Your personal finance questions: Is my retirement in jeopardy if I can’t buy a home?

Q I’m 35 years old and I don’t know if I’ll ever be able to buy my own house. Is my financial well-being in retirement in jeopardy?

AN Owning a home is one of the four pillars of building financial wellness, but it’s not the main one, says Frank Conway, founder of financial wellness provider MoneyWhizz and a qualified financial advisor. Owning a home allows the owner to accumulate personal wealth in a tax-efficient way by paying off the mortgage and raising principal, but it is not without costs. When paying off a mortgage, there can be a temptation to argue that the owner has no cost. Conway says that nothing could be further from the truth. As a property ages so will its maintenance costs and this needs to be factored into the family budget. Other costs like insurance, energy efficiency, and even property taxes will always be a factor. There are so-called “reverse mortgages” that can release home equity without the need for regular monthly payments. However, since they are largely based on an estimate of when the owner will die, they are not for everyone. Also, placing a lien against the family home will often raise objections from those who might hope to benefit from an inheritance, and thus derail parents’ plans to go this route, Conway said. Enrolling in an employer-sponsored pension or establishing a PRSA (Personal Retirement Savings Account) can go a long way toward building other forms of wealth. They are a flexible and mobile form of personal wealth. Mr. Conway advises those who have decided not to buy a home to enhance their pension through early enrollment, maximum contributions and not to be afraid of risk. Protecting your health is another important consideration. One can work in retirement. Individuals are also allowed to have reasonable levels of income tax-free. Property can play an important role, but it’s not the only means of achieving financial well-being in retirement, he adds.

Q I need to have a hip replacement. There is an outpatient procedure in the US that is not as difficult for the patient after the operation. I know because I had a hip replacement. Surgery is not offered in Ireland. Can my Irish Life 4D Health 2 plan cover this in the US?

AN This query is not easy, according to Dermot Goode of TotalHealthCover.ie. He said that he will have to contact the insurer directly and inquire about approval of medical treatment abroad. It’s all subject to prior authorization, and even if the insurer agrees to contribute to the cost (which is never guaranteed), it will likely only pay what it thinks the cost would be if it were carried out in Ireland, he said. This could leave a significant deficit. Goode cautions that you should also factor in travel and lodging expenses that won’t be covered by your insurer.

Q I read that the Irish Credit Bureau is closing at the end of the year. Will this affect my credit rating?

AN The Irish Credit Bureau will close at the end of this year. However, it’s unlikely to have any real material impact on your personal credit score, according to Mr. Conway of MoneyWhizz. The Irish Credit Bureau has been around since the 1960s and for much of that time was the only real credit reporting service in the country.

Conway says that one of the main weaknesses of his business model was how owned he was. The main stakeholders are commercial banks. For a long time, lenders, such as credit unions, did not report their credit activity through the ICB and this resulted in consumer credit gaps. This changed in the last decade or so with credit unions reporting borrowers’ loan information to the ICB, but it was probably too late, he added.

Following the financial collapse and state bailout, the Troika insisted that the Irish set up an independent credit reporting agency. The Central Bank’s Central Register of Credit is now the predominant place credit underwriters go throughout Ireland, Conway added.

The data collected by the CCR is as comprehensive as is required by a credit underwriter to make a fully informed decision on a credit application. This means that the role of the ICB has begun to diminish. Mr. Conway said that the demise of the ICB will not have a material impact on his personal credit history.

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