A fortunate few of us are born into wealth. Most of us have to work for it. And still others come into it at some point in their lives—whether by chance, or by inheritance. According to The Street, millennials are going to inherit a collective $30 trillion from their parents in the coming decades. Leaving a legacy to their loved ones is a goal that many American workers have as they build wealth throughout their lives. But is an inheritance something you should necessarily expect? Regardless, waiting on an inheritance is not a retirement plan you should bank on.
Reports show that 62 percent of millennials believe an inheritance and support from their children will be critical to funding their retirement needs. However, maintaining this type of mindset is risky. Here are a few reasons why waiting on an inheritance as your retirement plan could leave you high and dry later down the line.
- An inheritance is unpredictable. Maybe you know that an inheritance exists, but you can’t predict its timing. No one wants to be wishing their loved ones an early passing for the sake of collecting an inheritance sooner rather than later. The truth is, you can’t predict exactly when an inheritance will come into play in your financial situation. Therefore, waiting on an inheritance is not a practical retirement plan.
- Your family may choose to treat themselves. While many parents and grandparents opt to leave a financial legacy to their children and grandchildren, it’s not the case for everyone. After working hard for their entire lives, some people may want to treat themselves in retirement by spending the majority of their nest egg on themselves and/or their spouses. This follows the mindset, “If I can do it, you can do it too,” in regard to saving your own money to support yourself in retirement.
- Your family may need emergency funds. On the other hand, another plausible situation is that your loved ones end up needing to dip into the money they saved for your legacy on a financial emergency. This could include health care costs, long-term care, home or car repairs or any other unexpected but significant expense. In this case, the immediate need takes priority over the long term goal of leaving a legacy to their loved ones.
- An inheritance may not exist at all. In still another scenario, your parents or grandparents may not have saved any money at all to leave you an inheritance. It’s not uncommon for a family to never discuss finances and whether or not a financial legacy even exists. Assuming that your parents have set money aside for you without ever asking them is a mistake you want to avoid when it comes to planning for retirement.
- Waiting means you’re wasting time. If you’re waiting on an inheritance as part of your retirement plan, then you are not planning otherwise. That means you are not taking the advantage of the time you have to save and grow your money. Especially as a young investor, you should reap the benefit of having time on your side to allow your money to compound, participate in employer-matching plans and make contributions to individual retirement accounts.
Even if an inheritance is something you have talked about with your family, you should not rest all of your laurels on the fact that it will be able to fully support you in retirement. The implications of an inheritance are both risky and unpredictable—neither of which concepts are ones you want to associate with your retirement.
Instead of waiting on an inheritance, why not establish a more solid financial plan for retirement? Call our specialized Ty J. Young Inc. advisors today at 877-912-1919 to get started!