What to do With an Inheritance

Read More

Last-Will-and-TestamentWhat to do With an Inheritance

Receipt of an inheritance represents a time of sadness which, depending on the closeness of the benefactor, can also be tinged with an element of joy. Hopefully the joy results not from the loss of the benefactor, but from the possibilities created by a sudden influx of cash.

It is common for beneficiaries to be close to retirement when an inheritance is received. For those who have spent a lifetime struggling to save or who have fallen on hard times, the temptation of spending a large lump sum that would otherwise not have been attainable is hard to resist. Suddenly, dreams can come true.

The last few years before retirement are the most significant ones from a financial point of view. It is during this time that the scene is set for the thirty or so retirement years to follow. Receiving an inheritance presents a dilemma. Should it be spent on making dreams come true, or should it be conserved for retirement? A safe strategy would be to calculate the lump sum required to provide sufficient income for retirement and set that amount aside in a long term investment portfolio. Any surplus cash or future savings can then be spent, safe in the knowledge that retirement is taken care of. A riskier strategy would be to spend part of the lump sum with the aim of replacing the spent funds by saving future income to provide for retirement. The problem with this approach is that late in your working life there are significantly greater risks of loss of income through health problems or redundancy.  Combine this with a poor track record of saving and the likelihood that spent funds will be replaced is low. Neither approach is right or wrong; it is simply a matter of understanding the consequences.

Related Articles

Economy
Liz Koh

Budget Winners and Losers

The latest Government budget had something for everyone but while most households will be a few dollars a week better off, there are some clear winners and losers. In the winners’ corner are businesses, those on high incomes, and savers. The biggest losers are property investors who have built large portfolios financed partly by tax rebates.

Read More »

Top Up or Miss Out

The end of June is an important date for KiwiSaver members. The financial year for KiwiSaver runs from 1 July 2009 to 30 June 2010 and if you have contributed at least $1,040 to KiwiSaver during that time, you will be eligible for the full amount of Government tax credit to be paid into your KiwiSaver account in July.

Read More »

Responsible Investing

There is a worldwide trend for investors to want to make a positive contribution to the world by investing in companies that are socially and environmentally responsible. If you are passionate about the effects of climate change, the scarcity of food and water, and social or environmental policies in general, then you will no doubt wish to ensure that the companies in which you invest are going about their business in a manner that is consistent with your views.

Read More »

Helping You Live your retirement To the Max

Keep in touch

Fill in your details and we’ll get back to you in no time.