Hot Issues
spacer
The little-known rule with huge implications for self-managed super funds
spacer
Grappling with the uncertainties of retirement
spacer
Change to ATO decision relevant to SMSF in-house assets
spacer
Taking a personal perspective on the global super challenge
spacer
Some terms defined - Super & Investment
spacer
The perils of market-timing and over-confidence
spacer
Market Update – 30th September 2014
spacer
Hardly a do-it-yourself job
spacer
Super insurance: wide coverage, limited understanding
spacer
Good financial planning finally has a value: 23% more in retirement
spacer
ASIC eyes SMSF loan sign-off
spacer
Redesigning retirement incomes policy - from the ground up
spacer
Industry terms
spacer
Market Update - August 2014
spacer
Keeping to super's sole purpose
spacer
Taxing times for self-managed super funds
spacer
The relationship between SMSFs and their advisers
spacer
How family financial planning opened the door to a holistic advice career
spacer
Spotlight on your retirement income
Article archive
spacer
Quarter 3 July - September 2014
spacer
Quarter 2 April - June 2014
spacer
Quarter 1 January - March 2014
spacer
Quarter 4 October - December 2013
spacer
Quarter 3 July - September 2013
spacer
Quarter 2 April - June 2013
spacer
Quarter 1 January - March 2013
spacer
Quarter 4 October - December 2012
spacer
Quarter 3 July - September 2012
spacer
Quarter 2 April - June 2012
spacer
Quarter 1 January - March 2012
spacer
Quarter 4 October - December 2011
spacer
Quarter 3 July - September 2011
spacer
Quarter 2 April - June 2011
spacer
Quarter 1 January - March 2011
spacer
Quarter 4 October - December 2010
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