Planning for inheritance? Don't.
The vast majority of Americans won't receive any significant inheritance from their parents. But if you happen to still receive an inheritance, treat it as a windfall and use it to shore up debts or rapidly build up your own retirement savings
Hamm warns not to include expected inheritance into financial planning. If you do receive inheritance, he says, treat it as a windfall.
Issei Kato/Reuters/File
A surprising number of readers write in to me asking about whether or not they should change their financial plans to account for a healthy inheritance from their parents. Often, these are children who see their recently-retired parents having a significant amount of cash that the children believe they will eventually inherit.
Unfortunately, that鈥檚 not the reality of inheritance for most people.
In truth,聽92% of Americans will receive聽and only 1.7% of Americans can expect to receive an inheritance of more than $50,000.
Beyond that, roughly聽will wind up providing care for their aging parents. This can easily be viewed as a 鈥渘egative鈥� inheritance.
What about those parents flush with cash? Like it or not,聽will see their entire retirement savings vanish聽before they reach the end of their lives.
These stories reflect my own reality quite well. Neither Sarah nor I expect to receive any significant inheritance when our parents eventually pass away.
Although both sets of parents are in reasonably good financial shape at the moment, both sets have quite a few more years of living in retirement before they pass away, years that will likely eat through their savings.
In fact, we fully expect that in the next decade, we will end up helping at least one set of parents financially through their final years.
This is a difficult truth for us to face. Unlike many of the horror stories people hear about in-laws, Sarah and I both love our in-laws. I am as comfortable visiting my in-laws at this point as I am with my own parents 鈥� they鈥檙e among the people I鈥檓 most comfortable with in this world.
For me,聽the ability of both my parents and Sarah鈥檚 parents to have stability and safety for the rest of their lives is very important.聽They have done so much for us to this point that it鈥檚 the least we can do in return.
This, of course, means that we鈥檙e not banking on inheritance. Instead, we鈥檙e planning for an expense.
My advice to most people who are thinking about an inheritance is short and sweet:聽unless you have money literally sitting there in a trust with your name on it or a big life insurance policy with you as the beneficiary, I would not assume聽any聽inheritance at all.聽In fact, I鈥檇 assume the opposite 鈥� you鈥檒l probably end up providing some financial support to your parents in their later years.
If you happen to still receive an inheritance, treat that inheritance as a windfall and use it to shore up debts or rapidly build up your own retirement savings.
In other words, if it鈥檚 not in a locked box with your name on it, don鈥檛 count it.
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