One of the most common myths of retirement is “Plus, I’m going to get an inheritance.”

You: For you, maybe. My parents still love me.

It has nothing to do with love.

You: Sure it does.  If it didn’t, I wouldn’t let half my relatives in my house.

That’s not a good ratio.

You: Tell me about it; I was being generous at 50%.

It’s a mistake to count on an inheritance in your retirement plan.

You: Even a little bit?

Even a little.

You: Why?

Reason 1: Your Parents Might Not Have as Much as You Think (or Hope) They Do

You: My folks have a lot of money.

Do you know that for a fact or are you basing your comment on how they live?

You: What do you mean?

Have your parents sat you down and told you how much money they have or do you just think they have a lot of money because your parents earned a lot of money, live in a very nice house, drive nice cars, and go on exotic vacations?

You: More of the latter.

Which means you know nothing.

You: Excuse me?

While your parents are still your parents, if you haven’t had the “money talk,” you’re flying blind.  It’s no different than your utter lack of understanding of your neighbors’ or co-workers’ true financial picture; just because they might drive a nice car doesn’t mean they don’t have credit card debt up their eyeballs.

Reason # 2: Your Parents Might Have a Lot Less Money Compared to Two Years Ago

As The Wall Street Journal reported this week in Baby Boomers to Kids: Kiss Your Inheritance Goodbye, many retires and pre-retirees got crushed, like the rest of us, as the stock market tanked.  With very few years to make up the losses via additional savings and investment gains, many are doing what they can to preserve their ability to generate some sort of cash-flow for the duration of their retirements.  To do so, annuities and reverse mortgages are becoming more popular.  Those choosing such a path essential file for “Chapter Heaven” (a cute phrase from the article) by taking their wealth with them to the grave.

You: Why? How? What?

The typical annuity means a large lump sum payment in exchange for a series of smaller payments for the rest of life (or lives) of those making the payments. When the purchaser(s) (annuitant(s)) die, it’s over. No money is paid from that annuity for the descendants.

Reason # 3: Your Parents May Live a Lot Longer

Longevity is another reason why you shouldn’t count on your parent’s inheritance to help you in retirement.  Studies have shown that if you have two parents who live to age 65, at least one is likely to live until age 90.   Not only is that a huge drain on their savings, but you also won’t actually get the inheritance until they pass away. How old will you be when the younger of your folks turns 90?  Is that when you want to begin retirement or do you hope to already be retired by that point?

Reason # 4: Your Parents May Grow Old

If either one or both of your parents were to ever require assisted living and doesn’t have a top-notch long-term care insurance policy, even a potential inheritance of several hundred thousand dollars can disappear rapidly.  The cost of a nursing home is absolutely tremendous and absent the insurance, they’ll be paying for it. Medicaid only steps in when they’re financially wiped out, leaving you with nothing.

Reason # 5: You Have Siblings

Remember your brother or sister?  You can remember both? Great.  They’re blood relatives too and they’re likely to get an equal cut of whatever is left.  So divide it by two, three, or more.

Retirement is not about an inheritance. It’s about planning.  It’s one reason I discuss Retirement planning extensively here and why I guide the Retirement Planning site at  It’s also the reason I save aggressively in my IRA and my SEP-IRA. It’s why I saved as much as possible in my 401(k) when I was an employee. It should be the reason you’re saving – today.

What role does an inheritance play in your retirement plan?

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2 Comments to “Five Reasons Not to Count on An Inheritance in Your Retirement Plan”

  1. Abigail says:

    Amen! No one should count on an inheritance. You never know what’s going to happen.

    Even in the unlikely event that your parents have specifically set aside money for you for after they’re gone, you don’t know how things will go. They might run into serious financial trouble and have to delve into your funds.

    More importantly, you should be responsible for your own retirement. If money comes your way, terrific. But I think it’s silly to count on anything in the future (except, as they say, death and taxes).

    For me it’s also a selfish thing. If your parents leave you money, it’s money they’re not spending. And most people in retirement aren’t living as well as they could, in general. So if your parents are pinching pennies now to leave you money later, what kind of life is that?!

    As far as I’m concerned, my mom only needs to leave enough (hopefully) to deal with her funeral costs. Anything else will mean that she denied herself money she could be spending while she’s alive. And right now, she’s already helping my husband and I more than I would like. (We both have chronic health conditions.)

    That said, allegedly I’ll get a couple hundred a month from her pension after she passes. But I keep insisting to her that that sounds fishy. Is she sure it’s not based whether she draws for a certain length of time? And how could it possibly be for as long as I’m alive? There has to be some sort of limit… So I’m not going to count on it. Besides which, she only turned 51 this December. So, she has quite a lot of years ahead of her. (I’ve demanded she live to a ripe old age.)

    I think people just don’t think about things when they are so confident that their parents will leave them money. On the off chance that your parents saved well enough to live comfortably and still give you money, terrific! But don’t count the proverbial chickens…

  2. Michael says:

    Well said, Abigail.

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