Monique asks: I recently inherited R1,3-million. How should I invest it and what financial institution currently offers the highest interest rate?
Maya replies: Given that you are getting closer to retirement, now would be an excellent opportunity to sit down with a financial advisor and do a proper retirement plan.
What is your retirement fund worth?
What income can it provide you on retirement? When do you plan on retiring?
Do you plan on earning an income from other work after retirement?
The answers to these questions will provide a guideline to how to invest your inheritance.
As a general comment, these are some ways to maximise your inheritance:
– Debt: If you have debt you may want to settle that first.
– Emergency: Do you have emergency savings? You need to have three months of your salary available in a low risk investment like a 32-day notice account.
– Retirement top up: As this is after-tax money it may not be beneficial to save it into a dedicated retirement vehicle, but if you have a 10-year investment horizon you need to include equities so look at a prudential unit trust fund that has around 65% in equities. The favoured investment houses are Allan Gray, Prudential, Coronation and Investec for example. You may want to phase the money in overtime as the markets are quite volatile at the moment.
– Property: You may want to consider buying an investment property that can provide you with an income in retirement. (see related articles)
– Dream: This money could allow you to follow a dream that you have had for many years — starting your own business, learning a new language, visiting a country you have always wanted to go to, climbing Kilimanjaro.
Dreams and goals are a very important part of our lives and as long as you plan it carefully and it fits in with your entire financial plan, there is no reason not to live that dream
Interest rates
You ask which financial institution provides the best interest rate. It depends on the amount of money you are investing, however given your age it is not a good idea to just invest this amount in cash as it will not grow sufficiently to keep up with inflation.
For your emergency funds, Capitec has good interest rates and also consider the RSA retail savings bond. Although this is for a two-year period, you could invest a portion of your savings and if you were really in dire straits you are able to withdraw it but you would not receive the full interest paid.
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