Inheritance and Retirement Planning

Inheritance and Retirement Planning

Saving for the future is not a one-size-fits-all strategy, and depending on your income and savings threshold, retirement planning looks different for everyone. For some, it may be maximizing employer match and utilizing a 401(k), while others are simply saving in an IRA or savings account. Regardless of your strategy, there may be a question of whether or not your inheritance will play a factor in your future financial snapshot. If you’re lucky enough to inherit funds, you can boost your savings for the future, but the reality is that many will inherit very little – if at all – from previous generations.

Kiplinger reported on a Natixis survey from 2017, noting that older Americans are least likely to leave an inheritance for younger generations. Since then, economic conditions have worsened, including a global pandemic, higher cost of living, and record-breaking interest rates. Because of these circumstances, Americans have had fewer dollars to save for their family’s future, meaning that today’s workforce needs a retirement approach that’s more sustainable than relying on an inheritance from their loved ones.

While an inheritance can help you improve your retirement plan, you shouldn’t necessarily rely on one in today’s economy. Learn more below.

How to Use an Inheritance

While an inheritance may be a helpful boost, it likely won’t be enough to sustain a financially sound retirement and will require work to keep investments growing over the decades. However, there are some major advantages to receiving an inheritance that can help you get ahead. Read below to learn more.

Boost Retirement Savings

Extra money is extra money. Whether your inheritance is big or small, it can be a great way to boost your own retirement savings strategy. With the funds, you may be able to maximize your investments in a IRA, or look into other avenues of investments such as real estate property, bonds, and other investments you may have not previously considered.

Regardless of your approach, extra funds can help you boost your savings with the right investment strategy. If you’re not sure where to start, contact a financial advisor to review your current retirement strategy, goals, and future projections.

Pay-Off Debt

If you’re still working on solidifying your financial foundation and have a mountain of debt, receiving an inheritance can help you pay off outstanding balances, such as a mortgage, credit card, or student loans.

By eliminating debt, you will free up space in your monthly budget that can be used for the future, including increasing 401(k) and IRA contributions, adding money to an emergency fund, diversifying investments, and more.

Why You Shouldn’t Rely on Retirement

The reality of inheritance being a sustainable form of retirement savings is becoming rarer over the decades, and in today’s day and age, there are some key factors as to why, such as:

  • Cost of Living: As the cost of goods and services increases, so does the cost of living. With more funds being used for everyday spending, many people find it difficult to save for the future. According to the 2023 Retirement Confidence Survey conducted by the Employee Benefit Research Institute, 42% of retirees noted the high cost of living impacting retirement confidence, 25% noted a lack of savings, and 60% reported a decrease in their retirement funds.
  • Life Expectancy: In addition, people today are living longer than previous generations, meaning retirement savings are being utilized for longer, leaving fewer funds for younger generations.

Kiplinger notes that while Baby Boomers have previously been named the richest generation, the transfer of wealth will not be what retirees were expecting. Longer life expectancy and the increasing cost of living, make succeeding today and in the future a more difficult challenge.

Younger generations must take note and pivot their plans and not depend on an inheritance.

How to Plan Ahead

Changing your retirement mindset and shifting from expecting an inheritance to planning on your own requires change. Retirement planning is not a one-size-fits-all strategy and will require research, budgeting, and management on your part.

Start by reviewing your budget to fully understand your income and expenses. Once you have a grasp on your financial snapshot, you will understand how much you have each month to use for the future, and whether that means opening a new retirement account, diversifying your investments, or increasing contributions, the combination of tactics will vary throughout your life.

If you’re not sure where to start, utilize resources – like the Slavic401k blog – and meet with a financial advisor to review your snapshot. Together, you will find solutions that work for your budget today and maximize your earnings for the future.


Retirement Savings and Estate Planning: What You Need to Know

What You Need to Know About Designating Beneficiaries

Understanding the Impact of Inflation on Retirement

Retirement Planning Beyond 401(k) Plans: Exploring Supplemental Savings



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