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Expecting a big inheritance to fund your retirement? Don't bet on it

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.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Wealth trickles down through the generations right? Well, sort of, but not in the way some people think. In most cases, there's a wide gap between how much people expect to inherit and reality.

Our research shows almost one in five expect a significant inheritance and of those, almost two thirds need it for retirement. But the reality is the average inheritance between 2014 and 2016 was £11,000. Among those aged 55-64 the average was £33,000 and for those aged 65 and over it was £20,000.

Your retirement income shouldn't depend on ‘heir-raising' risks – but our research shows lots of people are gambling on getting an inheritance to make ends meet.

This isn't a sensible foundation to build your retirement on. Life and relationships are impossible to predict, so you might not get the kinds of sums you're expecting, and any cash you do get might not go as far as you want.

You also have absolutely no idea when it might arrive, if it in facts arrives at all; and the last thing you want is to tie your retirement to the death of a loved one.

If you expect inheritance to play a part in your plans, you need to make sure it's not a pivotal role, so the show can go on if it doesn't come in.

This article isn't personal advice. If you are unsure if a course of action is right for you, please seek advice.

The risks of relying on any potential inheritance for retirement income

  1. You don't know when you'll receive it

    The average age to inherit is expected to be around 61 for those aged 20-35 now, but more and more people are living beyond their 100th birthday. That means you could be well beyond your 70th birthday by the time you inherit. Dependent on when you plan to retire that could leave a long gap without the money.

  2. The circumstances of the donor might change

    There are a huge number of variables that can affect someone's ability to leave an inheritance. This can range from ambitious retirement plans to whether or not they need some form of paid care. They might also have other friends and family they want to support with lifetime gifts.

  3. The wishes of the donor might change

    There are plenty of people who change their mind about who they leave money to. It could be down to a number of reasons like changes in relationships or because they meet someone they want to prioritise. It could also even be because they change their approach to inheritance and want to leave money to charity or a different generation.

  4. You might be wrong in expecting one

    If the inheritance has never been discussed, then you could be barking up the wrong tree. They might not have the assets you expect or they might not plan to leave anything to you.

  5. You might not get nearly enough to retire on

    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.

    Learn more about annuities

How inheritance can fit into retirement planning

Plan without it

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.

When you factor it in, have a plan B

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.

Talk to your family

If an inheritance is likely to play some part in your retirement income, 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 they're happy to make lifetime gifts, so you can be sure of what you're going to receive – and when.

Talk it through with the experts

You can book a call with an HL adviser to discuss your retirement plans and how you've mapped out your finances.

Our advisers offer a free 30 minute telephone conversation during which you can ask us about anything you're unsure of. We won't provide you with personal advice on this initial call but if this is something you wish to pursue we can talk you through the services we offer as well as the cost.

That way you can hang up either feeling confident you're already doing everything you can in preparation for retirement, or knowing that financial advice is available if you need it.

There's no obligation to take advice at this stage, but if you do, there will be a charge which we'll explain in advance.

If our advisory service isn't for you, we'll offer further information to help you make decisions for yourself – it's your call.


Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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