Q&A With Gordon Pape: Where to Invest Inheritance?
Q – I need suggestions as to how best to proceed. A little about my situation so you are able to best make recommendations. I will be 64 in September, net income per month is $2,000, will be debt free, no RRSPs, and an inheritance which will leave me (after paying off debt) $50,000. So, the basic question, which you have been asked thousands of times is: How best to proceed? – Ray N.
A – You say you have no RRSPs, so I assume you do not have a TFSA either. That means you could put the full $50,000 from the inheritance into a TFSA and I suggest you do that. As of Jan. 1, the lifetime contribution limit for anyone 18 or older in 2009 and has not had a plan is $63,500.
These plans work well for low-income people because the money is not taxed when it comes out. That means any withdrawals won’t affect your eligibility for the Guaranteed Income Supplement, which you should apply for when you become eligible for Old Age Security at 65.
When you set up the TFSA, you have to decide how much risk you want to take with the money. A very conservative route would be to keep it all in a high-interest savings account and/or guaranteed investment certificates. You won’t receive much in the way of interest but anything you do earn will be tax-free. Alternatively, you might consider a portfolio of mutual funds or ETFs, which would offer more return potential but with higher risk. Given your age, I would suggest a 50-50 split between bond funds and equity funds. – G.P.
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