We take a look at the risks of relying on a big inheritance and what you could do to make sure you don’t need one to live comfortably in retirement.
Wealth trickles down through the generations, right? Well, sort of. But not always in the way you might think. There can be a wide gap between how much people expect to inherit and what they actually get.
Your retirement income shouldn't depend on ‘heir-raising' risks, and you certainly shouldn’t rely on getting an inheritance to make ends meet in retirement. Making your lifestyle in retirement dependent on the death of a loved one can have emotional consequences.
If you expect inheritance to play a part in your plans, then you need to make sure that it's not a pivotal role.
We delve into the risks of relying on your inheritance for your retirement and how it can fit into sensible planning.
Free and impartial retirement guidance for those over 50 is available from the government’s Pension Wise service. This article isn't personal advice. If you are unsure if a course of action is right for you, please seek advice.
According to the latest figures, people in the UK live into their 80s on average. But there will be many who live into their 90s and possibly even beyond that. That may mean that you don’t receive any inheritance until you yourself are in your 70s, which may be too late to make any difference to your retirement.
There are a huge number of factors which could impact whether someone leaves you an inheritance. They may spend a lot of money in retirement (as we’d all like to), or need to pay for care in later life. They might also have other loved ones they want to support or give money to while they’re still alive.
All sorts of things can happen which could impact who your potential donor decides to leave a legacy to. People could get married, children could be born, or other loved ones may need support. Your donor may even change their approach to inheritance and want to leave money to charity or a different generation.
If the inheritance has never been discussed, then your expectations could be completely wrong. They might not have the assets you expect or they might not plan to leave anything to you.
Even if you get the inheritance you're expecting, unless you do the calculations, it might not go as far as you expect. You need to have a clear idea of the kind of returns you can expect when translating a lump sum into an income – whether investing and taking the income or buying an annuity.
Your essential expenses should be covered regardless of when or if you receive an inheritance. A good approach is to have a guaranteed income that will cover these costs – as a combination of state pension, defined benefit pensions and annuities.
Ideally, any inheritance should be for the extras to make life more comfortable. If your pension savings will fall short without an inheritance and you're forced to factor it in, you need a robust plan B. This could include things like downsizing your home or working part time into retirement.
If an inheritance is likely to play some part in your retirement income, then you need to be as sure as you can be that you'll get one. It might feel like a ghoulish conversation to have with your loved ones, but you can't base your planning on a vague assumption and crossed fingers.
You might even find that they're happy to make lifetime gifts, so you can be sure of what you're going to receive – and when.
There’s a lot of what-ifs at retirement. You need a plan B in case things don’t pan out as you expected.
To get a better picture of what your retirement could look like, and a plan that doesn’t rely on an inheritance, it’s worth considering financial advice.
To find out more, book a call from our advisory helpdesk. They don’t give personalised advice themselves, but they’ll make sure that advice is right for you and that you’re comfortable with the charges involved. If you’re happy to proceed, then they’ll put you in touch with an adviser.
Mr Ford shares how talking with an adviser about your retirement plans will help both you and your partner take stock of what you’ve got, what you need to do between now and retirement and what that means for both your futures in work.
Financial adviser, Didi, provides tailored financial tips specifically crafted for people who work for themselves. This includes limited company owners, sole traders, partnerships, and limited liability partnerships.
Becoming a grandparent is a cherished milestone for many. Along with the joy of welcoming new grandchildren comes the opportunity of supporting their financial well-being and leaving a lasting impact on future generations.
Financial adviser Didi offers practical tips designed specially for women in the ‘Female Sandwich Generation’.