I'm 52, recently divorced and have come into quite a large sum (six figures) of money. I'm still in full time work and have no dependants. I've never had a financial adviser or even a detailed plan as I relied on my former partner to manage our affairs. Rather than leave the money in the bank earning low interest, what can I do to make the most of this windfall to secure my retirement in around 10 years’ time?
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My suggestion would be for you to arrange to see an adviser, one that suits you and you feel comfortable with as they will be able to provide assistance in asking more questions about your particular circumstances and formulating a plan with you which will assist you in taking control of managing and understanding your financial affairs.
You wish to retire in 10 years so adding most or all of the funds you have received to your superannuation is a great way to put that amount away for when you need it most, in retirement to provide you with an income stream to cover your lifestyle needs. This should also assist you in minimising your tax. The amount you can add to your superannuation will depend on what you have added to your superannuation in the past and needs to be clarified by seeking professional help. You wish to make the most of the windfall you have received so the funds in your superannuation should be invested in a diversified portfolio of a range of assets including cash, fixed interest, Australian Shares, International Shares, Property and Infrastructure in accordance with your risk profile. Over 10 years this would on average receive a rate of return greater than cash and you are minimising your risk of holding all your eggs in one basket by investing in a range of different assets. You then have the flexibility in the future of reducing your hours of work and considering a Transition to Retirement scenario whilst still maintaining your lifestyle.
If you have debt, then some of the funds received could be used to pay this down. It just depends on whether this is debt that is against an investment or your own home. If you have debt that you cannot claim as a tax deduction then it is always a good idea to pay this down and clear any other personal debts.
A review of your life insurance policies is important. You may have your former partner nominated as the beneficiary and this should be amended to who you wish to receive the proceeds of the policy. If you do not have any life insurance cover, then you should consider Income Protection, Trauma and Total and Permanent Disability to cover your income and medical costs should you be unable to work as you now only have you to rely on.
Understanding your goals and what you wish to achieve over the next 10 years and once you retire should be on your list. Another interesting question to ask yourself is where you wish to live in the future and start planning ahead where and what type of property you can see yourself in and what adventure you may be on once you do retire.
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