Ask Paul: I'm on Centrelink and I just inherited $500k


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Q. I am a 48-year-old relief teacher who works only one or two days a week, and I'm on Centrelink benefits.

I own my own home outright and have only about $85,000 super in a growth fund and little in savings.

My father recently passed away and I estimate he has left each of his four children (including me) about $500,000.

ask paul inheritance

I am thinking about investing yearly in my super in a tax-effective way, and investing the rest in a managed investment fund on a growth setting to help supplement my income.

My short-term money goals are renovating the house to the tune of $25,000, doing a bit of travel and maybe making a bit of a career change.

Otherwise, it's just keeping my head down and saving for retirement, when I might trade in the house for a country property.

I would welcome your thoughts on how to manage my money to suit my goals in a safe and tax-effective way. - Paul

A. Sorry to hear about your dad, but he would be very pleased you will be using your inheritance sensibly, Paul.

You mention investing in a safe and tax-effective way, and I reckon super is your best friend here.

A growth fund has a high exposure to assets like shares, but with a long way to retirement this strategy makes sense to me.

With your super at a pretty modest level, you can put up to $100,000 a year of your own money into your fund and you can even "bring forward" three years, meaning you can contribute up to $300,000.

You don't get any deductions on this, but I really think you should discuss this with your fund or an adviser.

You can't access the money until you reach retirement age, but super offers you low fees and a diversified investment strategy and over time the returns have been excellent.

Of course, you could just build a diversified investment portfolio outside super, but a low-cost super fund is well worth considering.

There are lots of things to take into account here, your tax rate being just one of them, so you will need to seek advice before considering this strategy.

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the Money TV show, and this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Click here to ask Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. Please view our disclaimer here.

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