Investing an inheritance from $10,000 to $100,000 whatever your life stage

The first thing to do when you first receive an inheritance, particularly if it comes at an unexpected time, is to consider your options. 

That may mean putting it in a high-interest savings account or a mortgage offset account while you decide what to do. 

Then consider your goals. Do you need to pay off debt? Are you looking to build long-term wealth? Pay off your home loan? Build a diversified investment portfolio? Or invest for the kids? 

Most people with a six-figure amount to invest will consult a financial adviser, although it can also be cost-effective to obtain one-off financial advice for smaller amounts.

Inheriting assets like shares or property, such as the family home, can also have different capital gains tax implications if you decide to sell, so getting tax advice may also be important.

In your twenties, it may be helpful to pay off any high-interest debt or build an emergency fund to cover three to six months of living expenses. Otherwise, the earlier you invest, the more time your money has to grow and compound.

$10,000 to invest:

• A growth-oriented exchange-traded fund (ETF) or managed fund may allow money to grow while offering flexibility to access it later if needed. 
• A voluntary contribution to super, allocated to growth or high growth, can be a tax-effective investment that compounds over the long term if you’re within the super contribution caps, or limits, although you generally can’t access it until you reach age 60 and have retired.

$100,000 to invest:

• Low-touch investors might consider a diversified range of shares via set-and-forget growth ETFs, such as index shares (that track the top 200 companies on the Australian share market or another share market index) or global shares.
• It may be worth consulting a financial adviser to start building a diversified growth portfolio of managed investments.

For many, the thirties are about getting into the housing market. 

$10,000 to invest:

• A high interest term deposit or savings account that offers some growth may be a good option over a short time frame.
• A voluntary contribution to super may allow you to save for your deposit faster using the First Home Super Saver scheme. The tax rate is generally 15% on earnings in super, while the amount of your contributions you can release to buy your first home increases in line with the shortfall interest charge rate (currently 6.78%).

$100,000 to invest:

Starting a family or looking to enjoy a little extra income?

• Dividend-focused ETFs may help generate a passive income stream.
• If property investing is more your thing, you may have enough to invest in a growing regional market, or a real estate investment trust (REIT).

At this point, many Australians who have a mortgage are looking to reduce it.

$10,000 to invest:

• Those with a mortgage that’s more than 50% of the value of their home might consider paying it down or putting their inheritance in a mortgage offset account. 
• If a mortgage is less than 50% of the value of the home, it may be worth considering shares as average share market returns most years can be higher than average mortgage interest rates – again, there are many low-cost ETFs and managed funds available.

$100,000 to invest:

• Thinking about paying for the kids’ education? Investment bonds can be a good option to include in the mix as withdrawals are tax-free after 10 years. 
• Some investors may consider debt recycling by paying down the mortgage and then applying for a new loan to buy an investment property. Interest on the new loan is generally tax deductible so those interest payments can be offset against your income to reduce the amount of tax you pay. 
• For those who can afford to invest the money outright, it may be worth building a diversified portfolio of ETFs or managed funds. Global and local shares have historically offered among the best returns. We can connect you with a financial adviser if you’d like help to invest. 

After the age of 50, it’s often a good time to maximise pre-tax and after-tax super contributions to harness some of those tax advantages. 

$10,000 to invest:

• Have you reached your annual super contribution cap limits? You can contribute up to $30,000 a year in concessional contributions, which are generally taxed at the concessional rate of 15%. These include compulsory employer contributions and salary sacrifice, as well as voluntary personal contributions (which could include a tax-free inheritance) for which you claim a tax deduction. 
• Alternatives might include investing in income-producing shares that usually pay a dividend, income or dividend ETFs, or REITs. 

$100,000 to invest:

• If you haven’t fully used your concessional contributions cap in any of the previous five financial years (and your total super balance was less than $500,000 at 30 June of the most recent financial year), you may be able to use those unused cap amounts to make additional catch-up contributions over the standard concessional cap amount (currently $30,000).
• Non-concessional super contributions (up to $120,000 a year to a maximum super balance of $2 million) are not taxed on the way in and are an effective means of growing your super quickly. While you can’t claim a deduction against these contributions, they compound relatively quickly in the super environment. Depending on how much you have contributed in prior years, you may be eligible to contribute up to $360,000. 
• Investors who are likely to need to draw on their investments in the next few years, might consider including some fixed income securities or managed volatility funds alongside higher-risk investments, such as shares.

Many people approaching retirement focus on preserving capital against sudden falls in value. But there are also real costs in going too conservative too early. 

From age 60, you can also access super if you meet a condition of release, such as retiring from a job. You can access your super regardless from age 65.

$10,000 to invest:

• It may be helpful to pay down any remaining debt or top up super.

$100,000 to invest:

• After 60, be cautious with gifting, as it may affect your eligibility to receive the government’s Age Pension from age 67. Gifts over $10,000 per year or $30,000 over five years will still be counted among your assets when it comes to Centrelink means-testing.
• For those who have reached their super contribution cap limits, it may be worth topping up your spouse’s super. 

Enjoy your retirement. Most investors are focused on capital preservation and income generation, and it may be worth using the bucket strategy with the goal of making your money last longer. At the same time, don’t forget to tick off the things on your bucket list. 

$10,000 to invest:

• Keep some money in cash or term deposits for accessibility.

$100,000 to invest:

• A mix of fixed income investments, REITs, and conservative managed funds may help reduce risk, alongside higher-growth shares or managed funds that you don’t expect to access in the next five years.

Whether you inherit a modest sum or a substantial windfall, align your investment strategy with your life stage, goals, and risk tolerance. 

For smaller amounts, many Australians manage without advice, but for larger inheritances, professional advice from a financial adviser and an accountant can help you navigate tax implications, diversify your investments, and plan effectively for the future. Explore your financial advice options.