Your personal finance questions – Should I use money my father left me to pay for my tracker?
Q My father recently died and left me €80,000. Should I use this to pay off part of my tracker mortgage now that European Central Bank rates are starting to rise? I have a tracker rate from the ECB plus 0.5 percent. I’m in my late 50s with kids in college but no other debt. The mortgage is still €120,000.
A Paying off more expensive forms of credit is always the first option, according to Joey Sheahan, head of credit at online broker MyMortgages.ie and author of The Mortgage Coach. You don’t have any other debt, so paying off your mortgage is a good idea, he said. And it’s relatively easy to do – just contact your lender directly to arrange it.
The fact that you’re on a tracker means you’re currently at an excellent rate, he said. So you might also consider investing some of these funds into your pension, especially if you pay the higher tax rate as you can get up to a 40% tax break on your contributions.
For example, if you put €20,000 a year into your pension for the next four years (ie €80,000 in total), you would get a tax break of 40 percent of that, which is €32,000. And you can always use the money you save from tax breaks to pay for your mortgage or support your children if you need to.
You could actually pay in €20,000 a year for seven years, which means you’d gross out €140,000 to invest in your pension, but you’d get a 40 percent tax break, meaning you’d get €8,000 annually, which is an overall relief of €56,000. So your gross contribution of €140,000 would only cost €84,000, Mr Sheahan said.
Q We are both in our early 60s and on the Laya Simply Connect program. We are particularly careful to maintain good orthopedic coverage. Is this plan still a good cover?
A According to leading health insurance broker Dermot Goode of TotalHealthCover.ie, this is still a good semi-private business plan, costing €1,361 per adult.
The plan includes good reimbursements for eligible outpatient expenses and also includes full coverage for major orthopedic procedures at standard private hospitals, he said. If you are happy with this type of plan, he would not recommend changing for this renewal as there is no other cheaper plan that offers the same level of coverage.
Mr Goode said there is another version of this plan called Simply Connect Plus, which costs €1,471 per adult and offers better outpatient coverage and lower co-payments at private hospitals.
Q How will inflation affect my savings?
A During the height of the Covid lockdown, many people were fortunate enough to be able to save big. This was due in large part to their inability to spend money. Over the past 12 months, however, these savings have been under attack by rising inflation.
Although most people associate inflation with higher food and energy costs, it also reduces the value of money and saves over time, according to Frank Conway, founder of financial wellness provider MoneyWhizz and a qualified financial advisor.
Take a saver with €50,000 deposit. If the inflation rate is 5 percent in just one year, the purchasing power of that money drops to about $47,600. So although the principal of $50,000 will still be deposited, it has lost about $2,400 in purchasing power, Mr. Conway said.
After five years, the purchasing power drops to around 39,000 euros, so the saver has lost 11,000 euros in purchasing power. Although inflation exceeds 5 percent today, it is expected to fall back to more sustainable levels over time.
Q I am insured under Irish Life Health’s 4D Health 3 scheme. All other family members are insured in so-called “company” plans. Is my coverage a business plan or should I review it?
A This is still an excellent private room corporate plan, costing €1,572 per adult, said Mr Goode of TotalHealthCover.ie.
It covers a private room in all public and ordinary private hospitals, and also includes good coverage for the high-tech hospitals and a 50 percent reimbursement for a range of eligible outpatient expenses, he said.
If you’re looking to increase your coverage for routine outpatient expenses, he suggests you consider the next tier up, namely the 4D Health 4 program, which costs €1,637 per adult, as reimbursement for physician and consultant fees increases to 75 percent .
https://www.independent.ie/business/personal-finance/your-personal-finance-questions-should-i-use-money-my-father-left-me-to-pay-off-my-tracker-41697122.html Your personal finance questions – Should I use money my father left me to pay for my tracker?