What to do with inheritance funds

penguine

Through recent inheritance and sale of a 2nd property my husband and I have been able to pay off our mortgage and still have a substantial amount remaining. We have one child and have already saved a large sum for her university expenses.

Ideally we would like to retire early (we are in our early 50s). We both work in the public sector and have paid into our company pension schemes and will also have some irregular income from a small family business.

What is the best way to invest our money to ensure a long-term income? Should we be looking at private pensions, or a mix of pensions and savings?

[Deleted User]

Personally if you have pensions sorted I'd forget all that and get daughter onto the housing market, even if she goes to uni that is still a world away from being able to get a job affording a property.


The most piece of mind is to know nearest and dearest have a roof and security whatever life throws at them.

penguine

BBH123 wrote: »

Personally if you have pensions sorted I'd forget all that and get daughter onto the housing market, even if she goes to uni that is still a world away from being able to get a job affording a property.

That sounds sensible, but as she's only 14 it feels a bit early to be getting her onto the housing ladder.

We owned a rental property until early in the year but have just sold it as we didn't want to be landlords in the first place, and don't really want to get back into buy-to-let again.

Linton

The best way to ensure long term income depends on your circumstances, what you want to do, when you want to do it and how much money is involved. So it's not possible to give appropriate suggestions without a lot more information.

Some pointers.....

Circumstances
1) Are either of you higher rate tax payers - if so put sufficient money into pensions.
2) Do you have cash savings? Suggest about 6 months living expenses to cover emergencies.
3) Are your pensions DB or DC? If DB what happens if you take it early?
4) Is inheritance tax a concern for you?
5) Have you any investment (ie shares) experience?

What do you want to do?
1) Retire early? If so when? It will probably be sensible to use the money to live on until you can get any DB pensions without deductions. In this case a significant tranche of the money could be left in cash as it will be used in the short/medium term future.
2) Will you want the money for income after you get your company and state pensions? If so that part of your spare cash should be invested in share funds since it wont be touched for perhaps 15 years. These should be held in a DC pension or in an S&S ISA to minimise tax.
3) Do you want to leave an inheritance for your child. Again this should be invested - pensions are useful if inheritance tax is a worry.

How much money is involved?
1) <£5K - doesnt matter much what you do.
2) <£50K- with a bit of thought you can probably sort out something sensible without advice with extra pension,S&S ISAs, cash savings.
3) If the money is a life-changing amount you need a proper plan. I suggest you talk to an IFA who can get down to a level of understanding and detail that isnt possible with strangers communicating via a forum. Before doing that you should have thought through what you want the money for, with £s and rough dates.
4) For very large amounts of money, investment should be the main policy. The value of cash savings could be seriously depleted by inflation by the time you need to use it.

MallyGirl

you would probably need to supply a bit more info to get much in the way of suggestions.
How early are you looking to retire? If it is before 55 then you would need funds till you can get at your pensions - this would need to be cash type as the time period is too short to be investing. It you are thinking early 60s is early retirement then a 10 year horizon is probably long enough to consider investing (stocks and shares, funds, etc).
Are the pensions going to pay out enough if you retire early?

penguine

Linton wrote: »

The best way to ensure long term income depends on your circumstances, what you want to do, when you want to do it and how much money is involved. So it's not possible to give appropriate suggestions without a lot more information.

Some pointers.....

Circumstances
1) Are either of you higher rate tax payers - if so put sufficient money into pensions.
2) Do you have cash savings? Suggest about 6 months living expenses to cover emergencies.
3) Are your pensions DB or DC? If DB what happens if you take it early?
4) Is inheritance tax a concern for you?
5) Have you any investment (ie shares) experience?

What do you want to do?
1) Retire early? If so when? It will probably be sensible to use the money to live on until you can get any DB pensions without deductions. In this case a significant tranche of the money could be left in cash as it will be used in the short/medium term future.
2) Will you want the money for income after you get your company and state pensions? If so that part of your spare cash should be invested in share funds since it wont be touched for perhaps 15 years. These should be held in a DC pension or in an S&S ISA to minimise tax.
3) Do you want to leave an inheritance for your child. Again this should be invested - pensions are useful if inheritance tax is a worry.

How much money is involved?
1) <£5K - doesnt matter much what you do.
2) <£50K- with a bit of thought you can probably sort out something sensible without advice with extra pension,S&S ISAs, cash savings.
3) If the money is a life-changing amount you need a proper plan. I suggest you talk to an IFA who can get down to a level of understanding and detail that isnt possible with strangers communicating via a forum. Before doing that you should have thought through what you want the money for, with £s and rough dates.
4) For very large amounts of money, investment should be the main policy. The value of cash savings could be seriously depleted by inflation by the time you need to use it.

Thanks, very good advice. It is a life-changing sum so it sounds like we need to seek advice.

bostonerimus

There's a lot of good advice here. I would add that you should stick the money in a bank savings account until you have educate yourself about investing and financial planning....only then should you decide what to do. If you understand the options for your money you will be well placed to either manage it yourself or evaluate the advice you get from an adviser.

Also if you want to retire early don't buy houses for your children. They have a lifetime to work and pay for that stuff themselves. It's the rare retiree that can afford to use their retirement savings for things other than supporting their own income.

aajax42

bostonerimus wrote: »

There's a lot of good advice here. I would add that you should stick the money in a bank savings account until you have educate yourself about investing and financial planning....only then should you decide what to do. If you understand the options for your money you will be well placed to either manage it yourself or evaluate the advice you get from an adviser.

Also if you want to retire early don't buy houses for your children. They have a lifetime to work and pay for that stuff themselves. It's the rare retiree that can afford to use their retirement savings for things other than supporting their own income.

Remember, your savings are just another gift to the government if you need care in later life. Think about setting up trusts, gifts to children etc as one way of preserving your hard earned for the next generation.
Cat amongst the pigeons and all that!