A new year is an opportunity to refocus on your future financial goals. For the last 150 years, we’ve helped our clients see what they have today, what financial goals are most important and how to reach their desired goals. Here we examine four of those financial goals.
Setting a new fitness goal or taking up a new hobby may sound like a fun way to start the year. But what about initiating a conversation on inheritance planning?
Sure, financial-planning related topics, such as inheritance planning, might not be the easiest to discuss, but the turn of the year is an ideal time to focus on financial goals over transient resolutions.
Perhaps you want to consider proactive savings options for your children’s future education; invest an inherited lump sum; retire abroad; or establish a family investment vehicle post business exit. Whatever your goal, you may need financial planning to help you achieve it.
At Goodbody, we create bespoke financial plans that help our clients see what they have today, what financial goals are most important and how to reach their desired goals. And we’re there throughout a client’s entire wealth journey, ensuring that as different life events or decisions unfold, they are equipped with the right advice.
Here we examine four common financial goals:
1. Funding education for children or grandchildren
The best place to start when it comes to funding your children’s future education is with child benefit – it’s a simple and convenient way to build up an education lump sum without even making an extra effort. What’s more, child benefit payments align perfectly with long-term education saving: they are untaxed, monthly, and run for 18 years; so, they can be particularly beneficial to fund third-level costs.
The current child benefit payment for one child is €140 a month for 18 years (€30,240) – and if it is feasible, parents could put this aside every month to help towards their child’s future education costs. While it’s a small hit to your cash flow, it alleviates a significant future expense.
If these funds were saved on a monthly basis into a well-diversified investment fund for 18 years, with an average return of 5% per annum, it has the potential to grow to €48,533. That’s not insignificant when you consider that four years of third-level costs in Ireland work out at €56,300.
Another consideration is the Small Gift Exemption, which parents and grandparents may wish to take advantage of. Each parent or grandparent can individually give a maximum of €3,000 (the tax-free annual gift allowance) per annum to a child/grandchild.
That way, both parents and / or both grandparents could transfer a maximum of €6,000 per child per annum which is currently outside the inheritance tax net. Again, investing this rather than saving it can have a significant impact on the amount available when it is needed for education costs.
2. Making an inheritance plan
Nobody likes talking about wealth and dying. Both are intensely private matters, wrapped up in complex emotions and social taboos. Even between families these subjects often go undiscussed. The idea of having a frank conversation about income or net worth or end of life arrangements strikes many of us as uncouth, even mortifying. Instead, we keep things to ourselves and hope of the best, putting off the awkward chat, the honest reckoning, the clear account of facts. We understand all of this – and at Goodbody, we see it every day. But a little forethought and preparation can help preserve wealth and income for your loved ones and for future generations.
When we advise a client on inheritance planning, our team will always meet their family – often multiple times – to fully understand their circumstances and their needs before making any recommendations. Our clients typically generate wealth from numerous sources and assets, including property portfolios and business ownership, so we believe we are well-placed to share our experience of devising effective inheritance strategies.
For inheritance planning, tax-efficient planning is key. Because tax and inheritance involve a transfer of assets form one party to another, there are inevitably tax implications. But how much tax is paid on an inheritance can vary significantly depending on how much advance planning has been undertaken. Addressing these issues as early as possible can not only provide peace of mind but can greatly assist in reducing the tax burden for the beneficiaries of an estate.
3. Getting retirement ready
When you start thinking about retirement, you’re faced with many important questions and decisions: can I afford to retire early? Where do I stand if I have changed jobs several times over the years and have several different pension funds? To tackle these questions, some simple planning is advisable.
Retirement looks different for everyone. That’s why we create plans so you can retire when you want to and have enough to do so. We offer specialist advice on how to maximise your position as well as planning strategies to meet your lifestyle needs.
Most pension schemes are established with a normal retirement age of 65 however, it is possible to retire between the ages of 60 and 70 and draw down on your pension fund at that time. If you are self-employed and have a personal pension or a PRSA you can also retire at any age after you turn 60 and take your benefits. The interesting thing to remember is that you don’t actually have to stop working and you could effectively ease your way into retirement by drawing on your pension fund and perhaps working two or three days a week. This idea of phased retirement is becoming more and more popular – so that is something to consider when contemplating retirement.
4. Preparing for a potential business exit
The prospect of selling your business raises many questions: what is the right price? Who is the right buyer? Is now the right time? How will I reward my employees? What about my family?
At Goodbody, we believe that owners should have their exit in mind from the beginning because it’s better to have a plan and not need it than to need a plan and not have one. After all, exiting the business is one of the most important personal and professional decisions any entrepreneur can make.
A plan for the business should focus on valuation and exit readiness and the fact-finding process often extends to advising on or requiring the following: organisation/group structure; valuation of the business versus peers; governance; leadership succession, people and incentivisation; level of preparedness for exit/succession; review of shareholder arrangements and objectives; financing capacity/exit options; investment of corporate cash; and pre-deal restructuring and maximisation of available business taxation reliefs.
Meanwhile, the plan for the owner will focus on retirement goals, cashflow modelling, key insurances review, determining entitlement to tax reliefs on exit, such as Entrepreneur Relief, inheritance and the passing of wealth tax efficiently, consideration of a relocation abroad, and managing wealth beyond the business asset.
It is never too early to start planning for a business exit. Last year, Goodbody and AIB Capital Markets collaborated to produce a report to arm business owners with information and practical tips to be aware of and to action where appropriate. You can download the report here.
Set goals, not resolutions, for 2024
Did you know the average New Year’s resolution lasts just 3.74 months?
That’s according to research by Forbes. Given the fleeting nature of resolutions, perhaps it’s time to focus on purposeful financial goals this year. The examples above provide a snapshot of the goals that our clients focus on – you can explore more of our service offering here.
So, whatever the financial goal, we’ll be there for every stage of your journey in 2024 and beyond – that’s what we’ve been doing for the last 150 years.
In the months ahead, we’ll be bringing you insights and events on key financial planning-related topics that matter most to our clients as well as investment updates from our in-house experts. Stay tuned!
