Hot Issues
spacer
Checking in on our 2016 economic outlook - and looking ahead
spacer
Making a fairer and more sustainable Superannuation System
spacer
Going undercover
spacer
‘Winners and Losers’ from new super proposals
spacer
The gymnastics of keeping your portfolio balanced
spacer
Market Update – August 2016
spacer
Stop!! Don't do a paper Budget, use our online budgeting tools instead.
spacer
Advisers the key to retirement stability, research shows
spacer
The toughest tasks for self-managed super
spacer
Lawyer warns on ‘adverse’ death taxes with insurance
spacer
Don't get distracted by super changes
spacer
A savings mirage?
spacer
Market Update - July 2016
spacer
The three biggest economic issues likely to affect markets in 2016
spacer
SMSFs warned on looming property ‘tough times’
spacer
Diversification counts when uncertainty beckons
spacer
Strong economic data stablises markets
spacer
Starting a super pension in 2016-17?
spacer
Market Update - June 2016
spacer
Resources on our site to help you, your family and your friends.
spacer
ATO extends looming SuperStream deadline
spacer
ATO's deadline for review non-arm's length LRBAs extended
spacer
A paradoxical relationship: The self-employed and super
spacer
Fresh SMSF documentation warnings surface
spacer
Making investing a family affair
Article archive
spacer
Quarter 2 April - June 2016
spacer
Quarter 1 January - March 2016
spacer
Quarter 4 October - December 2015
spacer
Quarter 3 July - September 2015
spacer
Quarter 2 April - June 2015
spacer
Quarter 1 January - March 2015
spacer
Quarter 4 October - December 2014
Coping with instant wealth

How would you cope with a sudden windfall? Would you invest and spend the money in a responsible way or would you be left floundering and vulnerable?

Many lottery winners and sports super stars are notorious for squandering their instant fortunes on high living and bad investments. We have all read their sorry tales.

A recent Wall Street Journal article - headed Too Rich, Too Soon - discusses what can go wrong when someone is showered in money. Journalist Jessica Silver-Greenberg points to the example of a baseball player who amassed $58 million in net assets only to end up a bankrupt.

Of course, few of us have much chance of becoming sports stars or winning the lottery, but many of us will experience some form of instant wealth by receiving a sizeable inheritance.

In her article, Silver-Greenberg quotes statistics from the Centre for Retirement Research at Boston College estimating that North America's 78 million baby boomers - born between 1946 and 1964 - will inherit $8.4 trillion during their lives.

The underlying message of this article, which quotes a range of financial planners, is that individuals should understand what to do if they suddenly come into possession of a large, perhaps unexpected, sum.

Tips from these advisers include create a diversified portfolio, treat "sure-fire" investment schemes with extreme caution, and revise your estate planning so the windfall is not distributed in an unexpected way in the event of your death.

And don't rush to spend your newly acquired money - perhaps lock a large amount away in term deposits until you gather your thoughts and revise your financial plan.

Interestingly, many of the challenges faced by a person receiving a big inheritance are similar to those faced by numerous recent retirees who gain full control over their superannuation savings after 40 years or so in the workforce.

 

By Robin Bowerman
Smart Investing
Principal & Head of Retail, Vanguard Investments Australia

28th February 2012

© Copyright Business & Estate Planning Specialists | Suite 5, 27 Godwin Street, Bulimba QLD 4171
PO Box 355, Bulimba, QLD, 4171 | Tel: 1300 781 727 | Fax: 07 3902 0499 | Email: info@beps.net.au | Web: www.beps.net.au | ABN: 50 536 670 728 |

FINANCIAL SERVICES GUIDE | ADVISER PROFILE | PRIVACY POLICY