional service. The reason for the supplementary pension is that a Class A PRSI contributor retiring before age 65, would be significantly worse off than a Class D PRSI contributor. In order to qualify you must first exhaust any entitlement to all other social welfare benefits such as job-seekers allowance. Supplementary Pensions Explained The supplementary pension payable, subject to certain...read more
Do you have Adequate cover? More and more couples in Ireland are choosing to cohabit and have children now, rather than marry. If you are one of these couples, have you spoken about ‘life of another’ family protection or personal protection? When it comes to protecting your family its important that you have the correct cover. Do cohabiting couples have adequate and appropriate protection in the event of death? Why do you need ‘life of another’ Cohabiting couples are treated as strangers, from an inheritance tax perspective, in the event of death. This may result in a significant percentage of a jointly owned property inherited being passed to Revenue in tax. ‘Life of Another’ Cover explained So let’s paint the picture. Ann and Barry are unmarried and jointly own a house together, valued at €300,000. They have 2 lovely children named Jack and Jill. They have the following protection in place: Joint mortgage protection policy that clears the mortgage in the event of either of their...read more
Brexit & UK Pensions Brexit and your pensions, how does it affect you? Britain is expected to formally trigger Article 50 of the EU within weeks, beginning the process of leaving the EU. Have you worked in the UK pre Brexit? If the answer is yes, Brexit may affect you more than you might think. You may not heard of QROPS? The UK 2017 Spring budget introduced an upfront, 25% tax on the value of the fund, on certain pension transfers. The UK government have introduced this measure to prevent transfers to exotic destinations, eg Hong Kong, that might facilitate access to the full fund while paying little or no tax. Brexit and your pension Currently, if you have pension funds left in the UK, you can still transfer from the UK pension scheme to a Qualified Recognised Overseas Pension Scheme (QROPS) and avoid any tax liabilities to HMRC (Her Majesty Revenue and Customs) on transfer, where: Both the individual and the pension scheme are in countries within the European Economic Area...read more
Pension Planning; Why? The following article appears as written by Pat Leahy, Infinity Financial Planning Ltd, in the Irish Examiner on 16.10.2015. For further information email Pat Leahy: email@example.com So, the aim is clear, you want to build a savings account to fund your lifestyle in retirement. The AIM is to spend your later years enjoying the things that give you most pleasure in life. Build your Plan with our helpWhat is the PROCESS required? How am I going to BUILD A PLAN? The amounts required are scary, and the NEED is just so far away. Being thoughtful, and discussing your options, helps remove some personal blind spots, increase’s your awareness, and will help you be better prepared.Sources of Income in Retirement Old Age Contributory Pension There are potentially four sources of income in retirement. Firstly, the Old Age Contributory Pension will give you €230p.w, presently. The goalposts are moving out to 67 years old by 2020 and 68 years old by 2028...read more
The methods of legitimately reducing your income tax bill have diminished greatly over recent years. This applies to self-employed individuals, PAYE employees and Directors of companies alike. A simple example of this, is tax relief on medical expenses has halved to 20%, and such modest relief is even subject to conditions. Some financial stability has been restored in Ireland. The economy and incomes, and hopefully your disposable income, is improving. As a result personal debt levels are reducing, gradually. Deposit rates are at all-time lows. Taxation of such deposits is a penal 40% on interest. Income Tax Relief Income tax relief is still available on pension contributions. Your retirement may seem like a long way off. Ultimately the choice of retiring or not is down to each individual. Technically, to benefit from a retirement fund you do not need to actually retire, just reach a certain age i.e 60 or 65. Personal pension plans are designed to give yourself the option in the...read more
Estate Planning Example As part of this Estate Planning example Our client, aged 52, had accumulated significant wealth in recent years. He was arranging his WILL through his solicitor. Tax advice established that his family would be subject to an inheritance tax bill of circa €200,000 on his death. This individual’s solicitor introduced the client for an initial consultation to ourselves. We arranged for a series of lifetime transfers to take place over a specified number of years as well as establishing Section 72 Inheritance Tax life assurance policies that would discharge the tax bill on his death. The result is that this will leave his estate intact for a tax free distribution of his wealth, in line with our clients intentions. Furthermore, the client had the peace of mind that he could comfortably spend some of his wealth on the things he wanted to do, before it is too late. A free will service is unlikely to provide much thought provoking questions or...read more
As a parent, your financial situation today will determine the financial future of your dependent adult child with special needs. We have dealt with people in your circumstances. Typically parental concern’s surround how your dependent adults will survive financially without you, and who will manage their financial affairs for them. Research, care and medication have all improved over time. Life expectancy for someone with Downs Syndrome was 9 years in the 1930s. Thankfully, today someone with Downs Syndrome can expect to live into their 50s, 60s and even 70s. People with special needs are living into old age. As a parent of a child with special needs, not only do you need to plan for your own financial future, you also need to prepare for the financial future of the dependents you leave behind. Having a long term financial plan is crucial. You will need to ensure that there will be enough for their medical bills, care assistants, homecare, to name but a few....read more
Employee benefits Employee benefits for contractors and employees vary greatly, even if they are working under the one organisation. Approximately 20% of employees have privately arranged Income Protection Insurance, and 50% of employees have sufficient levels of Life Cover for their dependents. Knowing that you and your family will be looked after should the worst happen is a valuable benefit and certainly not one that an informed contractor, employee or employer should give up easily. The complete benefits package Life cover, and other additional insurance benefits, can be provided on a group basis. Group life, and in particular group disability cover, could be a key element in properly valuing and retaining loyal employees. It can also free an employer from any implied moral duty that they may feel towards their employee should they be affected by death and/or disability when they already have a solution in situ. Why would an employer provide Group Risk benefits for their...read more
What is an ARF An Approved Retirement Fund (‘ARF’) is a personal tax efficient investment fund into which you can transfer all or part of the balance of your pension fund after you receive your retirement lump sum. Our objective At Infinity Financial Planning Ltd our objective is to find the most suitable solution to your needs. Before we are in a position to prescribe products or investment recommendations. We complete a thorough review of your current financial position to ensure we are acting in your best interests. Do you qualify to invest into an ARF Part of our pre-retirement consultation process includes working with you to identify answers to some important questions such as: Are you financially ready to retire? What sort of lifestyle do you want in retirement? What monthly income do you require in retirement? Can you invest the proceeds of your pension fund in an ARF after you retire? What are your alternative options i.e an annuity? After...read more
The following article appears as written by Pat Leahy, Infinity Financial Planning Ltd, in the Irish Examiner on 16.10.2015. For further information email Pat Leahy: firstname.lastname@example.org There are 5 TAX advantages to a personal pension plan. Firstly, Income Tax Relief (Subject to Revenue Limits) is provided at your marginal rate of tax on contributions. Therefore, if you are top rate tax payer for every €4 you get €2.67. This compares favourably with the now redundant SSIA of for every €4 you got €1. Secondly, as your contributions accumulate in your fund there is no tax on any growth i.e no DIRT or CGT. In addition, the austerity levy on pension funds no longer apply from 2016. Next, is the advantage of the tax free cash option on retirement, capped at €200,000. The fourth tax advantage is the Approved Retirement Fund (ARF) as a post retirement tax planning tool which allows you minimise or perhaps even eliminate your tax in retirement. The final tax...read more
Termination and Redundancy Payment Options Redundancy payment considerations can be a stressful time in your life. We have helped many clients negotiate this difficult time period by providing impartial and independent advice at a vital time. There are 3 methods of calculating how much of the (potentially taxable) termination payment that you can receive tax free. Basic Exemption The Basic Exemption is the minimum redundancy payment amount that the individual will receive tax-free. The amount is €10,160 plus €765 for each complete year of service with the employer. You obtain no benefit for part-years of service. An amount up to the basic exemption is tax-free and the employer can pay this without deduction of PAYE. Increased Exemption There are circumstances where you may be able to increase the basic exemption redundancy payment by a maximum of €10,000. This applies where: you have made no claim for relief in respect of a previous redundancy lump sum payment...read more
Income Protection How would you and your family cope financially, if you were out of work for a long period due to illness or injury? Do you know how much income, if any, you would receive from your employer? While we ensure such things as our houses, cars, even our gadgets, the most important thing you should insure is your income, as it is your most valuable asset. If your health is currently in ‘no-claim-bonus’ territory you should not expect to pay more than the price of a good drink per week. Your government is even willing to provide tax relief on the contributions paid. “It will never happen to me”. Unfortunately, no one knows what’s around the corner. Serious illnesses are on the rise. One in three people expected to be diagnosed with a critical illness at some point in their lives. In addition to this, you have a 30%, or 3 in 10, chance of being out of work for more than 90 days at some point in your working life. As much as we try to look after our...read more
The following blog post on financial planning for women is written by Collette Steele, Infinity Financial Planning Ltd. Statistically, women will outlive their spouses but will typically have a lower lifetime income. In addition to this, women either will or are caregivers to parents, children and spouses. These factors can have significant financial planning consequences for households. Single/Separated/Divorced/Widowed women have a greater financial planning need than the average single man or couple. Why? This is due to longevity. Women statistically live longer than men but will typically have less money to do so. Therefore an average woman should have a bigger pension fund than the average man. From our experience of providing financial advice to women, Here are some important points to consider: Will your pension fund be enough to last for 20 plus years after retiring? How will you cope if you were diagnosed with a serious illness or unable to work for a...read more
Preparing for retirement can be like the best laid plans – it may turn out different than expected. Like any strategy, the better prepared you are in advance the more flexibility you will have to adopt to changing circumstances. Nobody knows what the future holds. In order to make the transition as smooth as possible it is suggested that you ‘practice retirement’ in advance. Perhaps this advice applies to most lifestyle choices we make. Pre-retirement you may be taking two or three weeks’ holidays every year. Perhaps you should practice retirement first. In fact, having a transition towards retirement could actually be part of your retirement plan. This will hopefully increase the chances of you having a happy retirement. Here are some suggested plans to make that will help you ensure a smooth transition to your golden years: Go ahead and move. Do you plan on moving location in retirement? Consider planning the move now. This will give you more years to enjoy...read more
How do I keep track of my pensions? Like most people you may have moved jobs a few times in the past. As you change jobs you may start to accumulate pension benefits in different employer pension schemes. When you leave a job you will have to decide what to do with the pension benefits you may have built up in your former employer’s pension scheme, one of the more popular options is a personal retirement bond but there are also other options available to you. 3 Options for keeping track of your pensions Leave the benefits to grow in that scheme until you retire. This may result in difficulties when it comes to your retirement. You will most likely need to go back and try and contact these former employers to gain access to your pension benefits. Transfer your benefits to your new employer’s pension scheme, if you will be joining such a scheme. You will get these benefits when you retire from your new employer. Transfer your benefits to a Buy Out Bond (also...read more
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