Over the coming decades, baby boomers and older generations are expected to transfer more than $100 trillion in assets to their heirs, according to some estimates. If your parents or grandparents are well off, you might assume that at least a portion of their money will become yours, and that might mean you choose to save less today.
Financial experts caution, however, against relying on an inheritance to fund your retirement. Here’s why that’s risky and what to do instead.
Your inheritance could arrive later than planned
Pushing yourself to save aggressively for retirement may seem unnecessary if you’re expecting a generous inheritance once your parents die. The reality, though, is you don’t know how long your parents will live and when that money might arrive. Americans, especially those with means, are living longer, and GLP1 drugs and other new treatments could prolong life further.
The Social Security Administration reports that life expectancy has increased from 18.1 years for men born in 1930 to 20.9 years for men born in 1960. For women, it’s gone from 21.4 years for those born in 1930 to 23.7 years among those born in 1960.
“Counting on money that is not yet yours is inherently a risky retirement strategy,” says Aaron Bosch, financial adviser at Moneta Group Investment Advisors in St. Louis. “Advances in modern medicine mean people in the U.S. are living longer than ever. For many people, an inheritance may not arrive until they are already well into retirement themselves.”
Your inheritance could be surprisingly small
Not only might an inheritance land too late to fund your retirement fully, but the cost of long-term care could erode that windfall. CareScout, a company that helps families navigate long-term care, puts the average annual cost of assisted living at $74,400 as of 2025. For a shared nursing home room, that figure jumps to $114,975.
“If your parents live longer than expected and some of those years are spent in a nursing facility, the number you were picturing could end up significantly smaller,” Bosch says.
The Washington Post found that elder care costs are whittling down older Americans’ savings. The share of people left with nothing left to pass on rose from 6 percent for those who died between 2006 and 2010 to almost 11 percent among those who died between 2017 and 2022.
Plus, even if you do receive a sizable inheritance, the IRS might take a chunk of it if it comes from a taxable source, like an inherited traditional IRA.
Not all inherited assets are created equal
There are different types of assets that can be part of an estate plan. Trent Von Ahsen, managing partner at Cedar Point Capital Partners in Cedar Rapids, Iowa, says not all assets may be equally useful for actually paying near-term retirement expenses.
“A share of a family business, for instance, or a piece of land is very different than cash,” Von Ahsen explains. Even if you inherit an asset that could be worth a lot in theory, that doesn’t mean it automatically becomes an asset you can liquidate on the spot.
Use an inheritance as bonus retirement money
Ultimately, the amount of money you inherit may be different from the amount you expect, and it may arrive later than anticipated. Prioritize retirement plan contributions so you’re saving on a consistent basis.
“I would build a retirement plan that covers essential spending from your own savings and retirement income. Then model an inheritance separately,” Von Ahsen says. “I would be very cautious about reducing retirement contributions or making an irreversible decision based on money you don’t yet control. If the inheritance arrives, you can revisit that plan then.”
Or, as Bosch says, “think of an inheritance as more of a bonus.” If it comes through, you may be able to retire sooner than planned or live differently. Until then, work with an adviser to figure out how much you can afford to contribute toward retirement while balancing other goals, and set up automatic recurring transfers into a 401(k) or IRA to ensure your savings are funded consistently.
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