Getting an inheritance: what to do with a cash lump sum
1 July 2024
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If you’re about to receive or have just received an inheritance it’s likely you’re going through an intensely emotional time.
You may feel pressured and unsure of what to do with the money. You could be feeling overwhelmed as to what the best course of action is.
Read on for things you should consider before you invest your inheritance.
Stay calm, take your time
If you have just gone through an emotional experience (or still experiencing it), you may end up doing things with the money you could later regret by being reactive.
Take a step back from everything, take a deep breath and get used to having the money in your account. Allow yourself time to think about what you want to do with your money and consider if speaking to a financial planner would help.
Consider options to financially position yourself for a better future
You have options to consider with the money you’ve just received. You could spend some or all of it now, however you may be eliminating longer-term opportunities to financially position yourself for a better future.
Instead of spending everything, you could:
Pay off some debts or eliminate them entirely
If you’ve had interest clocking up on outstanding debts for years, you could use some of your inheritance to reduce them or eliminate them entirely. By paying off debts such as car loans, mortgage or credit card debt, you’ll be taking a lot of financial pressure off your shoulders.
Contribute to your personal emergency fund
Negative life events occur without warning, to anyone and everyone and it’s nice to have a safety net if the unthinkable happens. The possibility of serious sickness and injury, the loss of a job, financial market crashes and much more could be just around the corner. As we learned from 2020, even a worldwide pandemic is possible.
Make voluntary after-tax contributions to super to set up your post-working life
Growing your super is an incredible way to get yourself ready to live the life you really want after retirement. Your inheritance is a fantastic opportunity to make a voluntary after-tax contribution to your super to give it a real boost. Depending on your circumstances you can add up to $360,000 in non-concessional contributions, and if you have a partner they may be able to add another $360,000. That’s a potential extra $720,000 waiting for you when you retire. However, it’s important to note conditions apply based on your age and the amount you wish to contribute. You may wish to seek professional financial advice before making any decisions about contributing to super as you cannot reverse super contributions.
Just received an inheritance but not sure what to do with it?
This can be a difficult period for many, you’re not alone.
If you’ve spent a significant amount of time thinking about what to do next but still feel uncomfortable making a decision, we recommend making an appointment with a financial adviser.
A financial adviser may be able to help you see where you’re at financially, help you set financial goals and help you understand how your inheritance can contribute towards those goals.
You can choose your own financial planner or you can take advantage of the service available through Industry Fund Services (IFS). If you don’t have an existing relationship with a planner, you can contact the Financial Advice Association Australia (FAAA) and access their “Find a financial planner” service to locate an FAAA member near you. The financial planners at IFS can advise you about the options available to SA public sector employees.
If you would like to learn more about financial planning, or to make an appointment with an IFS planner, please call the Super SA Advice Administration team on 1300 162 348.
