When Inheritance Money forms part of Retirement Planning

If you are lucky you might be in the fortunate position of anticipating some inheritance money from family members which you plan to use as part (or all) of your retirement planning.

Not only does receiving a lump sum of money from an inheritance give you a financial boost, it can, depending upon the amount of money, take the pressure off your efforts to set aside money yourself for retirement savings.

Now, I don't want to be a doom-sayer but if your personal financial planning includes inheritance money then there are a few traps which it'd be prudent to take into account. After all, you don't want to be left short when that magic retirement day looms. There can be nothing worse than relying upon some amount of money for your retirement only to see it disappear before you receive it.

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What to Consider

Here are some things to look out for in no particular order:

  • People are living longer and so you maybe in the unenviable position of wanting to retire at a given age - lets say 65 but the benefactor still lives on and on.
  • The benefactor dies, but others contest the will or estate tying it up in legal arguments for years. Sometimes the bills generated by these legal battles eat up all the inheritance.
  • Laws change the rules and/or taxes payable affecting the amount of the inheritance.
  • The owner of the money re-marries and allegiances alter leaving you without the legacy you thought you would receive.
  • Investment decisions made by the benefactor (or their advisers) go sour eroding or eliminating any chance of an inheritance.
  • The benefactor changes his or her mind about the decision to leave you any money
  • The benefactor decides to skip a generation leaving the inheritance money to your children.
  • The investment assets of the benefactor or trust are invested in assets such as a private business which is difficult or even impossible to exit in a timely manner.
  • The investments may have been invested in assets which have not kept pace with inflation and so they have been eroded leaving you with a significantly reduced inheritance.
  • The benefactor goes on a spending spree! This happens a lot when one person (the spender) in the benefactor partnership dies and the other decides to live it up!
  • The owner of the investments requires or wants more to live in retirement and uses up their retirement savings leaving little or no inheritance.
  • The Will or estate stipulates conditions which are difficult, or you are unable, to meet.

Some countries have laws to prevent some of the above situations, but many do not and an inheritance is an entitlement and not a right.

Receiving an inheritance can be a mixed blessing. On one hand there's the joy of receiving the extra money. But, on the other hand you've had to lose someone close to you before you become the recipient.

It's best not to reply totally in receiving an inheritance. Instead, if you can, put in place a good savings program so that you accumulate retirement savings in your own name. Then you have a much greater degree of control over your retirement destiny.

And finally......

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Comments 9 comments

katiem2 profile image

katiem2 5 years ago from I'm outta here

Now this is where the road gets tricky. Thank you for the helpful details and facts on inheritance money and retirement planning. It's always a good time to plan and prepare. Well Done! :) Katie


obtaining grant of pobate 5 years ago

The fourth point is one that tends to come up a lot in my experience.


Green Lotus profile image

Green Lotus 5 years ago from Atlanta, GA

Good advice travelespresso and very timely. I would venture to guess that there will be a lot more people (baby boomers) coming into inheritance over the next few years.


travelespresso profile image

travelespresso 5 years ago from Somewhere in this exciting world. Author

Its true that the wave of boomers will continue to roll on into retirement Green Lotus for a few more years. Many will rely on an inheritance to get em through which is not a bad thing but not everyone will get what they hoped for.

Thanks so much for stopping by and commenting.


Suzanne Day profile image

Suzanne Day 5 years ago from Melbourne, Victoria, Australia

I reckon my retirement fund will disappear before I see it due to meddlesome governments etc! Good points you have made and I'll refer to them again in the future when needed. Great hub ; )


travelespresso profile image

travelespresso 5 years ago from Somewhere in this exciting world. Author

Meddlesome governments tampering with your retirement savings SD? That's shocking and for anyone living in a country where that can happen (aside from taxes which seem to be fair game), then its a major disincentive to saving for your retirement.

Glad you thought the points on inheritance money useful. Thanks for stopping by and leaving a comment.


ftclick profile image

ftclick 5 years ago

I never pictured it in this sense but it does have its part in the scheme of things.


travelespresso profile image

travelespresso 5 years ago from Somewhere in this exciting world. Author

Inheritance money sure does have a part in financial plans for some people. The trick is not to unduly rely on receiving it.

Thanks for your comment.


aboutaustralia profile image

aboutaustralia 5 years ago from Newcastle, New South Wales

You brought up some important points that I hadn't even considered. Being a baby boomer myself, I found the information very interesting and thought provoking, thank you. Voted up :)

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