We have never planned to inherit money, and our children do not plan to inherit money. It was not my parents’ responsibility to fund my retirement, nor is it my responsibility to fund my kids’ retirement. If it’s hard to save, they’ll just have to cut back on expenses. I would love it if there is money left for them after H & I die, but we aren’t going to plan for that … it would be an unexpected windfall for our kids if we don’t spend all of our money.
Good thing we didn’t plan on a large insurance policy my in laws promised us. Turns out it lapsed somewhere along the way. Stuff happens, and planning to get other peoples’ money doesn’t necessarily pan out.
If your parents are in the top .5% net worth category and you have a good relationship with them, perhaps it is not presumptuous. Even then, many high net worth individuals believe that giving everything to their children can have negative effects, like destroying their child’s ambition, and don’t do it.
For most people who have lesser means, well, life happens. Maybe they invest the biggest amount at the wrong time (year 2000) and see their initial investment cut in half twice in a decade, so the “typical” 40-year return does not materialize. Or maybe a parent has a major health setback and must retire earlier than expected AND cover large health care bills for many years. Maybe the parent has to spend a lot of money on something unexpected, like the care of a relative who becomes disabled and will need decades of care or to cover losses on a home that sold after a real estate market downturn or natural disaster or to settle a lawsuit. Or maybe the parent starts giving money to a lot of unsavory types and scammers before anyone realizes dementia is setting in. Or maybe there is a serious falling out between a parent and child when the widowed parent remarries and wants to alter the will to benefit the new spouse.
No one has a crystal ball, so even relatively well-off families often hope there is something substantial to leave to the next generation but caution everyone not to count on it.
We would love to leave an inheritance but never speak of it to our kids. We want them to make an effort to be fully self-sufficient and self-supporting for life, just in case the money isn’t there.
Reference @CMA22’s post. Life happens. Investments don’t work out as planned, someone gets a serious disease and ends up in an expensive nursing home draining the assets, nothing is guaranteed. You just cannot count on that money. They may have told you it’s yours, but people have personality changes, dementia, lawsuits, you don’t know until it’s in your name. And if they live another 40-50 years, so what? You’ll be retired.
We gave our kids our financial information, likely too much. We just want to make sure they get the assets, and they don’t magically disappear. Older kid doesn’t care, he’s a tech guy, well off. Younger kid is aware, but telling us to spend our money, don’t save it for them. We’ve realized that we don’t want them to wait for us to die to get huge sums, it could be over 40 years. When we feel comfortable (likely in a few years), we’ll start passing them money slowly, why wait until they’re 70? But I’m most certain I would not like it if they were thinking too much about how much they’ll be getting when we die.
Maybe some young people are, but not our mid-20’s ds. Perhaps it’s because he doesn’t like discussing our dying in general, but anytime we mention estate planning or what he might inherit, our ds says to enjoy our money and spend it. “I don’t want your money.”
I think it’s prudent to plan as if you will get nothing via inheritance.
But if your parents are wealthy enough that there is very little chance they can outlive their money, it’s also prudent to do proper planning for it - investing, tax/estate planning, and inheriting.
The stats at Inheritances by Age and Income Group — Penn Wharton Budget Model list a median unconditional inheritance from parents of $9k in US. Among persons with top 5% income, the median inheritance increases to $47k. For the overwhelming majority of persons in the US, an inheritance is not going to dramatically change their life, with little reason to plan lives around potential inheritances.
The average expected inheritance is notably larger than the average actual inheritance. There can be a variety of unexpected surprises, beyond things like high end of life medical costs. For example, my grandmother was not wealthy, but she owned a home in valuable area. My father grew up in this region as a child, and I think he planned to move to that home in retirement. Being an only child, my father assumed he would receive the home. Instead my grandmother remarried as a senior and died before her 2nd husband, who left the house to his son. My father didn’t get anything.
Table 2 in the linked page shows average (presumably mean) inheritance, not median inheritance.
In the linked page, table 3a shows that that probability of getting an inheritance at all for all ages and income groups is 7.4%. The top 5% income have an 11.1% chance of getting an inheritance.
However, table 4 shows the average inheritance conditional on getting an inheritance, which is $183,914 overall and $424,343 for the top 5%.
With most people getting $0 inheritance, but a small percentage inheriting a lot, the Gini index of inheritances would seem to be quite high.
Of course, those who inherit nothing may have had to spend money supporting parents who ran out of their own money, so they effectively had negative inheritance.
My parents and my in laws were children during the depression. Their formative years were shaped by the depression and WW2.
I think for them, there is a fear of running out. A lifetime of living frugally. The knowing of not having enough.
So my mother doesn’t have any extra to give. The in laws do but will wait until they’ve passed. Since their children are in their 60’s, it’s not a strategy for their retirement planning.
I wonder if my husband and I being raised as boomers in a time of prosperity, will feel differently about passing on our wealth before our children are in their retirement years.
Right now, we are retired but not yet to the age of Medicare and social security. Trying to navigate spending but guessing how much we can spend still.
I’ve probably posted this before, but our (high probability) goal is to die without impacting our kids financially. I chose to retire early (mom and 3 of 7 sibs have died at or before 70, and dementia runs in family). We have told kids to expect nothing, but of course would like there to be a fair amount to give them. At this point I’m thinking it would be more fun to have some nice vacations with with kids and pay for them, and hopefully have enough to help fund any grandkid’s college, instead of giving them cash in the next several years, but time will tell.
This. We told our financial planner that our goal is to die with 10 cents left in our money accounts. Our kids will have a house to sell…if we don’t sell it first.
We are gifting our kids money now…because we would rather see them enjoy it while we are alive to do so…rather than leave them some inheritance.
Having low taxes is great, but with that comes less services. NH is famous for touting its no income or sales tax, but the property taxes are a bear. I have heard a family member who lived in NH say that they were thankful that their kid didn’t need special services at school, because what was available was reduced due to lack of funds.
MA is middle of the road when it comes to taxes, but the “Taxachusetts” label has undeservedly stuck. For example, MA does not tax my teachers pension. Nearby RI does–so I know many teachers who move as a result. I don’t mind paying taxes when I know I receive the benefit of local and state services. We also pay the feds more in income tax than we get back from them in services.
Some low-tax states always have their hands out to the federal government, but that’s another discussion for another thread.
I vacillate between wanting to see my kids make good use of my money as they need it, vs. making sure there is enough that they won’t be burdened by my needs as I age. There is longevity on both sides of my family tree well into 90s and at least one past 100.
Then again, leaving something for them to inherit can be a boost to their own retirements as they have long genes from their Dad’s tree too!
As for now, I have given gifts with no strings some years, funded family vacations/outings other years, and gifted toward designated purposes as those opportunities arose.
I have a friend whose mother would not disclose her financial situation to her children, and didn’t have a trusted advisor. Many mistakes were made so she could ‘wow’ them when she died.
MA is one of ~15 states that does have an inheritance/estate tax, which kicks in at $1m, altho there have been some legislative attempts to increase that amount.
We still have my Mom and FIL with us. Both are set financially as long as they don’t have to spend a prolonged time in nursing home. My Dad passed quick with a 21 day hospital stay. My MIL was a bit longer with a stay in a rehab.
Neither Mom or FIL have serious money. Neither family were into having much if anything in the market. But both are living comfortably off pensions and SS, especially with one person households. Both own their homes.
We never planned on getting anything from them. We structured our retirement without funds for them. Mom has started to pass along some funds to myself and brother a couple of years ago. My wife was uncomfortable with it.
I would prefer my Mom to spend more of it, but that isn’t how she was raised and she was never comfortable until retirement. She won’t travel.
My 29 yo daughter who is an only child will most likely get some inheritance. My sister in law has no children and has named my daughter as her heir (and benefactor on her various insurance, pension, etc.) My husband and I think that we have enough that she will get money from us also (unfortunately will most likely be in MA so it will be taxed - UGH). We are generous with her now, because we do feel we have enough saved for retirement.
These things can change though. My father blew through his 1.2 mill from selling his home by paying for comfort aides, assisted living, etc. He is now basically broke and living in a nursing home that the government pays for. I won’t be getting any inheritance from him (but I had not counted on getting anything).
My daughter is extremely frugal and does not consider inheritance in her lifestyle or financial planning.
We are likely to retire before social security and Medicare kick in also, without pensions, so I am always curious to hear from others who have done it. Especially if they must purchase their own health care coverage.
How have you found your spending compares to pre-retirement spending in these early years?
We just did this. My husband was laid off from his job and decided to just retire. I have a small consulting gig and make very little. We are using the state (NJ) health insurance marketplace and since we have a very low income we pay low premiums for good coverage. Our plan is to stay low income - no withdrawing from 401 K, no Soc Sec, no pension monies, until we are of the age for Medicare. This way our health insurance stays low also.
We are currently spending a lot more than before. We are transitioning from our home of 35 years to an apartment. We have had two years of paying for two places to live because of this. The house is on the market, so we hope to be going back to a more reasonable spending level.
It is tough to judge how our spending has changed (when you don’t include the double housing costs). No commuting costs, no lunches at work, and lower insurance premiums (due to the market insurance). Our travel costs are probably the same as before (but we had the pandemic with no travel during this time). Due to inflation our day to day spending for things like food and gas have gone up, but that has nothing to do with retirement.
I’d prefer to not sell our primary home to fund retirement, so do not include that equity in our retirement planning. Also a lot can affect that future equity. But if we really need it, we should be able to sell it and downsize and boost our retirement funds by 25% or so.
