How Do Wealthy Families Blow Their Assets?

With a 90% failure rate, the likelihood of your money lasting past the third generation is slim.  A new survey from Merrill Lynch attempts to find the obstacles in the road to sustainable wealth.  Of 171 participants with over $5 million in investable assets, 70% said they wanted their money to last beyond their lifetime.  However, almost everyone in that 70% had an unreasonable expectation of how much they can withdraw and still have their money last.  Nearly a quarter would be bankrupt in their own lifetime if they spent at their desired rate.

Michael Liersch, a behavioral finance expert and the survey’s coauthor, says things start to go wrong with wealthy families when they start over-giving to family members or giving without accountability.  “By the fourth or fifth generation you can go from four people to over 100, and that will really affect the amount of money that can be distributed to each individual. You have to be really explicit about what you want the money to be used for.”

See Beth Pinsker, How Wealthy Families Blow Their Assets, Reuters, May 6, 2014.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.