How to invest a $240,000 inheritance
Shirley is 65 years old, retired, and considers herself a conservative investor. What should she do?
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Shirley is 65 years old, retired, and considers herself a conservative investor. What should she do?
READ: What should young Ellis do with a $500,000 inheritance?Managing your tax may not be that easy because you have CPP, OAS at 65, and some of your ex-husband’s pension. It is the tax on the $240,000 from your Mom you’ll want to watch. For example, a $240,000 GIC at 3.25% will generate $7,800 in interest which would be added to your income and taxed. Why is this important? You may be eligible to receive the guaranteed income supplement (GIS), at age 65. The amount you’ll receive is based on your taxable income, which includes your CPP, pension, and investment income, but not OAS. Use this table to find out how much you could receive. If you have a taxable income of over $18,096, not including OAS, then you will not receive the GIS. To reduce your investment income, maximize your Tax-free Savings Account (TFSA). The CRA only considers taxable income as income. If all your income came from a TFSA the CRA would assume you have zero income. The other thing you want to think about is how you manage your cash flow because it sounds like you need to make it stretch. Instead of budgeting, why don’t you set up two bank accounts, a master account for paying everything you have no emotional pull to spend more on, i.e. bills, auto, etc.., and a spending account for those things where there is an emotional pull to spend a little more, i.e. food, family, entertainment, etc.. Determine a set weekly amount to be deposited from your master account to your spending account. That is your weekly allowance for groceries, vacations, entertainment etc. Just use cash and a debit card, no credit card in this account. If you are spending too much get rid of the debit card and just use cash. Finally, Shirley, I’d suggest you talk to a financial planner. There may be some other things you can do to be more tax efficient. They may also able to give you some further suggestions around managing/stretching your cash flow. Allan Norman is a Certified Financial Planner (CFP) as well as an investment advisor (CIM) with Aligned Capital Partners Inc. in Barrie, Ont. He can be reached at [email protected] This commentary is provided as a general source of information and is intended for Canadian residents only. Allan offers investment advisory services and products through ACPI.
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