Hot Issues
spacer
Resources on our site to help you and your family.
spacer
The gender gap in retirement
spacer
Why popularity of ETFs is surging among SMSFs
spacer
Clearing up confusion about accessing super.
spacer
Good (investor) behaviour
spacer
Five reasons the RBA will likely cut rates again
spacer
Market Update – 31st July 2015
spacer
Customer-centred innovation underpins high satisfaction among financial advice customers
spacer
What the ATO is keeping an eye on
spacer
Through life and death
spacer
Why astute investors are a little like astute kayakers.
spacer
Your first SMSF portfolio
spacer
Market Update - June 2015
spacer
Money-smart ageing
spacer
A new (financial) year’s resolution for your SMSF
spacer
What’s ahead for US interest rates?
spacer
Super: Looking to June 30 and beyond
spacer
End of year tips for SMSFs
spacer
Reminders and Tax Strategies for SMSFs pre-year end
spacer
Market Update – May 2015
spacer
An investor's personal trainer
spacer
SMSF trustee penalties going up
spacer
Contraventions rife among non-advised SMSF trustees
spacer
Dealing with investor uncertainty
spacer
Reserve bank gives the economy a lift
Article archive
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