50s: Redefine Your Priorities
50s: Redefine Your Priorities
Case Study: Investing An Inherited Lump Sum
by The Gloss
In your 50s, you may be thinking more seriously about retirement and protecting what you’ve built. When a significant lump sum enters the picture, particularly through an inheritance, the responsibility of managing it wisely can feel overwhelming. It’s a moment that calls for careful decisions, not quick reactions.
That’s exactly where our client Christine* found herself. After inheriting a meaningful sum from her late mother, she wanted to honour that legacy by making smart, intentional choices. Like many people in their 50s, she wanted to protect the value of her inheritance while putting it to work for her future.
The importance of diversification when investing a lump sum …
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The inheritance of a large sum of money can change your circumstances significantly, and you may need financial planning to allow you to make the most of this.
Our client Christine* came to us after receiving an inheritance from her late mother’s estate. Having already taken the decision to use some of the money received to pay down her mortgage and with a balance of €500,000 remaining, Christine wanted to discuss what options were available to her.
With inflation and negative interest rates dominating news flow, Christine appreciated that allowing excess cash to sit on deposit was not a long-term solution.
It’s not always the case that people have sufficient funds to pay off debt and invest, as one of the most commonly asked questions following the receipt of a lump sum is: should I pay my mortgage or invest excess funds? We believe that with interest rates at historically low levels, meaning relatively cheap debt, we generally find clients are better continuing with their mortgage payments as usually they will never save as much as they are making in re-payments.
How to make the most of your inheritance
When we spoke to Christine, the first consideration was her investment time horizon for the lump sum or, more simply, the length of time she was willing to invest. Her financial situation is an important gauge of this: would Christine need these funds in the next 12-24 months? If so, it should be kept liquid and in cash, and not form part of an investment portfolio.
The second consideration was Christine’s risk tolerance – i.e. how much stock market volatility she’s willing to accept in exchange for potential longer-term growth. Ultimately, Christine’s investment mix should reflect her willingness and ability to tolerate risk in the context of her investment time horizon.
Often, people feel like they are risk takers but when this is quantified by illustrating examples of stock market corrections, they can become uncomfortable.
A diversified investment in global equity markets can offer high single digit returns on average over the long-term, but we can also expect them to correct by between 30-50 per cent every six to eight years. As we have experienced since the beginning of the year, markets can be volatile. That’s why thinking about your lump sum in different baskets of time and risk can be useful.
A rainy-day fund is essential for everyone, so together with Christine we decided to keep 10 per cent liquid, invest 80 per cent with a medium risk and time horizon (five years), and invest 10 per cent in a high-risk, long-term (six to ten years) aspirational bucket. The majority of the portfolio was invested across multiple asset classes (equities / commodities / bonds) with an actively managed approach taken to the allocation of these assets across the portfolio which is reviewed regularly.
For the aspirational bucket, we explored the Goodbody Smaller Companies Fund which is an actively managed, concentrated global equity fund that offers investment in a diversified portfolio of 35 to 45 small/mid-sized growth companies.
By allocating Christine’s lump sum across multiple risk buckets, we were able to help Christine achieve her key objective of avoiding the erosion of value of her lump sum from inflation over time by delivering long-term growth in a diversified investment portfolio.
Christine’s journey highlights an important truth: even with retirement on the horizon, the right strategy in your 50s can help you create strong financial resilience for the years ahead. Diversifying her inheritance allowed Christine to protect herself from market swings and maintain the flexibility she needed. If you’re considering how best to invest a lump sum, the Goodbody team can help you create a balanced plan that supports the life you want to live. Email us at [email protected] to start the process.
*Names have been changed to protect client anonymity.
SEE MORE: Inheritance Planning – Why Conversation Is Critical
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