What you need to know about investing an inheritance into super

Receiving an inheritance is usually a mix of emotions. Although you’re happy about the improvement in your finances, it’s coupled with sadness at the loss of a family member or friend.

It can also be challenging working out the best way to manage the bequest.

While your first thought may be to pay off your mortgage or take a holiday, it’s worth considering putting at least some of the money away for your retirement.

Points to consider before making a decision

It’s important to carefully review your current financial situation before you decide how to use an inheritance:

• Look at things like your level of debt, income and cash flow, how much risk you feel comfortable with, and how close you are to retirement.
• List your future financial goals such as taking early retirement or travelling overseas for an extended period.
• Consider eliminating any significant non-deductible debts like credit cards and car or personal loans to reduce your financial stress level.
• Think about the cost of investing outside the super system. For example, buying shares or a rental property outside super has administration and transaction costs like stamp duty or brokerage fees, while any income or capital gains may be taxed more heavily.

There’s a lot to consider, so it may be wise to talk to an independent financial adviser. They can help you work out your financial goals and offer personalised advice about the best course of action for your financial situation.

If you decide to take the opportunity to invest for your future and you’re comfortable with locking your money away until you’re at least 60, the super system is an attractive option. Here is what you need to know.

Contributing an inheritance into super: 10 points to weigh up

1. Lowers your investment tax bill